Skip to main content



) --


(NTAP) - Get NetApp, Inc. Report

investors will be closely monitoring the firm's analyst day Thursday for signs of upside as IT managers force open their corporate coffers.

The New York City analyst meeting comes at a critical time for NetApp. The company's shares have risen more than 77% this year, buoyed by a slowly improving economy and the company's status as one of the


firms in the tech sector.


storage maker

lately has impressed analysts, including

RBC Capital Markets


Goldman Sachs


TheStreet Recommends

Earlier this week Broadpoint AmTech reiterated its NetApp Buy rating, citing a wealth of upside potential. "The company offers one of the highest growth profiles in the entire technology industry," wrote analyst Brian Marshall, in a note released Monday, adding that the firm has averaged a 28% growth rate since 2004. "This compares favorably to its closest peer,



, which experienced an average growth rate of 19% over the same period," he added.

With a pro forma gross margin above 60%, NetApp is insulated against the falling cost of storage, and has side-stepped the worst of the recession. The company posted solid numbers in its recent

first-quarter results

. NetApp's revenue dipped 4% compared to the prior year's quarter, but comfortably beat analysts' estimates.

With some uncertainty still hanging over IT budgets, however, NetApp is still subject to the vagaries of the broader economy, according to Goldman Sachs. Despite clinching a place on Goldman's 'Conviction Buy' list, the analyst firm sees spending as NetApp's biggest risk, potentially delaying or preventing a return to double-digit revenue growth and 16% operating margin.

NetApp did not provide second-quarter revenue guidance during its recent quarterly results, citing lake of macroeconomic visibility, so it will be interesting to see whether the firm brushes off its crystal ball Thursday.

The storage specialist also unveiled a

shiny new CEO

during the summer, with COO Tom Georgens taking the company's reins from Dan Warmenhoven. Described as a "planned transition", Warmenhoven now serves as the firm's executive chairman, and investors will be keen to see how his successor maintains the NetApp growth trajectory.

The new CEO is likely to face questions about his M&A strategy Thursday, particularly after NetApp

lost out

to EMC in the tussle to acquire

Data Domain

( DDUP).

With NetApp locked in a market share battle with rivals EMC and


(HPQ) - Get HP Inc. Report

, it seems likely that the firm will look at other acquisitions and a number of names have already been mentioned. Possible targets could include software specialist


(CVLT) - Get CommVault Systems, Inc. Report

Virtual Tape Library (VTL) firm



or privately-held


Another possibility is NetApp itself becoming acquisition bait, according to Broadpoint AmTech's Marshall.

"It has been widely speculated over the last few years that NetApp is an attractive take-overcandidate for larger, more mature IT companies like


(CSCO) - Get Cisco Systems, Inc. Report



(IBM) - Get International Business Machines Corporation Report

and Hewlett-Packard," he wrote. "While we have no insight as to the validity of these speculations, we do believe that it would make sense for a larger IT company to acquire NetApp as it would be attractive from a product portfolio and accretion perspective."

NetApp shares dipped 77 cents, or 2.9%, to $26.06 Wednesday, while the


rose 0.01%.

-- Reported by James Rogers in New York