NetApps Profits Swell

Network Appliance's profit increased to $24.8 million for its fourth quarter, up from $19.7 last quarter and more than triple its $7.8 million figure a year ago.

Network Appliance Inc.s profit increased to $24.8 million for its fourth quarter, up from $19.7 last quarter and more than triple its $7.8 million figure a year ago, officials said Tuesday.

Revenue for the quarter was $241.6 million, up from $228.5 million in the prior quarter and $204.9 million a year ago. Profit for the year was $76.5 million, on $892.1 million in revenue, both up from just $3 million and $798.4 million, respectively, in 2002, officials said.

"I am very pleased with our performance during this quarter. This has been a terrific year for Network Appliance," CEO Dan Warmenhoven said in a conference call from the storage specialists Sunnyvale, Calif., office.

Network Appliance wont rest on its laurels, Warmenhoven said. The companys plans include growing its professional services division and its partnership with Accenture Ltd., and, this summer, launching a new low-end product, the FAS250.

The FAS250 is "our entry-level unified storage appliance for the distributed enterprise," Warmenhoven said. It will connect with both iSCSI and network-attached storage protocols, and will hold 1 terabyte of data in a 3U form factor. It can be upgraded to any other Network Appliance NAS system and will cost from $15,000 to $30,000. "Itll actually be the first of a family. More information on this ... will be coming later in the summer," Warmenhoven said.

NetApp is having success with its storage-area network configurations. "Approximately 13 percent of Filer and NearStore units shipped with the SAN protocol enabled," he said. NearStore is the companys disk-based backup appliance, shipping 2 petabytes, or approximately 10 percent of revenue this quarter, he added.

As has become the Network Appliance executives custom, Warmenhoven mocked competitive threats, but this time it was Microsoft Corp.s Server Appliance Kit, not usual rival EMC Corp. "Windows NAS is still not scalable. [It has] the least robust method of managing snapshots, its a copy utility," he said.

Regarding Microsofts new storage support in Windows Server 2003, "we think instead of being more competitive, what theyre actually doing is providing the hooks which we can leverage," Warmenhoven said. Much of the Server Appliance Kits market share has come from merely upgraded file servers, not actual NAS purchases, he asserted.

The companys partnership with Hitachi Ltd. has a promising customer pipeline but doesnt yet have a significant contribution to revenues, officials said. Also, Network Appliance, which currently has 2,345 employees, will buy back $150 million in common stock, they said.

"We believe [Network Appliance] continues to execute well in a difficult environment," said analyst Harry Blount, of Lehman Bros. Inc., in New York. "Revenues were better than our estimates," he said.

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