Can It Overcome The Competition?
Aside from its recent struggles with execution, NetApp must prove it can also distinguish itself from its competition, an area that has also been a source of concern for investors.
Its recent numbers, which have shown declining growth, suggest that investor concerns are correct. However, with data storage being a critical enterprise IT priority, I'd like to think that brighter days are ahead for NetApp if it is able to weather this storm. But it won't come easy.
Along with EMC, NetApp has to battle others, including HP, IBM and Dell (DELL), all of which are gunning for the same market. Nonetheless, it is NetApp that is somehow perceived to be the loser. Consequently, it is being punished. Its stock has lost almost 40% since April while EMC, a rival it has been in a neck-and-neck race with it all year, goes unscathed. It seems investors have made up their minds that perhaps EMC is the safer bet in terms of revenue prospects in high-end systems.While it is hard to dismiss EMC's brilliance in execution, it is equally difficult to ignore how discounted NetApp shares have become. I suppose investors are now torn between the two and feel the need to pick one over the other. That implies investors don't believe the market is able to support both companies. Further complicating matters is that IBM, HP and even a name such as F5 (FFIV), continue to jump into the enterprise pool.