Network Appliance Announces Results for First Quarter Fiscal Year 2004

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Sunnyvale, Calif. - August 19, 2003 -- Network Appliance, Inc.

Network Appliance, Inc. (NASDAQ: NTAP), today announced results for the first quarter of fiscal year 2004. Revenues for the first fiscal quarter were $260.5 million, an increase of 26% compared to revenues of $206.8 million for the same period a year ago and an 8% increase compared to $241.6 million in the prior quarter.

For the first quarter, GAAP net income increased 67% to $27.1 million, or $0.08 per share1, compared to GAAP net income of $16.2 million, or $0.05 per share for the same period in the prior year. Pro forma2 net income for the first quarter increased 59% to $28.7 million, or $0.08 per share, compared to pro forma net income of $18.0 million, or $0.05 per share for the same period a year ago.

"This quarter's results were highlighted by strong revenue growth and continued improvement in the operating profit margin," said Dan Warmenhoven, CEO of Network Appliance. "We continue to focus on our partnerships, innovative technology, and service and support solutions to help our customers meet their ever-increasing storage and storage management requirements."

Quarterly Highlights

In the first quarter of fiscal year 2004, Network Appliance continued to enhance its enterprise solutions, broaden its customer portfolio, expand its partnerships with other industry leaders, and gain market acceptance for its unified storage, iSCSI, NearStore™ and NetCache® solutions.

The company reinforced its commitment to interoperable management solutions by releasing the Manage ONTAP™ API Suite and Software Developers' Kit, which provides developers open access to Network Appliance™ application programming interfaces, enabling partners to more tightly integrate and synergize their management applications for optimal performance in NetApp® environments.

During the first quarter, customers from a variety of industries worldwide selected Network Appliance to store, manage and consolidate their business- and mission-critical data. Network Appliance enterprise storage and service wins include Ball State University; Continental Airlines; Siemens Business Services; Skidmore, Owings & Merrill LLP; Ticketmaster; and Visa Debit Processing Services. NearStore customer wins included EDS; Ford Motor Europe; and Jefferson Pilot Financial.

Network Appliance also expanded its channel strategy by signing distribution agreements with the North American Computer Products group of Arrow Electronics and Avnet Hall-Mark. The agreements enable new Network Appliance distributors to provide value-added resellers the tools, training, marketing, sales, and technical services to build and expand their storage businesses and open up greater market penetration opportunities for Network Appliance.

Network Appliance extended its strategic alliances with Oracle Corporation and Fujitsu Siemens Computers to offer low-cost, scalable, integrated server and storage platform solutions optimized for Oracle9i Database with Oracle9i Real Application Clusters (RAC) for Linux®. Network Appliance, Oracle, and Fujitsu Siemens Computers also opened Europe's first Enterprise Technology Center dedicated to assisting users with implementing enterprise solutions.

More than 500 customers have downloaded NetApp iSCSI protocols to test in their enterprise environments, and Network Appliance continues to take a leadership position in iSCSI. In addition, IBM announced support of Network Appliance's iSCSI solutions in IBM DB2 Universal Database environments, helping customers leverage the benefits of a simple and more affordable storage area network infrastructure.

In other partner-related news, Network Appliance extended its partnership with McDATA Corporation to deliver optimized networked storage solutions for companies of all sizes. NetApp also expanded its leadership efforts in Linux technology by partnering with Red Hat and SuSE Linux to develop enterprise storage solutions on Linux technology.

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

2. Pro forma results exclude amortization of intangible assets, stock compensation, restructuring charges, net gain or loss on investments, gain on sale of intangible assets, and the related effects on income taxes.

Conference Call Information

The NetApp quarterly results conference call will be broadcast live via the Internet from the investors section of Network Appliance's Web site at on Tuesday, August 19, 2003 at 2:00 p.m. Pacific time. The conference call will also be available live in a listen-only format at (800) 218-0530 in the United States and (212) 329-1452 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 547054.

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

NetApp and NetCache are registered trademarks. Network Appliance, NearStore, SnapVault, and SnapLock 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

The statement regarding market acceptance of unified storage and other NetApp solutions is a forward-looking statement within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include any statement regarding future events or the future financial performance of Network Appliance Inc. that involves risks or uncertainties. In evaluating these statements, readers should specifically consider various factors that could cause actual events or results to differ materially from those indicated, including without limitation: decline in the general economic conditions, customer demand for products and services, customer acceptance of product architectures, increased competition, inherent risk in the international operations, 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 its mostly recently submitted 10-K and 10-Q.

Network Appliance
Marla Dierkes

Network Appliance
Rod Mathews

Network Appliance
Billie Fagenstrom