Network Appliance Announces Results for First Quarter Fiscal Year 2007
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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 share1 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-GAAP2 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 2½% 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 (866) 700-0133 in the United States
and (617) 213-8831 outside the United States. The passcode for both
numbers is 31954843.
- 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,
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 that simplify data management. Information about Network
Appliance solutions and services is available at
www.netapp.com.
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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.
Press Contact:
Network Appliance, Inc.
Jodi Baumann
Ph: (408) 822-3974
jodi@netapp.com
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