QUOTE AND NEWS
Forbes  Nov 21  Comment 
Buying from a startup seems pretty risky -- especially when there are well-established publicly-traded technology companies like EMC, NetApp, and VMWare who can sell you stuff. Why would a big company take the risk of switching to a startup's...
Market Intelligence Center  Nov 18  Comment 
NetApp Inc (NTAP) closed Monday at $42.23 and technical indicators recently have been bullish. Based in part on those numbers, MarketIntelligenceCenter.com's patented algorithms have identified a couple of attractive trading opportunities in...
Forbes  Nov 14  Comment 
In early trading on Friday, shares of NetApp (NTAP) topped the list of the day's best performing components of the Nasdaq 100 index, trading up 2.2%.  Year to date, NetApp registers a 2.1% gain.
Benzinga  Nov 13  Comment 
NetApp Inc. (NASDAQ: NTAP) reported mixed earnings results Wednesday. The stock reacted adversely Thursday, trading at $41.01, down 2.93 percent. After the earnings report, Brean Capital was one of the more bullish analysts. Below are...
Forbes  Nov 13  Comment 
The company expects OEM revenues to decline at 30-40% through fiscal 2015. On the other hand, NetApp’s branded revenues are expected to continue to grow through the end of the calendar year, owing to the seasonal rise in product demand from the...
Benzinga  Nov 13  Comment 
NetApp Inc. (NASDAQ: NTAP) reported its second quarter results on Wednesday after market close. Sherri Scribner of Deutsche Bank reviewed NetApp's quarterly results in a note to clients on Thursday. "The company did a good job of improving...
Forbes  Nov 13  Comment 
In early trading on Thursday, shares of Viacom (VIAB) topped the list of the day's best performing components of the Nasdaq 100 index, trading up 3.0%.  Year to date, Viacom has lost about 18.4% of its value.
Benzinga  Nov 13  Comment 
In a report published Thursday, Brean Capital analyst Ananda Baruah reiterated a Buy rating on NetApp Inc. (NASDAQ: NTAP), and raised the price target from $45.00 to $47.00. In the report, Brean Capital noted, “We remain Buy rated on NTAP...




 
TOP CONTRIBUTORS

Network Appliance, Inc. (NASDAQ: NTAP) sells hardware and computer software and services used to store and manage large amounts of data. Its customers range from small and medium businesses to Fortune 10 companies. Network Appliance's flagship product is a piece of hardware that can store hundreds of terabytes of data (1 terabyte = 1000 gigabytes). The company's hardware is technologically more advanced than traditional storage devices (such as local hard drives) because it automatically optimizes storage space with its internal operating system and uses networks to connect to a company's computers that are far away. Corporations and government agencies are demanding large data storage capacities because of an explosion of electronic information from scientific and population growth. In addition to high storage capacities, these institutions also demand products that keep their data safe, especially in a world where more and more confidential information is transferred through computer networks. NetApp sells software packages, such as data reduction services and disk-to-disk backup software, along with its core hardware product, to address this demand.

Furthermore, to help NTAP meet all of its customers' needs, it has partnerships with many industry leaders such as Cisco Systems (CSCO), International Business Machines (IBM), Microsoft (MSFT), Symantec (SYMC), among others.[1]

Business and Financials

For fiscal year 2010 (NTAP's fiscal year ended April 30, 2010), NTAP posted total sales of $3.93 billion, a substantial increase from the previous year's sales of $3.41 billion.[2] Furthermore, it was largely able to keep its total costs the same as 2009, enabling NTAP to increase its operating income from $47.2 million in 2009 to $488.4 million in 2010. As a result, its net income increased to $400.4 million in 2010, compared to $64.6 million in 2009.[2]

Business Segments

NetApp's product line can be divided into hardware and software, sold to both small and large enterprises (SMEs) and large corporations. The company's intercore business is its network-based data storage hardware.

Products Segment (Hardware) (60.6% of 2009 net revenues)[3]

  • FAS family: NetApp's flagship Fabric-Attached Storage device is a piece of hardware, used to store a company's data, that has its own operating system, disk arrays and built-in data management software. The device is used to keep all of a company's data together in one location, while making sure the data is accessible and stored efficiently. This lets a company avoid spending money on buying expensive memory disks and wasting time tracking down scattered pieces of information.
  • V-Series: A V-Series device is a piece of hardware that centralizes the data located on storage devices purchased from other data management vendors. This also makes sure the company's data is accessible and stored efficiently, and is especially valuable when the company's data is dispersed on storage devices purchased from many different companies.

