NetApp, Inc. (NTAP): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

Summary:
NetApp reported better-than-expected first-quarter results. The company provided encouraging second-quarter guidance, reflecting the company's stringent cost control measures and continuing share buyback initiatives. Moreover, rapid adoption of the ONTAP system remains a growth catalyst, going forward. Additionally, NetApp is gaining momentum in flash based solutions with the newly introduced all-flash array, which will help the company to gain traction in the storage market. The recent product launches and product refreshes will drive revenues and improve cost efficiency, thus enhancing margins. Nonetheless, we believe that an uncertain IT spending outlook and competition from EMC Corp. remain headwinds. Continuous decline in OEM revenues also remains a cause of concern. Thus, we initiate our coverage on NetApp with a Neutral recommendation.

Overview:

California-based NetApp, Inc. NTAP provides enterprise storage and data management software and hardware products and services. The company's product line comprise two storage platforms - FAS storage platform and E-Series platform. FAS Storage Platform is based on the NetApp Data ONTAP operating system, which combines storage efficiency, data management and data protection. The FAS product line includes FAS6200, FAS3200 and FAS2000 series. The E-series platform helps in the deployment of Hadoop Big Data infrastructure. The E-series product line comprises EF540 Flash Array and the recently introduced EF550.

Leveraging these solutions the company addresses both the Storage Area Network SAN and Networked Attached Storage (NAS) markets. A networked storage necessarily provides external data repository that can be shared through LAN, thus freeing local storage space. Also, network storage also supports automated backup programs that prevent data loss.

The company also offers support, consulting and training services. The company markets and distributes products worldwide through a direct sales force, value-added resellers, system integrators, original equipment manufacturers and distributors.

NetApp derived 62.3% of fiscal 2014 revenues from Products (down 4% year over year), 14.5% from Software entitlements and maintenance (up 2% year over year), and 23.2% from Service (up 9% year over year).

During fiscal 2014, NetApp had two 10% plus customer, Arrow Electronics and Avnet Inc, who accounted for 22% and 16% of total revenue respectively.

On geographical basis, NetApp derives 56% of revenues in fiscal 2014 from Americas (United States, Canada and Latin America), 31% from Europe, Middle East and Africa (EMEA) and the rest 13% from Asia Pacific (APAC).

NetApp faces stiff competition from Dell, EMC, Hitachi Data Systems, Hewlett-Packard, International Business Machines Corp and Oracle Corp.

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