Network Appliance Announces Results for Fourth Quarter and Fiscal Year 2004

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Sunnyvale, Calif. - May 18, 2004 -- Network Appliance, Inc. (NASDAQ: NTAP) today announced

results for the fourth quarter and fiscal year 2004. Revenues for the fourth fiscal quarter were $337.0 million, an increase of 39.5% compared to revenues of $241.6 million for the same period a year ago and a 13% increase compared to $297.3 million in the prior quarter.

For the fourth fiscal quarter, GAAP net income increased 47% to $36.4 million, or $0.10 per share(1) compared to GAAP net income of $24.8 million, or $0.07 per share for the same period in the prior year. Pro forma(2) net income for the fourth fiscal quarter increased 71% to $43.5 million, or $0.12 per share, compared to pro forma net income of $25.5 million, or $0.07 per share for the same period a year ago.

Revenues for fiscal year 2004 were $1.17 billion, an increase of 31% compared to revenues of $892.1 million for fiscal year 2003.

For fiscal year 2004, GAAP net income was $152.1 million, or $0.42 per share, compared to GAAP net income of $76.5 million, or $0.22 per share for fiscal year 2003. Pro forma net income for fiscal year 2004 increased 74% to $146.0 million, or $0.40 per share, compared to pro forma net income of $83.8 million, or $0.24 per share for fiscal year 2003.

"NetApp posted exceptional performance during the quarter with revenues growing 39.5% year over year. Our accelerating growth during the year was driven by the adoption of our new systems platforms, secondary storage for compliance applications, and our extended interconnect offerings for SAN and iSCSI," said Dan Warmenhoven, CEO of Network Appliance. "Investments we made over the past several years are paying off in our growth today and we plan to continue investing in our business to take full advantage of current and emerging market opportunities that will fuel our growth in the future."

Quarterly Highlights

Throughout the fourth quarter of fiscal year 2004, Network Appliance reinforced its position as a storage leader with milestone deployments, expanded partnerships, and continued market acceptance for its unified storage, NearStore®, and NetCache® families.

Network Appliance completed its acquisition of Spinnaker Networks, Inc. which will accelerate the delivery of the NetApp® "Storage Grid" architecture, enabling customers to leverage even more value from their storage and data infrastructures. Also during the quarter, the company announced several key industry milestones, including reaching the 100th iSCSI installation and the deployment of over a petabyte (1000 TB) of compliance storage in enterprise customer environments.

During the fourth quarter of fiscal year 2004, Network Appliance announced strategic partnerships with Agfa, AppIQ, BearingPoint, CreekPath, FileNet, Fujitsu, SmarTeam, Sun Microsystems and VERITAS to address a variety of data management, information lifecycle management (ILM), backup and recovery, and compliance/retention issues central to enterprise customers today. The company also announced support for the SNIA SMI-S standard to simplify SAN management and joined the Enterprise Grid Alliance (EGA) to drive industry adoption of Grid computing.

Also during the fourth quarter, global customers from a variety of industries worldwide selected Network Appliance to store, manage, and consolidate their business- and mission-critical data. Customer wins included AT&T, Baring Asset Management, Continental Teves AG, Cross Country Healthcare, Inc., Honda Motor Company, Lockheed-Martin, NASA Flight Dynamics, PDI/DreamWorks SKG, Renault-Nissan, State of Kentucky, The United States Federal Aviation Administration (FAA), University of Phoenix Online and Volkswagen Coordination Center.

Network Appliance™ product- and service-related highlights during the fourth quarter included three key awards, including the selection of Network Appliance customer Mustang Engineering for Storage Network World's (SNW's) "Best Practices in Storage" award for Data Lifecycle Management (DLM). Network Appliance also won Australian Technology & Business Magazine's coveted Editor's Choice award for the NetApp FAS250 unified storage system. Additionally, the company won the Service & Support Professionals Association (SSPA) prestigious WebStar Service Award for the fourth consecutive year.

Footnotes:
1. Earnings per share represents the diluted number of shares for all periods presented.

2. Pro forma results for all periods presented exclude amortization of intangible assets, in process research and development, stock compensation, restructuring charges, net gain or loss on investments, gain on sale of intangible assets, and the related effects on income taxes, as well as an income tax benefit from a nonrecurring foreign tax ruling.

Conference Call Information

  • The NetApp quarterly results conference call will be broadcast live via the Internet at http://investors.netapp.com/ on Tuesday, May 18, 2004 at 2:00 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 (800) 240-8621 in the United States and (303) 262-2190 outside the United States.
  • A replay will be available for 72 hours following completion of the live call by dialing (800) 405-2236 in the United States and (303) 590-3000 outside the United States, replay code 577898.

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 continue to drive "The evolution of storage.™" Information about Network Appliance solutions and services is available at www.netapp.com.

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NetApp, NearStore and NetCache are registered trademarks and Network Appliance and The evolution of storage are trademarks of Network Appliance, Inc. in the U.S. and other countries. All other brands or products are trademarks or registered trademarks of their respective holders and should be treated as such.

Network Appliance Usage of Pro Forma 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. In addition, 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. 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.

"Safe Harbor" Statement under U.S. Private Securities Litigation Reform Act of 1995

This press release contains forward-looking statements within the meeting of the Private Securities Litigation Reform Act of 1995. These statements include comments regarding: investing in our business to take full advantage of market opportunities and the acquisition of Spinnaker Networks which will accelerate the delivery of the NetApp "Storage Grid" architecture. These forward-looking statements involve risks and uncertainties, and actual results could vary. Factors that could impact our ability to achieve our goals include: general economic and industry conditions, including expenditure trends for storage related products; our ability to deliver new product architectures and products which meet market acceptance; our ability to design products which compete effectively from a price and performance perspective, our ability to successfully complete and integrate our proposed acquisition of Spinnaker Networks; and other important factors as described in Network Appliance, Inc.'s reports and documents filed from time to time with the Securities and Exchange Commission, including our most recently submitted 10-K and 10-Q.

Contacts:
PRESS CONTACT:
Dave Black
Voce Communications for Network Appliance, Inc.
(408) 822-3287
dblack@vocepr.com

INVESTOR CONTACT:
Network Appliance
Tara Calhoun
(408) 822-6909
tara@netapp.com