NetApp announces results for second quarter fiscal year 2012

Issued by NetApp
Sunnyvale, California, 18 Nov 2011

NetApp (NASDAQ: NTAP) today reported results for the second quarter of fiscal year 2012, which ended on 28 October 2011. Revenues for the second quarter of fiscal year 2012 totalled $1.507 billion compared to revenues of $1.251 billion for the same period one year ago.

For the second quarter of fiscal year 2012, GAAP net income was $165.6 million, or $0.44 per share [1], compared to GAAP net income of $175.4 million, or $0.45 per share, for the same period a year ago. Non-GAAP net income for the second quarter of fiscal year 2012 was $235.5 million, or $0.63 per share [2], compared to non-GAAP net income of $212.2 million, or $0.54 per share, for the same period a year ago.

Revenues for the first six months of fiscal year 2012 totalled $2.965 billion compared to revenues of $2.405 billion for the first six months of the prior fiscal year, an increase of 23% year-over-year. GAAP net income for the first six months of fiscal year 2012 totalled $305.1 million, or $0.78 per share, compared to GAAP net income of $326.1 million, or $0.85 per share for the first six months of the prior fiscal year. Non-GAAP net income for the first six months of fiscal year 2012 totalled $457.8 million, or $1.17 per share, compared to non-GAAP net income of $403.1 million, or $1.05 per share, for the first six months of the prior fiscal year.

“NetApp produced record non-GAAP earnings per share in the second quarter. In aggregate, we saw strong revenue growth across most areas of our business, offset by some unexpected weakness in a handful of our largest accounts,” said Tom Georgens, president and CEO. “NetApp achieved the highest number of net new customer wins in more than two-and-a-half-years this quarter, and in our 'Smart Decisions are Built on NetApp' campaign, we just launched the new FAS2000 series platform built on our Data ONTAP 8.1 operating system - all of which will drive market share gains going forward.”

Outlook

* NetApp estimates revenue for the third quarter of fiscal year 2012 to be in the range of $1.520 billion to $1.610 billion, which equates to approximately 1% to 7% sequential revenue growth and approximately 18% to 25% year-over-year revenue growth.
* NetApp estimates that third-quarter fiscal year 2012 GAAP earnings per share will be approximately $0.36 to $0.40 per share. NetApp estimates that third-quarter fiscal year 2012 non-GAAP earnings per share will be approximately $0.56 to $0.60 per share.
* NetApp estimates that share count for the third quarter of fiscal year 2012 will increase to approximately 380 million shares, including an estimated nine million shares from the company's outstanding convertible notes [3] and 0.5 million shares from outstanding warrants. Share count does not include the company's outstanding note hedges, which are expected to offset 80% of the dilution from the convertible notes at maturity or conversion.

Business highlights

During the second quarter of fiscal year 2012, NetApp once again was recognised for its unique corporate culture and demonstrated its commitment to delivering the solutions and technologies that help customers and partners accelerate their business.

NetApp further cemented its position as a great place to work by ranking third on the inaugural “World's Best Multinational Workplaces” list, due to its culture of innovation focused on helping customers and partners thrive.

Additionally, NetApp continued to provide the storage foundation for customers across all industries who want to achieve the flexibility and efficiency required in today's challenging business and IT landscape. NetApp also expanded its existing solution portfolio to help customers transition to the cloud and address growing big-bandwidth requirements. Highlights for the quarter included the following:

Milestones, awards

* NetApp named one of the best workplaces in the world. Thanks to its culture of innovation focused on customer and partner success, NetApp was named the third best workplace in the world by the Great Place to Work Institute. NetApp joins an elite group of 25 multinational companies on the inaugural list that have been recognised by their employees for their company culture and workplace environment.
* NetApp continues to rank as one of the best places to work in the United States. In addition to its global recognition, NetApp was once again named a “best place to work,” ranking first in Research Triangle Park in the giant companies category, and one of 50 best places to work in the Washington, DC, area. The honours are a testament to NetApp's model company approach, strong culture, and talented employees.

Enterprise, government education customers build on NetApp foundation to dramatically increase IT efficiency, flexibility

* Thomson Reuters leverages NetApp to transform how the legal industry gets information. Thomson Reuters built on a NetApp shared storage infrastructure to create WestlawNext, an innovative and intuitive research tool that has set a new standard for online professional search. The NetApp foundation enables WestlawNext to search up to 50 times more data than before, return results 64% faster than other online search platforms, and meet or exceed a 99.9% uptime target that is critical for the legal community. Furthermore, improved storage performance helped Thomson Reuters save nearly $65 million in additional data centre costs.
* US Department of Energy selects NetApp as storage foundation for one of the world's most powerful supercomputers. The Sequoia supercomputer, which will be deployed in 2012, at Lawrence Livermore National Laboratory (LLNL), will leverage NetApp as its storage foundation. Sequoia is expected to be twice as fast as today's most powerful system, and will manage massive compute workloads in which real-time analytics, scalable performance and secure storage are mission-critical.
* California universities manage skyrocketing data growth and dramatically reduce costs with NetApp. The University of San Diego (USD) recently turned to NetApp to help it effectively manage growing storage requirements as a result of an increase in high-bandwidth education applications and everyday administrative tasks. Building on a NetApp platform enabled USD to improve operational efficiencies and gain the flexibility necessary to meet its evolving IT needs.

