Earnings Preview: NetApp

Aug.15.12 | About: NetApp, Inc. (NTAP)

NetApp (NASDAQ:NTAP) is expected to report Q1 earnings after the market close on Wednesday, August 15, with a conference call scheduled for 5:30 pm ET.

Guidance

The consensus estimate is 38c for EPS and $1.46B for revenue, according to First Call. NetApp delivered upbeat Q4 results, but on last earnings call, management provided an "unusually cautious" outlook for its Q1 results. This caused the stock to get crushed, causing it to lose a full one-third of its value over the previous two months, which made some believe the company could be more susceptible to a buyout. Among the potential suitors speculated are IBM (NYSE:IBM), Oracle (NYSE:ORCL) and Cisco Systems (NASDAQ:CSCO), a company it has partnered with on a new cloud product. ISI Group analyst Brian Marshall theorized that NetApp could attract a takeover bid of $50 a share. NetApp sees Q1 non-GAAP EPS between 34c-39c and revenues in the range of $1.4B-$1.5B, a decline of 12%-18% sequentially. Non-GAAP gross margins are expected to be in the range of 60%-61%, while non-GAAP operating margins are projected at roughly 11.5%, plus/minus 5%.

Analyst Views

After NetApp severely disappointed investors on guidance last quarter, ThinkEquity expects the company to return to"business as usual," expecting NetApp to show upside to Q1 estimates and guide in-line with Q2 estimates. ThinkEquity believes NetApp's Q1 guidance adequately incorporated prevalent environmental risks.