NEW YORK ( TheStreet) -- I've never been the type to boast about value for stocks that are trading at or near their 52-week highs, but in the case of NetApp ( NTAP), I'm willing to make an exception.
What the Street has begun to realize is that even though NetApp has often played second fiddle to market leader EMC ( EMC), the storage market is still up for grabs. With industry experts projecting that market to grow by close to 200% over the next three years, logic says that NetApp should do well even if the company remains in second place. But don't confuse that for complacency. If my suspicions are correct, this company has much bigger ambitions. NetApp will report fiscal first-quarter results on Wednesday after the market close. When the company announced year-end results in May, management guided revenue to come in the range of $1.47 billion to $1.57 billion, which suggests year-over-year growth of close to 6%. Management also projected non-GAAP gross margin to be up 1% sequentially, while non-GAAP operating margin is projected in the range of 13.5% to 14%, up 1.5% to 2%, sequentially. These numbers seem a bit conservative, which suggests that management doesn't expect enterprise spending to pick up much as analysts have projected for the second half of the year. Even so, I expect NetApp's results to arrive on the high end of its guidance, if not exceed it. Let's recall that in the May quarter, even though revenue was up just 1% year over year, management still figured out a way to beat expectations while growing revenue 5% sequentially. That was an indicator that business was beginning to pick up, especially since the company's higher margin service revenue grew 8%, which helped offset weakness in the product business. NetApp bears were quick to point out EMC outperformed in the recent quarter. Well, that's true. I'm not going to debate that. In EMC's case, that's what a market leader is expected to do. But we need to keep things in perspective. Take Hewlett-Packard ( HPQ) for instance, whose storage business consists of what is called "converged and traditional" storage. But HP has not figured out a way to grow that business, which recently lost 13% year over year. So when looking at NetApp's market position, the good news here is that while the absolute numbers may not inspire much confidence at first glance, on a relative basis it's clear NetApp is still growing market share. I don't expect anything different in Wednesday's first-quarter results.