NetApp Changes Top Leadership, Reports Relatively Strong Earnings

By Chris Preimesberger  |  Posted 2009-08-19 Print this article Print

President/COO Tom Georgens is elevated to president and CEO, replacing longtime CEO and board chairman Dan Warmenhoven, who remains as executive chairman. Despite a 4 percent drop in revenues, NetApp outperformed Wall Street estimates in the face of the sluggish economy.

Network storage provider NetApp made news on two fronts on Aug. 19: It reported earnings for the first quarter of its fiscal year 2010 and made a change at the top in its daily operations. 

President and Chief Operating Officer Tom Georgens (pictured) has been elevated to president and CEO. Longtime CEO and Chairman of the Board Dan Warmenhoven-who put in 14 years as chief executive officer-will take the new role of executive chairman. Georgens had served as NetApp's COO and president since January 2008.

The Sunnyvale, Calif., storage software and hardware maker reported revenues for the quarter of $838 million, down 4 percent compared with revenues of $869 million for the same period a year ago but higher than analyst expectations. Non-GAAP EPS of 22 cents a share beat Wall Street estimates by two cents.

The company said that it will not provide specific earnings guidance for next quarter, citing "reduced visibility caused by the recent changes in the macroeconomic environment."

"Given the economic backdrop, NetApp performed well in the first quarter. With year-over-year revenue growth roughly flat on a constant currency basis, our revenue performance clearly outpaced the storage industry at large," Georgens said on a conference call with analysts, journalists and investors.

Georgens also pointed out that NetApp's operating income and operating margin both increased year over year and produced its highest gross margin percentage in more than five years.

During the conference call, Georgens addressed NetApp's failed attempt to acquire Data Domain, which was bought by competitor EMC in July for about $2.3 billion following a monthlong bidding war.

"Data Domain certainly would have brought a synergy to our product line [bringing disk-based backup and virtual tape libraries with it]," Georgens said.  "But we already have a high attached rate of disk-based backup. Data Domain would have accelerated our presence in this sector, but the absence will not make vulnerable the core aspects of our business."

'Cloud Computing Will Have a Dramatic Impact on Us'

"We have been successful in selling into virtual server environments. Cloud computing will have a dramatic impact on us in the future. We are uniquely positioned to capitalize on it. Customers are urgently exploring outsourcing to the cloud and looking for best-of-breed suppliers to provide data center products. Our unified architecture and seamless scale-out are attractive to [cloud service] aggregators. ... This trend will accelerate over next few years, and we will grow commensurately."

Georgens joined NetApp in October 2005 and served until January 2007 as NetApp's executive vice president and general manager of enterprise storage systems before being elevated to president/COO in January 2008.

Before joining NetApp, Georgens spent nine years at Engenio, a subsidiary of LSI Logic-including the last two years as CEO.

"Over the past four years, Tom has proven his leadership capabilities in both strategy development and day-to-day operations," Warmenhoven said. "His appointment represents a continuity in leadership at NetApp. The company is well-positioned, and I look forward to supporting Tom as he leads NetApp to the next stages of growth."

Company Did Not Have to Drop Prices

"NetApp had a very solid quarter, especially when sales in Europe and Asia were not great," Enterprise Strategy Group storage analyst Brian Babineau told eWEEK. "More importantly, they held prices pretty tight-they didn't have to give away product.

"They showed tremendous execution. They did have a little tailwind as they had an extra week in their quarter, which, as management commented, contributed to a $20 million opportunity."

Chris Preimesberger Chris Preimesberger was named Editor-in-Chief of Features & Analysis at eWEEK in November 2011. Previously he served eWEEK as Senior Writer, covering a range of IT sectors that include data center systems, cloud computing, storage, virtualization, green IT, e-discovery and IT governance. His blog, Storage Station, is considered a go-to information source. Chris won a national Folio Award for magazine writing in November 2011 for a cover story on and CEO-founder Marc Benioff, and he has served as a judge for the SIIA Codie Awards since 2005. In previous IT journalism, Chris was a founding editor of both IT Manager's Journal and and was managing editor of Software Development magazine. His diverse resume also includes: sportswriter for the Los Angeles Daily News, covering NCAA and NBA basketball, television critic for the Palo Alto Times Tribune, and Sports Information Director at Stanford University. He has served as a correspondent for The Associated Press, covering Stanford and NCAA tournament basketball, since 1983. He has covered a number of major events, including the 1984 Democratic National Convention, a Presidential press conference at the White House in 1993, the Emmy Awards (three times), two Rose Bowls, the Fiesta Bowl, several NCAA men's and women's basketball tournaments, a Formula One Grand Prix auto race, a heavyweight boxing championship bout (Ali vs. Spinks, 1978), and the 1985 Super Bowl. A 1975 graduate of Pepperdine University in Malibu, Calif., Chris has won more than a dozen regional and national awards for his work. He and his wife, Rebecca, have four children and reside in Redwood City, Calif.Follow on Twitter: editingwhiz

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