Skip to main content


(NTAP) - Get NetApp Inc. Report

's shares surged more than 12% Thursday, after the company

beat analysts' revenue estimate for the second quarter.

The storage company's quarterly report offered some positive news for the tech sector at a time of

rapidly shrinking budgets.

Last week networking giant


(CSCO) - Get Cisco Systems Inc. Report

sent shockwaves through the industry when it forecast a

weak second quarter amid tight enterprise and service provider budgets.

NetApp reported a 15% increase in revenue from a year ago to $912 million, comfortably beating analysts' estimate of $904.6 million, although it was at the low-end of the company's guidance.

In early trading Thursday, shares of NetApp were up $1.29 to $11.68.

The storage specialist acknowledged the tough economy during a conference call late Wednesday and did not offer third-quarter revenue guidance.

"In the near term, the uncertain economic climate makes visibility and confidence of our pipeline less certain," said Steve Gomo, NetApp's chief financial officer.

Acknowledging the difficulty of forecasting the depth and duration of the economic downturn, NetApp's Chief Executive Dan Warmenhoven suggested third-quarter revenue could be flat or slightly up sequentially.

Scroll to Continue

TheStreet Recommends

Analysts had estimated third-quarter revenue of $958.95 million and earnings of 34 cents a share.

In the conference call, NetApp executives said they plan to control the company's expenses, including implementing a hiring freeze in the second half of this fiscal year.

The storage firm, which competes with




Hewlett Packard

(HPQ) - Get HP Inc. Report

, came out of the second quarter with $2.3 billion in cash. NetApp reiterated in the conference call a desire to return to a 16% operating margin, compared to 11% in the second quarter.

Analyst firm

R.W. Baird

maintained its outperform rating on the company, in a note on Thursday. "We remain positive on shares of NetApp following modest upside to the quarter," wrote analyst Jayson Noland. "

We are encouraged with NetApp's cost/operating margin focus."

Noland, acknowledging the expected decline in IT budgets, lowered his NetApp price target from $24 to $20.

Despite solid revenue growth, NetApp saw a decline in second-quarter profit to $49 million, or 15 cents a share, from $84 million, or 23 cents a share, in the year-ago quarter.

NetApp officials noted a significant slowdown in business during September following

Lehman Brothers

' bankruptcy, although storage sales rebounded in October.

The company also cited strong growth from its channel partners during the second quarter, notably from Arrow and


(AVT) - Get Avnet Inc. Report

, which contributed almost a quarter of NetApp's revenue.