Quick Take
- NetApp reported a total revenue of $1.63 billion in its Q3
earnings
- Net income of $158 million, EPS of $0.43
- Q4 Guidance : Revenue range $1.7-$1.8 billion
- Flash storage solutions with hybrid and SSD arrays showed a
67% sequential growth
- NetApp has installed over 36 petabytes of Flash, in over
20K systems as of Q3 2013
NetApp (
NTAP
) posted its Q3 earnings on February 13, up slightly y-o-y with
revenues coming in at $1.63 billion. The revenue was in line with
the guidance provided in Q2. Net income came in at $158 million, or
$0.430 per share, compared to GAAP net income of $120 million,
or $0.32 per share last year. NetApp designs solutions for storing,
managing and protecting business data through enterprise storage
and data management software, and it also provides hardware
products and services. NetApp also estimates Q4 revenues to be in
the range of $1.7-$1.8 billion, and EPS is expected to be $0.65 to
$0.70 a share.
We explain some key business developments below.
See our full analysis on NetApp
Services And Software Growth Outpacing Hardware
Decline
Storage hardware is the most valuable division of NetApp,
constituting nearly 40% of its value while Software and Consulting
Services constitute nearly 30% of its current value, with cash
making up for the rest. On a y-o-y basis, product revenue fell very
slightly from $1.063 billion in 2011 to $1.06 billion in 2012. This
decline was however negated by growth in software revenues which
climbed from $203 million to $230 million, and services revenue
which grew from $300 million to $340 million. This trend is likely
to help margins as we estimate product gross margins to be in the
low 50% range while services margins are slightly higher nearing
60% and software margins are much higher nearing the 90% mark. The
downturn in hardware revenues is short term and is likely to pick
up as IT spending improves.
The software business was driven byData ONTAP, the #1 storage
operating system, which according to NetApp, represents the vast
majority of the storage market opportunity. ONTAP 8, saw strong
customer adoption as almost 50% of the global installed base has
moved to ONTAP 8, with a majority already shifting to version 8.1,
launched in mid 2012.
Flash Storage Key Growth Driver
NetApp has a strong flash portfolio and as of Q3 2013, it has
shipped over 36 petabytes of flash deployed over 20,000 systems
worldwide. Flash provides high speed data performance and the
company has introduced a portfolio of hybrid and SSD based
solutions, which has seen strong traction in the market. In Q3,
bookings for systems with Flash pools, a hybrid disk and SSD
solution, grew 67% sequentially despite the costs associated with
it as companies are willing to pay for the enhanced performance. We
can see the hybrid solutions becoming a major driver in 2013.
We currently have a
$37.50 Trefis price estimate for NetApp
, which is slightly higher than its market price.
Understand How
a Company's Products Impact its Stock Price at Trefis