Sunnyvale, Calif. - August 16, 2006 -
Network Appliance, Inc. (NASDAQ: NTAP), the leader in advanced
networked storage solutions, today reported results for the first
quarter of fiscal year 2007. Revenues for the first fiscal quarter
were $621.3 million, an increase of 39% compared to revenues of
$448.4 million for the same period a year ago and an increase of 4%
compared to $598.0 million in the prior quarter.
For the first fiscal quarter, GAAP net income was $54.7 million, or
$0.14 per share(1) compared to GAAP net income of $60.1 million, or
$0.16 per share for the same period in the prior year. This first
quarter of fiscal year 2007 is the first quarter in which Network
Appliance adopted the implementation of FAS 123(R) expensing of
stock options in the GAAP results. Non-GAAP(2) net income for the
first fiscal quarter increased 55% to $96.6 million, or $0.25 per
share, compared to non-GAAP net income of $62.1 million, or $0.16
per share for the same period a year ago.
"NetApp delivered another strong quarter, driven by strong growth
in every region of the world," said Dan Warmenhoven, CEO of Network
Appliance. "Our new products and new relationships are gaining
momentum, and our business with enterprise customers reached record
levels. Our results demonstrate that the NetApp value proposition
resonates with customers and continues to drive our competitive
success."
Outlook
- Network Appliance estimates that growth in revenue for the
second quarter of fiscal year 2007 will be in the range of
2�% to 4%, which translates to 32% to 34% growth year over
year.
- Including the implementation of SFAS123(R) and with current
information and assumptions, the company expects second quarter
GAAP earnings per share to finish between $0.13 and $0.16 per
share. Network Appliance expects second quarter non-GAAP earnings
per share to be in the range of $0.25 to $0.26 per share.
- For the full fiscal year 2007, Network Appliance estimates that
revenues will finish in the range of 32% to 33% higher than fiscal
year 2006.
- Including the implementation of SFAS123(R) and with current
information and assumptions, the company expects GAAP earnings per
share for fiscal year 2007 to be in the target range of $0.61 to
$0.69 per share. Network Appliance estimates full-year non-GAAP
earnings per share to be in the range of $1.04 to $1.06 per
share.
Quarterly Highlights
During the first quarter of fiscal year 2007, Network Appliance
demonstrated value and leadership in the data center with new
products and solutions for the enterprise, introduced the
industry's first all-in-one solution for the small and medium
business (SMB) market, and continued its leadership position in the
iSCSI and network-attached storage markets.
This quarter, NetApp challenged the largest storage competitors for
data center leadership by introducing a new line of products and
services designed to enhance customers' data management
capabilities, offer the best total cost of ownership, and achieve
the highest productivity. The FAS6030 and FAS6070, new flagship
systems that greatly extend the breadth and scale of the NetApp
storage systems portfolio, extend the NetApp FAS line to a
substantially higher level of performance and scalability.
Additionally, NetApp debuted an enhanced NetApp Manageability
Software family and new Fibre Channel (FC) SAN capabilities as well
as Premium Support Services for the FAS6070 and Rapid Deployment
Services for Storage Implementation. Highlighting its greater value
in data center environments, the expanded NetApp portfolio offers
modular, transparent scalability for the largest data center
applications and consolidations; maximum flexibility to help
customers adapt to business changes; and the highest availability
of application data, ultimately enabling more productivity for IT
administrators and achieving the best overall total cost of
ownership. These offerings are aimed at enterprises that have vast
data requirements and demanding service-level agreements and that
operate large-scale Oracle®, SAP, and Microsoft®
enterprise applications.
During the quarter, NetApp announced the availability of its new
Data ONTAP® GX operating system, giving customers with
high-performance computing (HPC) applications extreme throughput,
flexibility, and NetApp hallmark simplicity and reliability. Data
ONTAP GX combines the global namespace functionality of SpinOS
(acquired through the Spinnaker Networks® acquisition) with
the key data management, performance, and high-availability
features of Data ONTAP 7G. Although the needs of NetApp enterprise
customers are well served by the performance, features, and
functionality of Data ONTAP 7G, HPC customers in the areas of
energy, entertainment, and electronic design automation have an
insatiable demand for extreme levels of performance. Coupled with
the new FAS6070 and/or FAS3050 systems, HPC customers can leverage
the clustered file system technology inherent in Data ONTAP GX,
which enables individual files or datasets to be striped across
multiple nodes to achieve far greater performance than can be
achieved with a traditional storage system. Data ONTAP GX, coupled
with the new FAS6070, scales in capacity up to 6PB and achieves the
unprecedented industry performance of more than one million
operations per second, based on the SPEC SFS benchmark.
