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NetApp still smashing the competition

G-men at war

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NetApp carried on steamrollering EMC and other competitors by growing faster than the market in its third fiscal 2011 quarter, with a 25 per cent jump in revenues and a 60 per cent hike in profits.

It's making more headway selling storage to VMware customers than VMware owner EMC.

Revenues rose to $1.268bn compared to $1.012bn a year ago. Net income soared to $172m contrasting to the $108m recorded a year ago.

The numbers would have been even higher, but NetApp could not supply enough Flash Cache I/O modules for its new FAS3200 and FS6200 arrays. Demand exceeded supply, particularly with the 3200 which has had the fastest new product sales ramp in NetApp's history. It is estimated revenues could have been $10m – $15m higher without this supply hiccup.

CEO and president Tom Georgens said: "We are committed to catching up to the demand as quickly as possible."

Revenues rose only 5 per cent compared to the previous quarter and NetApp actually missed Wall St revenue estimates of $1.279bn. The NetApp steamroller is being restrained by the Flash Cache supply constraints, which could affect the final fiscal 2011 quarter where NetApp is estimating revenues will be $1.38bn and net income $147m - $172m.

The two G-men

EMC is hoping that its new VNX converged CLARiiON and Celerra storage array line will retard NetApp's progress even more, particularly when it adds its block-level deduplication facility to match NetApp's A-SIS later this year. El Reg also understands that we can expect screamingly good SPC benchmark numbers from the VNX later this year.

EMC's president and chief operating office Pat Gelsinger has a focus on Georgens' NetApp and wants EMC to overhaul its arch-competitor in the mid-range storage array space. He has ground to make up.

NetApp reckons there is an almost 30 per cent difference between its growth rate and that of its four largest competitors, using a measure that looks at results over two years. It believes it has a 15 per cent share of the overall external disk storage market. Stifel Nicolaus analyst Aaron Rakers estimates it actually has about a 12 per cent share, up from 8 per cent a year ago.

Other competitive forces impinging on NetApp's future growth rate include Dell's Compellent, HP's expected downsized 3PAR array and, possibly, Oracle's Sun 7000 ZFS array.

NetApp knows this and has, somehow, to continue its growth momentum, either with faster hardware or enhanced software or both. It noted it faced execution challenges in the EMEA geography which are being focused on by management but EMEA results were fairly healthy. Revenue there was $450m, a 35 per cent year-on-year increase and a 29 per cent rise compared to the previous quarter.

If IBM tells its sales force to sell V7000 and XIV arrays in preference to NetApp-sourced N Series, then that could put somewhat of a brake on NetApp's growth. There are unconfirmed rumours that this is an IBM EMEA sales tactic. All good things come to an end and that includes NetApp's long run but when, when, will that long run end? We don't know. NetApp's competition is making its moves and we'll have to wait and see how effective they are. ®

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