NetApp Shares Surge on Revenue Beat

NetApp (NTAP Quote)'s shares surged more than 12% Thursday, after the company beat analysts' revenue estimate for the second quarter.

The storage company's quarterly report offered some positive news for the tech sector at a time of rapidly shrinking budgets.

Last week networking giant Cisco (CSCO Quote)sent shockwaves through the industry when it forecast a weak second quarter amid tight enterprise and service provider budgets.

NetApp reported a 15% increase in revenue from a year ago to $912 million, comfortably beating analysts' estimate of $904.6 million, although it was at the low-end of the company's guidance.

In early trading Thursday, shares of NetApp were up $1.29 to $11.68.

The storage specialist acknowledged the tough economy during a conference call late Wednesday and did not offer third-quarter revenue guidance.

"In the near term, the uncertain economic climate makes visibility and confidence of our pipeline less certain," said Steve Gomo, NetApp's chief financial officer.

Acknowledging the difficulty of forecasting the depth and duration of the economic downturn, NetApp's Chief Executive Dan Warmenhoven suggested third-quarter revenue could be flat or slightly up sequentially.

Analysts had estimated third-quarter revenue of $958.95 million and earnings of 34 cents a share.

In the conference call, NetApp executives said they plan to control the company's expenses, including implementing a hiring freeze in the second half of this fiscal year.

The storage firm, which competes with EMC (EMC Quote) and Hewlett Packard (HPQ Quote), came out of the second quarter with $2.3 billion in cash. NetApp reiterated in the conference call a desire to return to a 16% operating margin, compared to 11% in the second quarter.