Network Appliance Announces Results for Fourth Quarter and Fiscal Year 2007

Sunnyvale, Calif. -- May 23, 2007 -- Network Appliance, Inc. (NASDAQ: NTAP), the leader in advanced networked storage solutions, today reported results for the fourth quarter and fiscal year 2007. Revenues for the fourth fiscal quarter were $801.2 million, an increase of 34% compared to revenues of $598.0 million for the same period a year ago and an increase of 10% compared to $729.3 million in the prior quarter.

For the fourth fiscal quarter, GAAP net income increased 51% to $89.6 million, or $0.23 per share1 compared to GAAP net income of $59.2 million, or $0.15 per share for the same period in the prior year. Non-GAAP2 net income for the fourth fiscal quarter increased 28% to $114.2 million, or $0.30 per share, compared to non-GAAP net income of $89.3 million, or $0.23 per share for the same period a year ago.

Revenues for fiscal year 2007 totaled $2.8 billion, an increase of 36% compared to revenues of $2.07 billion for fiscal year 2006.

For fiscal year 2007, GAAP net income increased 12% to $297.7 million, or $0.77 per share, compared to GAAP net income of $266.5 million, or $0.69 per share for fiscal year 2006. Non-GAAP net income for fiscal year 2007 increased 37% to $430.7 million, or $1.11 per share, compared to non-GAAP net income of $315.3 million, or $0.81 per share for fiscal year 2006.

"Network Appliance had a great finish to a great year. With 36% annual growth, NetApp clearly provides to customers the best value in the industry," said Dan Warmenhoven, chief executive officer. "And while we weren't immune from the March macroeconomic spending slowdown, our competitive differentiation and business fundamentals have never been stronger."

Outlook

  • Network Appliance expects sequential revenue for the first quarter of fiscal year 2008 to decline by 6% to 7%, which translates to about 20% to 21% growth year over year.
  • Including the implementation of SFAS123(R) and with current information and assumptions, the company estimates that the first quarter of fiscal year 2008 GAAP earnings per share will be approximately $0.14 to $0.15 per share. Network Appliance expects first quarter non-GAAP earnings per share to be approximately $0.24 to $0.25 per share.
Quarterly Highlights

During the fourth quarter of fiscal year 2007, NetApp broadened its Fibre Channel (FC) storage area network (SAN) portfolio and enhanced data management and data protection solutions with new products as well as broader and deeper partnerships. The company also continued to gain momentum in the SAN market while maintaining market leadership in both network-attached storage (NAS) and iSCSI.

Continuing its extension into the data center, NetApp announced two new midrange platforms aimed at making enterprise data center management easier for customers. The NetApp® FAS3040 and NetApp V3040 series created additional market opportunities for NetApp as it broadened its enterprise lineup and added functionality for FC SAN environments.

The NetApp FC SAN portfolio was further strengthened with the worldwide availability of new switches, including two new blades for the Brocade® 48000 Director, and the QLogic® SANbox® 9000 Core and SANbox 5600 Stackable Series of switches.

NetApp expanded its enterprise-class software line with NetApp ReplicatorX™ and NetApp SnapManager® software for use with SAP® solutions. NetApp ReplicatorX (formerly Topio TDPS) provides continuous data replication and recovery across a range of locations and storage systems, including EMC, HDS, HP, IBM, and NetApp. NetApp SnapManager software for use with SAP enhances application availability and provides increased storage management flexibility in SAP environments.

From a market perspective, according to IDC's Worldwide Quarterly Disk Storage Systems Tracker Q4 20063, NetApp continued to grow faster than the market in FC SAN in both revenue and capacity, year over year. The company grew FC SAN revenue at more than seven times the rate of both the market leader and the overall FC SAN market, and grew FC SAN capacity at more than four times the rate of the overall market.

In addition to FC SAN, NetApp continued to demonstrate leadership in the NAS and iSCSI storage markets, maintaining the number-one market share position in capacity shipped for NAS (38.9%) and in iSCSI for both capacity and revenue.

NetApp also continued to show significant gains in storage software, growing six times faster than the overall storage software market from 2005 to 2006, according to IDC's Worldwide Quarterly Storage Software Tracker Q4 20064.

NetApp leadership in innovation remained strong with the news that it has been positioned by Gartner, Inc., in the "Visionaries" quadrant in the Gartner Magic Quadrant for Storage Resource Management (SRM) and SAN Management Software, 20075.

On the partner front, NetApp unveiled several new solution enhancements and partner offerings with Brocade, Cisco, Fujitsu, Onaro, RSA, SAP, Symantec, and VMware to address a variety of data concerns, including data management, data protection, and data replication.

In corporate news, NetApp topped the "Most Admired Company" list in the computer peripherals industry in FORTUNE Magazine's 2007 "America's Most Admired Companies" rankings.

NetApp StoreVault™ S500 also received accolades in the fourth quarter as it was voted "Best Product of the Year" in Small Business Computing's 2007 Product Excellence Awards.

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, May 23, 2007, at 2:00 p.m. Pacific time. This press release and any other information related to the call will also be posted on the Website at that location.
  • The conference call will also be available live in a listen-only format at (800) 901-5231 in the United States and (617) 786-2961 outside the United States. The pass code for both numbers is 67805785.
  • A replay will be available for 72 hours following the completion of the live call by dialing (888) 286-8010 in the United States and (617) 801-6888 outside the United States, using replay code 37079987. The Webcast replay will be posted on our Website 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 that 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 the first quarter of fiscal 2008; statements regarding the anticipated benefits of our products, technologies, and services relative to the offerings of our competitors; 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 our ability to build non-deferred backlog to levels consistent with our past results and to increase our revenue over the next several quarters; 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 represents the diluted number of shares for all periods presented.
2
Non-GAAP results of operations exclude amortization of intangible assets, stock-based compensation expenses, other acquisition-related costs, in-process research and development, restructuring charges/recoveries, gain/loss on sale of assets and investments, certain other nonrecurring events, and the related effects on income taxes.
3
IDC's Worldwide Quarterly Disk Storage Systems Tracker, Q4 2006.
4
IDC's Worldwide Quarterly Storage Software Tracker, March 2007.
5
Gartner Inc., "Magic Quadrant for Storage Resource Management (SRM) and SAN Management Software, 2007."

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, other acquisition-related cost, restructuring charges/recoveries, gain/loss on sales of assets and investments, certain other nonrecurring events, and the related effects on income taxes as well as certain discrete GAAP provisions 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.

Press Contacts:
Mark Heers
Director Marketing and Alliance
Network Appliance
Tel: +61 2 9979 5623
mheers@netapp.com

Rachel York
Max Australia
Tel: +61 2 9954 3492
Rachel.york@maxaustralia.com.au