This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

NetApp Building Cloud, Storage Capabilities, Value

NEW YORK ( TheStreet) -- There's often no prestige in being considered second best at what you do. But when your current market is expected to grow in demand by close to 200% over the next three years, "prestige" becomes overrated pretty quickly. This makes the prospects of NetApp (NTAP - Get Report) all the more interesting.

While this company plays second fiddle to market leader EMC (EMC - Get Report) in the realm of enterprise data storage and overall "Big Data", NetApp has been steadily building its storage/cloud capabilities while others such as IBM (IBM - Get Report) and Hewlett-Packard (HPQ - Get Report) have fallen off the grid. This means astute investors can still do well with second place. And if my suspicions are correct, the implications of "No. 2" may not matter for very long.

Revenue was up 1% in the most recent quarter, while growing 5% sequentially. While that wasn't up to the company's usual standard, it was still enough beat the low-end of management's guidance. Besides, NetApp wasn't significantly outperformed by EMC, which posted growth of only 3%. Product revenue was unusually weak, though -- falling 2% year over year. But this was offset by a better performance in service revenue, which grew 8%.

Also, to keep things in the proper perspective, HP's overall storage business, which consists of both converged and traditional storage, lost 13% year over year. But NetApp left no questions in terms of profitability. With the help of an improved product mix, non-GAAP gross margins advanced 170 basis points year over year to 60.1%, which led to a 4% increase in net income to $253 million.

This tells me that management has figured out ways to drive gross-margin expansion with a richer mix of products, which continues to accelerate cash flow. And as noted above, this is likely just the beginning of NetApp's growth, especially since the total available market for "Big Data" is projected to grow by as much as $17 billion over the next three years. The current market now stands at $6 billion.


To that end, fiscal 2014 first-quarter guidance seemed a tad conservative. Management expects revenue in the range of $1.47 billion to $1.57 billion, which suggests year-over-year growth of just 5.6%. NetApp expects non-GAAP gross margin to be up 1% sequentially, while non-GAAP operating margin is projected in the range of 13.5% to 14.0%, up 1.5% to 2% sequentially.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Submit an article to us!
SYM TRADE IT LAST %CHG
CSCO $28.89 0.00%
EMC $26.48 0.00%
HPQ $33.16 0.00%
IBM $173.08 0.00%
NTAP $35.91 0.00%

Markets

DOW 17,928.20 -142.20 -0.79%
S&P 500 2,089.46 -25.03 -1.18%
NASDAQ 4,939.3270 -77.6020 -1.55%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs