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NetApp misses revenue goal

'We're in unprecedented waters right now'

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NetApp made a reduced profit in its first fiscal 2012 quarter, reflecting a sudden US sales drop-off attributed to public sector and financial services buying slowdowns.

Revenues for the quarter, which finished on 29 July, were $1.458bn: a healthy 26 per cent increase on the $1.154bn seen a year ago but lower than the Street's expected $1.5bn. Net income of $139.5m was 7.4 per cent lower than the $150.7m seen in the first quarter of fiscal 2011.

CEO Tom Georgens talked about "the challenging macroeconomic environment modestly impacting our revenue growth", and said there had been record FAS6000 sales – that's NetApp's high-end storage array. He said there were "near record numbers of new enterprise customer wins, and our new E-series sales exceeded our forecast".

So what went wrong?

There was a dramatic sales slowdown after the first week of July, which was ascribed to general economic conditions. It was seen particularly in the UD federal business and in the financial services market. Quoted in MarketWatch, CFO Steve Gomo mentioned the US debt crisis and Eurozone uncertainties.

He said: "The past six weeks have been incredible. We're in unprecedented waters right now."

Brocade says its results have been affected by general business conditions, and there are signs that a storage, and general, market slowdown might be happening. But don't mention the "recession".

NetApp's outlook for the next quarter is for revenue in the range of $1.5bn to $1.6bn, meaning 3 to 10 per cent sequential revenue growth and approximately 20 to 28 per cent year-over-year revenue growth. Wall Street generally had been expecting $1.6bn.

NetApp's CFO, Steve Gomo, will retire at the end of the year in what NetApp terms a "planned succession". Nick Noviello, currently SVP for finance and global controller, will take on the CFO slot on 1 January, 2012. ®

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