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

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.”