During the quarter, NetApp unveiled the StoreVault™ S500,
aimed at the small and medium business market segment. StoreVault
S500 combines enterprise-proven storage technology from NetApp with
the scalability, simplicity, security, and affordability that are
missing in today's network storage solutions for SMBs. The
StoreVault S500 is the industry's first scalable all-in-one network
storage appliance for the SMB market segment that supports NAS,
iSCSI SAN, and FC SAN, providing SMB customers unparalleled
flexibility compared to direct-attached storage.
Continuing disclosures of privacy breaches are driving requirements
for enterprise-wide encryption and key management. This quarter,
Decru, a NetApp company, unveiled a new key management platform,
the Decru® Lifetime Key Management™ 3.0 Appliance (LKM
Appliance). The LKM Appliance extends Decru's capabilities for
secure, automated, enterprise-class management of storage
encryption keys and adds integration capabilities for third-party
encryption products.
In other product news, NetApp was awarded Storage Vendor of the
Year and NAS Product of the Year for the NetApp®
NearStore®R200 storage system at the Storage Awards: The
Storries III. Judged by the readers of Storage Magazine, the UK's
leading IT storage magazine, the Storage Awards recognize
excellence and innovation in the UK storage industry.
From a market perspective, according to IDC's Worldwide Quarterly
Disk Storage Systems Tracker Q1 2006,(3) NetApp gained revenue
share in the networked storage market, growing to a 9.6% share in
Q1 2006, up from an 8.5% share at year-end 2005. NetApp also gained
capacity share in networked storage, growing to 19.5% from 15.8% in
the same period.
In the FC SAN market, NetApp continued to grow faster than the
market in both revenue and capacity, both sequentially and year
over year. Sequentially, FC SAN market revenue dropped 12.9% while
NetApp grew 17.4%. Year over year, the FC SAN market revenue grew
14.8% while NetApp grew 60.2%.
In the NAS market, NetApp grew faster than the market in both
revenue and capacity, both sequentially and year over year.
Sequentially, the NAS market revenue dropped 1.5% while NetApp grew
7.3%. Year over year, the NAS market revenue grew 14.7% while
NetApp grew 17.8%. NetApp continues to lead the NAS market in terms
of capacity, with a 45.8% share in Q1 2006, up from a 42.6% share
at year-end 2005.
NetApp demonstrated continued leadership in the iSCSI market in
terms of revenue and capacity, with first place market share for Q1
2006 in capacity shipped (40.0%) and in revenue (29.7%). In Q1
2006, the iSCSI market revenue dropped 7.2% sequentially, while
NetApp grew 10.0%.
Also this quarter, NetApp announced it has shown the strongest
market share growth among the top 10 vendors of storage software
and has moved into the top four vendors for market share in 2005.
According to Gartner's report "Market Share: Storage Management
Software, Worldwide, 2005,"(4) the total market for new license
revenue in 2004 to 2005 grew at a rate of 8.8%, with NetApp beating
the market with a growth rate of 42.3% for the same period. For the
third year in a row, this was the fastest growth rate among the top
10 vendors in the space and for the first year places NetApp in the
top four, with a total overall market share of 6.5%.
On the partner front, NetApp unveiled several new solution
enhancements and partner offerings with Attune Systems, Brocade,
Cisco, Emulex, Microsoft, Symantec, and Reconnex, to address a
variety of data concerns, including network file management, data
content monitoring, data protection, and FC SAN scalability.
In corporate news, NetApp entered into a definitive agreement to
sell its NetCache� business to Blue Coat Systems. Also
during the quarter, Edward Kozel, a member of the Yahoo! board of
directors and CEO of cRight, Inc., a developer of anti-piracy
software, joined the NetApp board of directors.
Webcast and Conference Call Information
- The NetApp quarterly results conference call will be broadcast
live via the Internet at http://investors.netapp.com on
Wednesday, August 16, 2006, at 1:30 p.m. Pacific Time. This press
release and any other information related to the call will also be
posted to the Web site at that location.
- The conference call will also be available live in a
listen-only format at 0011 1 617 213-8831 outside the United
States. The passcode is 31954843.
- replay will be available for 72 hours following the completion
of the live call by dialing 0011 1 617 801-6888 outside the United
States, with replay code 85474493. The Webcast replay will be
posted on our Web site for at least one year.
