NetApp feels the pain from plummeting profit

Storage vendor's revenue flat and net income more than cut in half

Storage vendor NetApp's profits were more than cut in half during its first fiscal quarter, despite net revenue remaining stable.

Net income dropped annually from $140m (£89m) to $64m in the vendor's first quarter of FY13, which ended on 27 July, while revenue for the same period remained more or less stable at £1.44bn, compared with FY12's Q1 figure of $1.5bn.

The decrease in revenue of $68m from products was not made up for by the year-on-year revenue increase from software and services, which totalled $55m collectively.

Spending on sales and marketing increased by $20m to $482.9m along with an increased spend of $50m on research and development, on which NetApp spent $221.4m in Q1. Income from operations dropped from $176m in last year's Q1 to $80m in the same period this year.

Speaking on a conference call discussing the results, Nicholas Noviello, NetApp's chief financial officer, predicted a conservative approach to spending.

He said: "For Q2, though we expect a slightly higher spending level as annual employee merit increases take effect, we also expect to continue to maintain a level of conservatism in spending, given the overall business environment."

The vendor predicts revenue for Q2 will fall in the range of $1.5bn and $1.6bn.

Tom Georgens, president and CEO of NetApp, said the results reflected the company's predictions.

"NetApp produced... revenue in line with our prior guidance. We continue to deliver on multiple fronts, advancing our technology and partnerships. With our best-of-breed partnering strategy and ongoing innovation-led solutions, we enable our customers to scale their business without limits," he added.