Network Appliance Jumps on Strong Outlook, Buyback

Shares of Network Appliance Inc. climbed as first-quarter earnings topped recently-lowered estimates and the provider of network storage solutions forecast stronger-than-expected sales for the fiscal second quarter and said it would buy back up to $1B of stock. NTAP said it earned $34.3M ($0.09/share) on revenue of $689.2M, compared with $54.7M ($0.14/share) on revenue of $621.3M a year ago. Excluding items, earnings were $76M ($0.20/share) compared to $96.6M ($0.25/share) last year, and above the $0.19 average analyst estimate. Analysts had expected revenue of $686.4M, on average. The company had warned earlier this month that results would fall far short of its previous guidance due to cutbacks in orders from large U.S. customers. "We are clearly disappointed with our revenue growth this quarter, yet confident about our underlying business strength and continued health," said CEO Dan Warmenhoven. "Our bookings growth and cash flow are both very encouraging, and we are optimistic about getting back on track for higher growth in revenue and profits going forward" (see full earnings call transcript). Against that backdrop, the company forecast second-quarter earnings of $0.16-$0.18/share, or $0.24-$0.26/share excluding items, on revenue of $752M-$768M. Analysts were expecting adjusted earnings of $0.25/share on revenue of $742.8M. Fourth-quarter sales were projected at $1B by NTAP. First-quarter bookings grew 27%; analysts said backlog and bookings suggest there is pent-up demand for data storage. In addition to the new repurchase plans, $200M remains available from a previous authorization, and the company said it may buy back as much as $500M in stock during the second quarter. Shares, which have fallen 38% this year, rose 5.8% to $25.56 AH, extending a 3.1% gain in the regular session.

Sources: Press release, Reuters, Bloomberg
Commentary: Network Appliance Tumbles On Slashed Forecast • Is Network Appliances on Sale? • Network Appliance: Choosing Growth Over Earnings
Stocks/ETFs to watch: NTAP. Competitors: EMC, HPQ, MSFT. Partners: IBM. ETFs: IAH, PHW

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