Network Appliance, Like Cisco, Sees Demand Weakness

It’s not just Cisco (CSCO). Last week, to refresh your memory, The stock market got ripped after Cisco CEO John Chambers noted that the company is seeing softening in U.S. enterprise demand, particularly from the financial, automotive and retail sectors. On that call, Chambers noted that it was seeing particular weakness among its 25 largest customers, a group which includes 8 financial services companies.

Well, last night, Network Appliance (NTAP) CEO Dan Warmenhoven made similarly cautious remarks about spending from the very largest U.S. companies. In a conference call with analysts after the company’s fiscal second quarter earnings report, Warmenhoven said that its U.S. business ex federal grew only 9% in the U.S. in the latest quarter, and that revenue from its 22 largest U.S. ,commercial accounts fell 4% versus last year. He also warned that continued softness in U.S. enterprise market “may also seep into the U.K.”

Warmenhoven says financial services companies were the biggest problem, but that there was softness at other companies as well; he mentioned Texas Instruments (TXN) in particular. Warmenhoven made a grim joke, asking the analysts - who of course work for broker-dealers - to keep the problem to themselves. “Once you start exporting that set of problems to the rest of the economy, everybody is going to go in the tank,” he said.

Analyst reaction to the Network Appliance results were mixed. Bear Stearns analyst Andrew Neff raised his rating on the stock to Peer Perform from Underperform, given better-than-expected results and guidance and a more balance risk-reward picture. “Though we still have concerns that NTAP’s outlook may set an unrealistically high bar…the combination of improved execution and higher ests prompt us to move to Peer Perform.”

Goldman Sachs’ Laura Conigliaro repeated her Neutral rating on the stock, and zeroed in on the comments on IT demand. “The uncertainty surrounding softer U.S. commercial demand and the possibility of the slowdown expanding to other geographies will be a headwind,” she writes.

Network Appliance Thursday is off 55 cents, or 2.1%, at $26.06.