Mixed fortunes for NetApp and Cisco last quarter

NetApp's net income soars 21.5 per cent annually while Cisco's slumps by more than half

NetApp emerged from the last quarter significantly better off than its ally Cisco in terms of net income, after the duo's respective profits went in opposite directions.

For the three months to 24 January - NetApp's third quarter - the storage giant's net income shot up 21.5 per cent annually to $192m (£115.6m), on sales which dipped by one per cent to $1.6bn. But for Cisco's second quarter ending 25 January, profits spiralled in the opposite direction, with its GAAP net income down 55 per cent to $1.4bn, on sales which slid 8.2 per cent to $11.2bn.

Cisco blamed a one-off charge of $655m related to faulty memory components sold in certain products between 2005 and 2010.

"Although the majority of these products are beyond Cisco's warranty terms and the failure rates are low, Cisco is proactively working with customers on mitigation," said Cisco's chief financial officer Frank Calderoni. "This results in a charge to product cost of sales during the second-quarter fiscal 2014."

Calderoni said the payment was not reflective of his firm's overall performance and so it was discounted from its non-GAAP net income figure, which fell only 7.4 per cent annually to $2.5bn.

Cisco boss John Chambers pointed to the UK as a stand-out performer in EMEA and praised the country's strong momentum. Although sales across the whole region fell two cent annually in the quarter, it was the best-performing area for Cisco globally as its Asia-Pacific and Americas businesses both reported a five per cent sales dip over the same period.

EMEA was a star region for NetApp too after its sales here grew three per cent annually, the same growth rate it enjoyed in its Asia-Pacific business. The storage firm suffered the impact of lower US federal spending, which drove its total Americas sales down five per cent year on year.

NetApp chief executive Tom Georgens pointed to strong performance from its channel partners over the last quarter.

"In terms of new customer acquisition, which is primarily driven by our channel partners, our new customer acquisition year to date has almost doubled what it was last year," he said. "I feel good about the channels."

NetApp's chief financial officer Nick Noviello said he remains confident about the firm's strategy but forecasts a modest quarter ahead.

"We have to anticipate that this challenging IT spending environment will continue," he said. "As a result, our target revenue range for Q4 is [between] $1.62bn and $1.72bn, which at the midpoint implies a four per cent sequential growth, but a three per cent decline in revenue versus Q4 last year."