Wells Fargo Securities Sees Cost Actions as Reflecting Demand Pressures for NetApp

In a report published Thursday, Wells Fargo Securities analyst Maynard Um reiterated a Market Perform rating on

. In the report, Wells Fargo Securities noted, “NetApp announced its plans to realign its workforce, which would result in a global headcount reduction of approximately 600 employees. We believe these actions are likely a reflection of the soft demand environment and indicative of the pressures particularly in light of the fact that the company did a larger resource alignment just 10 months back impacting 900 employees globally (at that time, NetApp was seeing a constrained IT spending environment and large declines in its OEM business). We believe the IT spending environment has remained constrained as reflected in NetApp's recent revenue performance (NetApp has missed Street revenues estimates in last four quarters by 1-3% and has reported sales below the mid-point of its guidance range in each of these four quarters). In the last 11 quarters, NetApp has missed Street revenue estimates in 7 quarters, roughly in line in three and beat estimates in only one. More recently the macro pressures seem to have increased (soft U.S. Fed demand, continued caution around OEM business and a decline in Americas commercial business in FQ3). In addition to budget constraints, customer uncertainty around future cloud models is also creating some pause (and not helping sentiment).” NetApp closed on Wednesday at $37.85.