900 out at NetApp as profits fall

Storage vendor hails FlexPod growth despite annual and Q4 profit dip

NetApp is cutting 900 global jobs after its fourth-quarter profits dropped four per cent and its revenue figure failed to hit Wall Street expectations.

For the three months to 26 April, Netapp's net income fell four per cent annually to £174m (£115m) on sales which crept up one per cent over the same period to $1.72bn - missing Wall Street's forecast of $1.76bn.

For its full fiscal 2013, GAAP net income fell annually by 17 per cent to $505m, on revenue which rose two per cent to $6.3bn when compared to its fiscal 2012.

The storage vendor announced it will cut 900 jobs across its global operation as part of a restructuring plan which will cost the firm between $50m and $60m in a pre-tax charge.

Nicholas Noviello, NetApp's chief financial officer, said the move would benefit the vendor in the long term.

"We took this action to better align our resources and investments to our most strategic initiatives. While difficult, we believe these decisions position us well for the future, enabling us to achieve our business objectives, profitability and profit growth expectations," he explained.

NetApp's chief executive Tom Georgens claimed that Q4 saw an expansion of its leadership in flash storage as well as a strong uptake of its Data Ontap product.

Speaking on a conference call transcribed by Seeking Alpha, Georgens added that its FlexPod technology also grew considerably over Q4 and its whole fiscal year.

He said: "Our FlexPod business continues to grow as measured on every metric: partners, customers and sales. We have grown the FlexPod customer base almost 150 per cent from fiscal year 2012 and in Q4 we more than doubled booked business from Q4 a year ago."

For its fourth quarter, NetApp's indirect and OEM business accounted for 81 per cent of its revenue - up six per cent sequentially. Arrow and Avnet's combined revenue contribution grew 19 per cent sequentially, providing 37 per cent of its total revenue for its final quarter.

Georgens added that partnering continues to be a key aspect of its strategy.

Over the coming 12 months, NetApp plans to increase its current stock repurchase programme from $1.4bn to $3bn over the next three years. In the next 12 months, it plans to repurchase $2bn of stock, $1bn of which will be complete in the next four months.

NetApp expects revenue to be in the range of $1.48bn and $1.6bn in its fiscal 2014 first quarter.