Sinking sales fail to ground rocketing profits at NetApp

Storage vendor's revenue let down by bigger-than-expected slump in OEM sales

Worse-than-expected performance in NetApp's OEM business has led the vendor to lower its guidance for its next quarter after it dragged down its sales figure in Q4.

For the three months to 25 April, NetApp's net revenue fell four per cent year on year to $1.65bn (£98m) but net income still managed to jump 13 per cent to $197m over the same period. For the full year, net income rocketed 26 per cent to $637.5m on revenue which remained flat at $6.33bn.

NetApp put the Q4 sales slump down to "seasonal revenue dynamics" and what it described as conservatism in its OEM business. In Q4 its OEM revenue dropped by more than a third annually, which prompted it to lower its revenue target for Q1 to between $1.42bn and $1.52bn, which will signal a three per cent year-on-year slump.

Product revenue was another headache for NetApp in its fourth quarter after it fell eight per cent annually to $1bn. Its software entitlements and maintenance revenue was flat compared with last year, while services sales rose seven per cent over the same period.

The vendor did not give a specific breakdown of its regional sales but said EMEA and the Asia-Pacific region were "up slightly" which offset lower sales in the Americas which were prompted by lower US federal spending.

Tom Georgens, NetApp's chief executive, said: "We delivered revenue within our guidance range... despite unanticipated headwinds in our OEM business.

"In calendar 2013 we outgrew the market, gained share and increased gross margins, demonstrating our competitive advantage and the value we deliver."