NetApp's Revenue Increases, but Weak Profit Forecast Hurts Stock Price

By Chris Preimesberger  |  Posted 2011-02-16 Print this article Print

Overall revenues were up 25 percent from 2010, but a weaker-than-expected profit forecast sends stock value sliding 6 percent.

Despite fears in some industry quarters that storage systems makers have begun losing financial ground to cloud service providers, NetApp on Feb. 16 reported that its overall revenues are up 25 percent from a year ago, beating Wall Street projections.

However, it wasn't all good news for the company. Based on a weaker-than-expected profit forecast, the company's stock value slid 3.7 percent to about $58.50 in after-hours trading. It had been down about 6 percent to around $54.85 at the close of trading.

The Sunnyvale, Calif.-based network storage system provider, in its fiscal Q3 2011 report,  showed revenues totaling $1.268 billion compared with $1.012 billion for the same period a year ago. Net income was $172 million, or 42 cents per share, compared with $108 million (30 per share) for the same period in 2010.

The company forecast fiscal fourth-quarter profit of 49 to 53 cents per share. Analysts had expected 54 cents per share, according to Thomson Reuters.

NetApp CEO Tom Georgens said the weak outlook was no indication of a slowdown in sales or market share gains. Rather, a shortage of its new FAS3200 storage systems was blamed for the shortfall. Georgens said the company is trying to catch up with high demand for the cloud system-ready storage arrays.

"Our recent product launch further enhanced our competitive position and significantly surpassed our expectations," Georgens said. "We have experienced the fastest uptake for a new product in the history of the company and as a result, demand has exceeded the available supply of our new FAS3200 systems. We pride ourselves on our ability to execute this business with precision, even in the face of exceptionally rapid growth. We are committed to catching up to the demand as quickly as possible."

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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