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NetApp signals recession kick-off

Uh oh

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Batten down the financial hatches - NetApp has put hiring plans on hold, and is seeing customers putting off spending. CEO Dan Warmenhoven says it's spreading like a nuclear chain reaction from the automotive and financial sectors.

It's hardly a shock, though - how could financial institution implosion and bailout with a drastic reduction in business loan availability not hit the storage market and IT generally? Warmenhoven has felt the first wind of a potentially mega-credit crunch chicken coming home to roost and put plans to hire 500 more NetAppers on hold.

The effects started only days ago, and he's now expecting NetApp's results for the current quarter to be much lower than anticipated. The company will still grow, he thinks, even gain market share - just not so much of it as he thought last March.

NetApp CEO Dan Warmenhoven

Dan Warmenhoven, NetApp's CEO.

NetApp's Wall Street sales have fallen from July 2007's 17 per cent of total sales to less than ten per cent now. There is also anecdotal information from analysts that high-end EMC DMX sales are being affected, though nothing concrete.

It's possible NetApp may have to make layoffs, but Warmenhoven is hopeful that this won't happen. At the same time he's signalling that if he has to then he will. He is not seeing signs of actual distress amongst NetApp's customers yet - instead he's seeing them conserve cash and wait, to see if things get worse. The effect on storage purchases is the same though; they don't get made.

How will customers cope with storing all the new data coming their way? Deletion and deduplication are two obvious ways, as well as imposing quotas on users' unstructured data like email.

As customers delay spending to conserve cash and as credit becomes harder and more expensive to obtain, then storage suppliers with a small amount of cash reserves, a high level of debt repayment, and/or a need to invest in product development will be more vulnerable than others to a sales revenue slump - particularly if they sell to market sectors directly exposed to the credit drought such as finance, construction and automotive manufacturing. Better get your credit crunch chicken shelter ready. ®

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