NEW YORK ( TheStreet -- NetApp ( NTAP) bust out its first guidance for nine months during its analyst day Thursday, signaling a much-improved IT spending environment. With its bullish second- and third-quarter forecast, NetApp is clearly confident of its ability to increase the pressure on rivals such as EMC ( EMC) and Hewlett-Packard ( HPQ). "Yes, we're back in the guidance business," explained NetApp CFO Steve Gomo during a presentation at the New York event. "We want to take share, and if we take share we will be growing at a pretty good clip." For the second quarter of fiscal 2010, Gomo forecast revenue between $887 million and $885 million, up from $838 million in the prior quarter, and well above analysts' estimate of $862.05 million. NetApp expects to earn between 29 cents a share and 30 cents a share during the quarter, compared to Wall Street's estimate of 29 cents. Gomo also issued third-quarter guidance, forecasting sales between $910 million and $930 million. Analysts surveyed by Thomson Reuters had expected revenue of $893.98 billion. Third-quarter earnings are expected to be between 35 cents a share and 36 cents a share, above analysts' estimate of 33 cents a shares. NetApp will also achieve its goal of a 16% operating margin during the third quarter, according to the CFO. The numbers has an immediate impact on NetApp's shares, which quickly gained $1.18, or 4.46%, to reach $27.62, outpacing the modest rally in tech stocks that saw the Nasdaq gain 1.22%.
As expected, NetApp CEO Tom Georgens faced a barrage of questions from on the company's M&A strategy. After recently losing out to EMC in the tussle to acquire Data Domain ( DDUP), the executive was asked whether he was looking at other acquisitions. "The Data Domain thing didn't go our way, but that doesn't scare us away from other deals, nor do we feel compelled to do something
like the Data Domain deal," he responded, vaguely. "Not winning Data Domain doesn't expose a hole in our portfolio that we feel compelled to fill tomorrow." A number of names have nonetheless been touted as possible NetApp M&A targets, including software specialist CommVault ( CVLT) Virtual Tape Library (VTL) firm FalconStor ( FALC) and privately-held Sepaton. Georgens was also asked whether his own company could be acquisition bait. With its strong growth profile, even in a tough economy, NetApp is seen as one of the best-positioned firms in the tech sector. "We desire to be independent -- I think there's a preference for that within the company," he replied. "I think there's an opportunity for NetApp to be a true growth company -- a dollar invested with NetApp will generate a better return than a dollar invested with NetApp and our successor." The CEO also used his analyst day presentation to describe NetApp's own sales strategy, specifically its efforts to target the 'Storage 5000', the world's 5000 users of data storage. "60% of the Storage 5000 are not covered by NetApp today," he said. "There's plenty of headroom in our existing market to increase our share."
Georgens, who recently took the company's reins from Dan Warmenhoven, also sees opportunities around service providers and system integrators, particularly after recent tech sector consolidation. "We have seen a lot of alliances develop
but whenever there's an alliance, there's also alienation," he said. "H-P buys EDS, Dell ( DELL) buys Perot ( PER); what does that mean for Accenture ( ACN), CSC ( CSC) and Wipro ( WIT)?" Firms like Accenture and CSC were already reluctant to recommend IBM ( IBM) because of competition from its Global Services division, so the EDS deal casts H-P in the same light, according to Georgens. "These companies are coming to NetApp," he said. -- Reported by James Rogers in New York