Software Software entitlements and maintenance (17.3% net revenues)[3]

  • Data protection: NetApp sells software that protects confidential data from being lost, destroyed, or stolen. It does so through encryption, disk-to-disk back up, and data reduction. The security of a company's data has become critical because all kinds of confidential information is stored electronically.
  • Storage management: NetApp also sells software designed to make enterprise data management less complex, for example, by letting a company migrate large amounts of data to a centralized server and accounting for duplications. As a result, the company saves money by hiring less IT personnel and avoiding costly situations in which data is lost or mishandled.

Consulting/Services (22.1% net revenues)[3]

In addition to its products, NetApp also provides consulting services, such as helping a company use its IT software to maximize storage space, as well as technical support.

Key Trends and Forces

As companies and government agencies produce more and more data, they demand high-capacity data storage hardware

The growth of information that is transferred electronically creates high demand for hardware and software like those sold by NetApp: by some estimates, the growth rate of data needed to be stored has reached 100% a year. Sources of this growth include scientific advancements (such as genomic data in the field of bioengineering), higher standards for products/services (such as new categories of financial data kept by banks), and population growth (such as social security data). NetApp's products store hundreds of terrabytes of data efficiently using its built-in data mangement software. At optimum levels, a NetApp NAS system reduces the required raw data storage space by 80% in comparison to standard storage devices. Furthermore, since NetApp systems centralize all of a company's data, they make information more accessible in comparison to traditional hardware. For example, an employee in New York would be able to access changes to a document made by an employee in Hong Kong. Effective data management lets a company spend less time/money on IT and increases the productivity of the company's employees.

Increased physical risks to devices storing confidential data lead to greater demand for data protection hardware

More and more pieces of sensitive information, ranging from social security numbers to credit card numbers, are being stored electronically. In light of this trend, geopolitical events such as terrorist attacks, natural disasters such as hurricane season (both of which threaten to damage servers where data is physically stored), and laptop theft pose a challenge to the security of sensitive data. NetApp sells hardware devices and software packages that help companies minimize the cost of recovering from such calamaties. Therefore, as the value of a company's data increases, so does the company's demand for data protection products.

IT software vendors such as NetApp are especially vulnerable to the market volatility that affects their group of customers

While high-end data storage products improve the handling of a company's data, they are not an essential component of the company's business. Many companies see no need to purchase expensive, high-end data storage devices or spend money upgrading their preexisting data management systems. This is especially manifest during times of recession, since IT is an easy place for companies to save money. NetApp is also vulnerable to slow-downs in consumer spending in the media/entertainment and telecommunications industries.

Competitors

NetApp competes in the high-performance networked storage market. It competes against several large corporations, such as Hewlett-Packard Company (HPQ), International Business Machines (IBM), and Sun Microsystems (JAVA), that have business units in the data storage market. In addition, Dell (DELL) is a competitor through its reseller partnership with EMC (EMC) (see below). In comparison to these corporations, NetApp is more focused on data storage technology, letting it develop hardware that uses raw storage space more efficiently, and complementing the hardware with more software packages. To compete with larger corporations, NetApp offers discounts to attract retailers. Smaller competitors in the high-performance market segment follows. In addition to the following companies, NetApp competes against venture capital-backed companies that also focus on developing advanced data storage technology.

  • EMC (EMC) - EMC is one of NetApp's most serious competitors, with business segments in information storage, content management and archiving, and RSA information security.
  • Brocade Communications Systems (BRCD) - Brocade sells data storage products that focus on storage area networks, a specific method of inputting data for storage that is subsumed by NetApp's hardware.
  • Data Domain Inc. (DDUP) - Data Domain specializes in data management technology, such as dedupliation and archiving services, as well as recovering data from disasters.
  • QLogic (QLGC) - QLogic sells data storage devices mainly to original equipment manufacturers.

References

  1. NTAP 10-K 2010 Item 1 Pg. 5
  2. 2.0 2.1 NTAP 10-K 2010 Item 6 Pg. 36
  3. 3.0 3.1 3.2 NTAP 10-K 2009 Item 7 Pg. 44
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