About Network Appliance
Network Appliance is a world leader in unified storage solutions
for today's data-intensive enterprise. Since its inception in 1992,
Network Appliance has delivered technology, product, and partner
firsts to simplify data management. Information about Network
Appliance™ solutions and services is available at
www.netapp.com.
This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
These statements include all of the statements under the Outlook
section relating to our forecasted operating results and metrics
for second quarter of fiscal 2007 and for all of fiscal 2007;
statements regarding our optimism for our 2007 fiscal year
generally; statements regarding the anticipated benefits of our new
products, technologies, and services, including Data ONTAP GX,
Decru Lifetime Key Management 3.0 Appliance, StoreVault, the
FAS6030, and the FAS6070; and statements regarding anticipated
benefits from partner offerings. These forward-looking statements
involve risks and uncertainties, and actual results could vary.
Important factors that could cause actual results to differ
materially from those in the forward-looking statements include
general economic and industry conditions, including expenditure
trends for storage-related products; risks associated with the
anticipated growth in network storage and content delivery markets;
our ability to deliver new product architectures and enterprise
service offerings; competition risks, including our ability to
design products and services that compete effectively from a price
and performance perspective; risks with new product introductions;
our reliance on a limited number of suppliers; our ability to
accurately forecast demand for our products and successfully manage
our relationships with our contract manufacturers; our ability to
expand our direct sales operations and reseller distribution
channels; our ability to develop, maintain, and strengthen our
relationships and product offerings with strategic partners; risks
associated with international operations; our ability to
successfully acquire and integrate complementary businesses and
technologies; foreign currency exchange rate fluctuations; and
other important factors as described in Network Appliance, Inc.
reports and documents filed from time to time with the Securities
and Exchange Commission, including the factors described under the
sections captioned "Risk Factors" in our most recently submitted
10-K and 10-Q. We disclaim any obligation to update information
contained in these forward-looking statements whether as a result
of new information, future events, or otherwise.
1 Earnings per share represent the diluted number of shares for all
periods presented.
2 Non-GAAP results of operations exclude amortization of intangible
assets, stock-based compensation, restructuring charges/recoveries,
net gain/loss on investments, and the related effects on income
taxes.
3 IDC's Worldwide Quarterly Disk Storage Systems Tracker Q1
2006.
4 Gartner Dataquest, "Market Share: Storage Management Software,
Worldwide, 2005," Aman Munglani and Nikhil Pank, June 28,
2006.
NetApp, Data ONTAP, NearStore, and Spinnaker Networks are
registered trademarks and Network Appliance, NetCache, and
StoreVault are trademarks of Network Appliance Inc. in the United
States and other countries. Decru is a registered trademark and
Lifetime Key Management is a trademark of Decru Inc., a NetApp
company. All other brands or products are trademarks or registered
trademarks of their respective holders and should be treated as
such.
Network Appliance Usage of Non-GAAP Financials
The Company refers to the non-GAAP financial measures cited above
in making operating decisions because they provide meaningful
supplemental information regarding the Company's operational
performance. These non-GAAP financial measures exclude amortization
of intangible assets, in-process research and development, stock
compensation, restructuring charges/recoveries, net gain/loss on
investments, and the related effects on income taxes as well as
certain discrete GAAP provision for income tax matters recognized
ratably for non-GAAP purposes. We have excluded these items in
order to enhance investors' understanding of our ongoing
operations. The use of these non-GAAP financial measures has
material limitations because they should not be used to evaluate
our company without reference to their corresponding GAAP financial
measures. As such, we compensate for these material limitations by
using these non-GAAP financial measures in conjunction with GAAP
financial measures.
These non-GAAP financial measures facilitate management's internal
comparisons to the Company's historical operating results and
comparisons to competitors' operating results. We include these
non-GAAP financial measures in our earnings announcement because we
believe they are useful to investors in allowing for greater
transparency with respect to supplemental information used by
management in its financial and operational decision making, such
as employee compensation planning. In addition, we have
historically reported similar non-GAAP financial measures to our
investors and believe that the inclusion of comparative numbers
provides consistency in our financial reporting at this time.
Investor contacts:
Network Appliance, Inc.
Tara Calhoun
Ph: (408) 822-6909
tara@netapp.com
Network Appliance, Inc.
Billie Fagenstrom
Ph: (408) 822-6428
billief@netapp.com
Press Contacts:
Mark Heers
Director Marketing and Alliance
Network Appliance
Tel: +61 2 9979 5623
mheers@netapp.com
Debbie Sassine
Max Australia
+612 9954 3492
debbie.sassine@maxaustralia.com.au