NetApp gloats over storming fourth quarter
Wall Streeters relish a pleasurable beating
Engeno and OEMS
He also discussed the positioning of the V-Series, the product that virtualises third-party arrays and brings them into NetApp-land, with Engenio's OEM customer base:
The V-Series represents an opportunity to add value to that installed base, but we're going to do it in collaboration with the OEMs because to try to go around them I think would jeopardise all the OEM business and that's clearly not our intention now. Our intention is to keep the OEM business alive and well and thriving. So for a lot of them, the ability to add V-Series to their existing installed base is an opportunity to protect their installed base and add more value to their customers and reduce the risk of them being replaced by some joint competitor.
Georgens also discussed the NetApp and IBM relationship and said IBM has aspirations to have its own products in the Engenio and N Series space. But:
The desire by their internal groups to develop their own products makes the positioning very, very complicated. And are we happy with the positioning? No. On the other hand, our engagement with IBM's customer facing groups, the people who actually have to put solutions in front of customers, that relationship is actually exceptionally strong. So I think that an approach to storage from a pure platform perspective and basically creating SAN products and NAS products and unified products in a very, very hardware point of view is interesting, but it's just recreating the fractured product line that's given us an opportunity to gain share ... IBM has introduced products that are competitive with both Engenio and with the NetApp offerings over the years, yet this business still continues to grow, it still continues to be robust.
I think that [IBM] internal groups are looking to compete and develop competitive products and if they truly are competitive and they truly can compete with our feature set both from a hardware and a software perspective, clearly demand will shift in that direction. But if we continue to out-innovate them and have a higher development gains and introduce products to market faster, then we'll preserve the business. It's no different. It all comes down to innovation and execution excellence. And it's been that way for the last five years and that's the nature of the OEM business.
NetApp and EMC
Georgens thinks NetApp and EMC will draw away from other storage vendors because they have the resources to out-innovate the pack. They will also thrive against the server vendors because the server vendors only sell storage to customers that buy their servers. He says the server vendors have all lost ground. "The server guys are basically going to use the value proposition that's effectively one of integration, that they will basically come to the end users with a stack of hardware, software and services with a single support function and basically sell an integration."
What customers gain in integration they give up in best of breed. The ones who don't mind will buy storage from server vendors and that's why NetApp is in the OEM business. The ones that do mind will buy best of breed products and that's why NetApp is partnering with Cisco, VMware, Microsoft and others to build best of breed integrated stacks:
The idea is that if we can come to the customer with something that is every bit as integrated with a common support on the back-end and companies that can provide professional services on the front-end, then the customer doesn't have to trade off best of breed for an integrated solution. They can get something that is actually even more integrated, yet still best of breed, and I think that's the value proposition that we're pushing.
Looking ahead, NetApp sees no slowdown. It estimates revenue for the first quarter of fiscal year 2012 to be "approximately $1.500bn, plus or minus 3 per cent, which equates to approximately 2 to 8 per cent sequential revenue growth and approximately 26 to 34 per cent year over year revenue growth." No Engenio OEMS are deserting following NetApp's acquisition of Engenio and everything looks rosy in Sunnyvale. ®