Network Appliance Announces Record Fiscal Third Quarter Results as Revenues Grow 30% Year-Over-Year

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Sunnyvale, Calif. - February 17, 2004 -- Network Appliance, Inc. (NASDAQ: NTAP) today announced results for the third quarter of fiscal year 2004. Revenues for the third fiscal quarter were $297.3 million, an increase of 30% compared to revenues of $228.5 million for the same period a year ago and an 8% increase compared to $275.6 million in the prior quarter.

For the third fiscal quarter, GAAP net income increased 104% to $40.2 million, or $0.11 per share(1) compared to GAAP net income of $19.7 million, or $0.06 per share for the same period in the prior year. Pro forma(2) net income for the third fiscal quarter increased 76% to $40.1 million, or $0.11 per share, compared to pro forma net income of $22.7 million, or $0.06 per share for the same period a year ago.

Revenues for the first nine months of the current fiscal year totaled $833.3 million, compared to revenues of $650.5 million for the first nine months of the prior fiscal year.

For the first nine months of the current fiscal year, GAAP net income was $115.6 million, or $0.32 per share, compared with income of $51.6 million, or $0.15 per share for the same period in the prior year. Pro forma net income for the first nine months of the current fiscal year totaled $102.4 million, or $0.28 per share, compared to pro forma net income of $58.3 million, or $0.17 per share for the first nine months of the prior fiscal year.

"I am extremely pleased with our performance this quarter. Revenue for the third fiscal quarter grew year-over-year by 30% to record levels and we also achieved our highest-ever net profit level," said Dan Warmenhoven, CEO of Network Appliance. "Our results this quarter mark the return to our target business model, and we remain confident about the market opportunity ahead of us."

Quarterly Highlights

In the third quarter of fiscal year 2004, Network Appliance continued to reinforce its position as a storage leader by expanding its unified storage, iSCSI, and NearStore® solutions, extending its partnerships, and winning enterprise customers across all target industries.

The company announced its Storage Grid strategy to enable customers to leverage more value from their storage and data infrastructures. As part of the strategy, Network Appliance announced the FAS980 and FAS980c, the newest members of the NetApp® FAS900 platform, along with key elements in extending the NetApp unified storage systems into the high-end. Also unveiled during the quarter, the NetApp NearStore R200 storage system and SnapVault™ software solution for backup, compliance, reference, archive, and "secondary" data needs. NetApp also announced the integration of RAID-DP (double-disk parity) into its full line of enterprise storage systems to increase data protection in the event of multiple storage-related disk failures. In addition, the company announced that its NetApp gFiler™ supports unified NAS and SAN consolidation for IBM storage system platforms.

During the third quarter of fiscal year 2004, Network Appliance also announced deeper and more strategic partnerships with Cisco, VERITAS, FileNet, IXOS Software, and Princeton Softech to address a variety of data management, information life cycle management (ILM), backup and recovery, and compliance/retention issues central to enterprise customers today.

Global customers from a variety of industries worldwide also selected Network Appliance to store, manage, and consolidate their business- and mission-critical data in the third quarter. Unified storage, iSCSI, SAN, NAS, and NetCache® wins included AutoNation Inc., Bibliotheque nationale de France, Inc., HDFC Standard Life, Interval International, Kimberly-Clark, Oracle, Telefonica de Argentina, and Volvo IT AB. NearStore customer wins included Centraal Bureau voor de Statistiek, Cisco, Dassault Systemes, E.ON, First Assist, Inc., and Nielsen//NetRatings.

The company reaffirmed its commitment to iSCSI technology by completing Microsoft's Design for Windows Logo testing for the NetApp FAS960, FAS960c, FAS940c, F825, F825c, FAS250, and NearStore R150 to ensure that they meet Microsoft standards for iSCSI compatibility and interoperability with the Windows® platform. In addition, Network Appliance extended support for IBM Lotus applications by announcing iSCSI support for NetApp SnapManager® for Lotus Domino.

Network Appliance also furthered its Linux® strategy by joining the Open Source Development Labs, a global consortium dedicated to accelerating the adoption of Linux.

Also during the quarter, Network Appliance announced its intention to acquire Spinnaker Networks, Inc., a privately held company based in Pittsburgh, Pennsylvania. The proposed software technology acquisition reaffirms the Network Appliance business model and accelerates the company's vision for a Storage Grid future.

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, 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 from the investors section of Network Appliance's Web site at http://investors.netapp.com/ on Tuesday, February 17, 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) 867-1054 in the United States and (303) 262-2175 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 568756.

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, SnapManager, and NetCache are registered trademarks and Network Appliance, gFiler, SnapVault, 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: the return to our target business model and our confidence in the opportunity ahead of us; our Storage Grid strategy; the nature and goals of our strategic partnerships; our proposed acquisition of Spinnaker Networks and the expected benefits thereof; and our vision for a Storage Grid future. 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:
Network Appliance
Marla Dierkes
408-822-3580
marla@netapp.com


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