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NetApp's Still Heading to $50

NEW YORK ( TheStreet) -- It doesn't take much for an already finicky group of investors to hop off a tech company's bandwagon, especially when that company is entrenched behind a market leader that can presumably do no wrong. This seems to be what has happened to NetApp (NTAP - Get Report), whose stock has been down as much as 5% since the company reported fiscal first-quarter earnings.

While I won't deny that NetApp's fight for market share against rival EMC (EMC) in the enterprise storage space has been a struggle, it's not as if NetApp hasn't been making meaningful dents. EMC remains the undisputed leader, yes. But in the process, not only has NetApp steadily built its storage/cloud capabilities, but the company has also bloodied the noses of less formidable storage rivals like IBM (IBM), Dell (DELL) and Hewlett-Packard (HPQ) - all of which have essentially fallen off the grid in realm of Big Data.

To that end, I believe that the Street has exaggerated NetApp's first-quarter numbers, which I will admit weren't stellar. But nevertheless, NetApp's 5% year-over-year increase in revenue is nothing to shake a stick at. Let's not forget that the enterprise spending recovery on which several prominent analysts have mortgaged their reputations, has yet to materialize. The earnings reports and weak guidance that we've seen so far from the likes of Brocade (BRCD) and Cisco (CSCO) suggest that companies are still (to some degree) starving themselves. But they can only do so for so long.

So I refuse to buy the argument that's now being sold by some analysts that NetApp is now a company on the decline. This is even though NetApp posted not only a 4% increase in product revenue, but a 9% increase in the company's branded business - its largest increase in almost two years. And even though management did offer somewhat downbeat guidance, I was encouraged by the fact that management said that the company should post similar branded revenue growth in the second quarter.

The branded business, which consists of NetApp's industry-leading ONTAP storage operating system, is one area where the Street continues to discount NetApp's growth potential. And given NetApp's ability to deliver solid enterprise solutions, which is reflected in the company's 9% growth this quarter, I don't believe that aside from EMC, there is another company that is better positioned to capitalize on the expected surge in Big Data spending over the next two years.
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