NetApp (NTAP) chairman and ex-CEO Dan Warmenhoven, 62, is retiring from his position following the company's September annual meeting. CEO Tom Georgens has been named chairman and "assumes the associated duties" immediately.
Lead independent director and ex-PricewaterhouseCoopers CEO Nicholas Moore, 71, will also retire from the board in September. Michael Nevens, a senior advisor to P-E firm Permira and a NetApp board member since 2009, will replace him.
After falling 3.5% Y/Y in Q3, external disk storage system sales rose 2.4% in Q4, says IDC. The growth came even though sales of the servers that interact with these systems fell an estimated 4.4%.
Total disk storage sales, which include storage subsystems found within servers, rose 1.3% in Q4 after dropping 5.6% in Q3. IDC attributes the turnaround to "traditional year-end budget flushes, improved economic sentiment, and a strong desire to address long-standing storage infrastructure inefficiencies."
Market leader EMC, which posted strong Q4 numbers to go with light guidance, saw its external disk share rise 220 bps Y/Y to 32.9%, and its total disk share rise 200 bps to 25.8%. The gains largely came at the expense of restructuring IBM, whose shares respectively fell 190 bps and 200 bps to 13% and 14%.
H-P's (HPQ) external disk share rose 30 bps to 9.6%, and its total disk share 40 bps to 16.3%. NetApp (NTAP), which delivered nearly in-line revenue and soft guidance last month, saw its external share fall 10 bps to 11.5%, and its total share stay flat at 9%. Private Dell's total share fell 140 bps to 9.9%.
NetApp (NTAP) expects FQ4 revenue of $1.62B-$1.72B and EPS of $0.77-$0.82. While the latter is in-line with an $0.80 consensus, the former is below a $1.73B consensus.
Though FQ3 revenue missed estimates, NetApp was able to beat EPS forecasts with the help of $507M worth of buybacks. From the looks of things, buybacks will also provide a lift to FQ4 EPS.
Product revenue (drives future maintenance/service revenue) -4% Y/Y to $10.015B. Software entitlements/maintenance revenue -1% to $227M, services +8% to $368M.
OEM revenue, hurt by partner IBM's weak storage sales, fell 23% Y/Y to $157.3M. NetApp-branded revenue rose 2% to $1.45B.
Gross margin rose 310 bps Y/Y to 63.5%. The triggers: A 400 bps improvement in product GM to 57.1%, and a mix shift towards software/services. Thanks to job cuts, sales/marketing spend fell 4% to $475.9M.
Rival EMC reported healthier storage sales last month, albeit while issuing soft guidance.
A number of enterprise IT hardware names are moving higher on a slightly down day for the Nasdaq after Oracle provided better-than-expected numbers for its long-struggling hardware unit.
After falling 14% Y/Y in the August quarter and badly missing estimates,, Oracle's hardware product sales only fell 3% in the November quarter, a decline that's favorable to a guidance midpoint of -6%. In addition, Oracle has set an FQ3 guidance range for the business of -2% to +8%.
H-P (HPQ +2.4%), EMC (EMC +1.7%), NetApp (NTAP +1.3%), SGI (SGI +2.1%), Cray (CRAY +1.5%), Fusion-io (FIO +1.9%), and newly-public Nimble Storage (NMBL +1.8%) are among the companies rallying.
Mellanox (MLNX +5.5%), which supplies InfiniBand hardware for Oracle's engineered systems (now 30% of hardware product revenue), is up sharply.
Citing the impact of faster-than-expected cloud computing adoption, Morgan Stanley's Katy Huberty has downgraded Accenture (ACN -1.9%) and NetApp (NTAP -0.9%) to Equal Weight. Meanwhile, citing more favorable risk/reward, Huberty has upgraded Western Digital (WDC +2.8%) to Overweight and Brocade (BRCD +0.5%) to Equal Weight.
Concerns about the impact of cloud services on sales of IT outsourcing services such as Accenture's, and enterprise storage hardware such as NetApp's, have been around for some time. Recent numbers (I, II) provided by the companies, and by peers such as IBM and EMC, haven't done much to soothe those fears. Synergy Research recently estimated sales of cloud infrastructure (IaaS) and app platform (PaaS) services rose 46% Y/Y in Q3.
Accenture now trades at 15x estimated FY14 (ends Aug. '14) EPS exc. net cash, and NetApp trades at just 10x estimated FY14 (ends April '14) EPS exc. net cash.
Western Digital, whose hard drive sales have been pressured by PC weakness and SSD adoption, recently began shipping its first helium drives (they're lighter, denser, and more power-efficient than traditional drives), in part to better meet the needs of Web/cloud companies.
NetApp (NTAP) expects FQ3 revenue of $1.575B-$1.675B and EPS of $0.68-$0.73, largely below a consensus of $1.69B and $0.73. The enterprise storage giant asserts it's gaining share, but also says it's facing "an ongoing uncertain macro environment."
Revenue grew only 1% Y/Y in FQ2 after rising 5% in FQ1. Branded (non-OEM) revenue rose 5% vs. 9% in FQ1.
However, with NetApp's numbers having come a month after EMC and IBM provided disappointing Q3 storage hardware figures, some bad news was priced in.
$151M was spent on buybacks. That helped EPS beat consensus in spite of a revenue miss.
Enterprise storage sales have been hurt by soft IT hardware spend, U.S. federal weakness, and the cannibalizing impact of cloud infrastructure services running on commodity hardware.