Art Centre College of Design, in Pasadena, consolidated its storage resources onto a single, unified NetApp platform, allowing the school to more effectively manage its overall IT environment and save more than $135 000 in additional storage costs.

NetApp helps customers transition to the cloud, manage big-bandwidth requirements

* NetApp partners with VMware to help make cloud a reality. NetApp collaborated with VMware to deliver VMware cloud infrastructure and management on NetApp. The joint solution enables organisations to evolve to a secure cloud-computing model at their own pace, gaining greater flexibility and efficiency without needing to rip and replace their existing infrastructure. With this new solution, customers are able to invest resources back into the business to drive innovation and manage for the future.
* NetApp media and entertainment solution delivers extreme performance and scalability. The NetApp media content management solution, which expands on NetApp's existing big-bandwidth portfolio, is optimal for bandwidth-intensive environments and offers leaders in the media and entertainment industries high performance and always-available data access to maximise their collaborative efforts and workflow processes.

Webcast, conference call information

The NetApp second-quarter fiscal year 2012 results conference call was broadcast live on the Internet, at investors.netapp.com, on Wednesday, 16 November. This press release and any other information related to the call was also posted on the Web site at that location. An audio replay Webcast will be available on the Web site.

NetApp uses a hybrid format for disclosing key financial information associated with its quarterly results. Concurrent with the press release, NetApp posts a supplemental commentary with financial information and statistics to its Web site at investors.netapp.com.

NetApp

NetApp creates innovative storage and data management solutions that deliver outstanding cost efficiency and accelerate business breakthroughs. Discover its passion for helping companies around the world go further, faster, at www.netapp.com.

“Safe Harbor” Statement Under U.S. Private Securities Litigation Reform Act of 1995

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include all of the statements under the Outlook section relating to our forecasted operating results, share count, and metrics for the third quarter of fiscal year 2012, as well as our expectations regarding our future market share and regarding our partnerships and strategic alliances and the benefits that we expect our customers to realise from using our products and from our strategic alliances and partnerships. These forward-looking statements involve risks and uncertainties, and actual results could vary. Important factors that could cause actual results to differ include, but are not limited to, general macroeconomic and market conditions, particularly the continuing fiscal challenges in the U.S. and Europe; the effects of the flooding in Thailand; customer demand for our products and services, including our recently announced new product introductions and other important factors described in NetApp reports and documents filed from time to time with the Securities and Exchange Commission (SEC), including the factors described under the sections titled “Risk Factors” in our most recently submitted Annual and Quarterly Reports on Forms 10-K and 10-Q, respectively. We disclaim any obligation to update information contained in these forward-looking statements whether as a result of new information, future events, or otherwise.

NetApp, the NetApp logo, Go further, faster, and Data ONTAP are trademarks or registered trademarks of NetApp, Inc. All other marks are the property of their respective owners and should be treated as such.

[1] GAAP earnings per share are calculated using the diluted number of shares for all periods presented.
[2] Non-GAAP net income excludes the amortisation of intangible assets, stock-based compensation, acquisition-related income and expenses, restructuring and other charges, asset impairments, non-cash interest expense associated with NetApp's convertible debt, net losses or gains on investments, and its GAAP tax provision, but includes a non-GAAP tax provision based on its projected annual non-GAAP effective tax rate for the first three quarters of the fiscal year and an actual non-GAAP tax provision for the fourth quarter of the fiscal year. Non-GAAP earnings per share are calculated using the diluted number of shares for all periods presented.
[3] 80% hedged on maturity or conversion of the convertible notes.

NetApp usage of non-GAAP financials

The company refers to the non-GAAP financial measures cited above in making operating decisions because they provide meaningful supplemental information regarding the company's ongoing operational performance. Non-GAAP net income excludes the amortisation of intangible assets, stock-based compensation, acquisition-related income and expenses, restructuring and other charges, asset impairments, non-cash interest expense associated with its convertible debt, net losses or gains on investments, and its GAAP tax provision, but includes a non-GAAP tax provision based on its projected annual non-GAAP effective tax rate for the first three quarters of the fiscal year and an actual non-GAAP tax provision for the fourth quarter of the fiscal year. It has excluded these items in order to enhance investors' understanding of its ongoing operations. The use of these non-GAAP financial measures has material limitations because they should not be used to evaluate the company without reference to their corresponding GAAP financial measures. As such, the company compensates for these material limitations by using these non-GAAP financial measures in conjunction with GAAP financial measures.

These non-GAAP financial measures are used to: (1) measure company performance against historical results, (2) facilitate comparisons to the company's competitors' operating results, and (3) allow greater transparency with respect to information used by management in financial and operational decision-making. In addition, these non-GAAP financial measures are used to measure company performance for the purposes of determining employee incentive plan compensation. The company has historically reported similar non-GAAP financial measures to its investors and believes that the inclusion of comparative numbers provides consistency in its financial reporting at this time.

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