NetApp (NASDAQ: NTAP) today reported results for the third quarter of fiscal year 2010, which ended 29 January 2010. GAAP revenue for the third quarter of fiscal 2010 was $1.01 billion, compared to GAAP and non-GAAP revenue (1) of $746 million and $874 million, respectively, for the same period one year ago.
For the third fiscal quarter of 2010, GAAP net income was $108 million, or $0.30 per share (2) compared to GAAP net loss of $82 million, or ($0.25) per share for the same period in the prior year. Non-GAAP (3) net income for the third fiscal quarter of 2010 was $144 million, or $0.40 per share, compared to non-GAAP net income of $93 million, or $0.28 per share for the same period one year ago.
GAAP revenue for the first nine months of the current fiscal year totalled $2.76 billion, compared to GAAP and non-GAAP revenue of $2.5 billion and $2.7 billion, respectively, for the first nine months of the prior fiscal year.
GAAP net income for the first nine months of the current fiscal year totalled $255 million, or $0.73 per share, compared to GAAP net loss of $4 million, or $0.01 per share for the first nine months of the prior fiscal year. Non-GAAP net income for the first nine months of the current fiscal year totalled $350 million, or $1.00 per share, compared to non-GAAP net income of $262 million, or $0.78 per share for the first nine months of the prior fiscal year.
"The NetApp team demonstrated remarkable execution this quarter. With record revenue, record profit and record EPS, the company produced double-digit year-over-year revenue growth and our operations team shipped a record number of systems, despite persistent supply constraints," said Tom Georgens, president and CEO. "I am very pleased with the breadth of our progress. Business levels grew in every major geography, we gained momentum in both our channel and our direct business, and clearly gained market share this quarter."
Outlook
* NetApp estimates revenue for the fourth quarter of fiscal year 2010 to be in the range of $1.07 billion to $1.10 billion.
* NetApp estimates share count for the fourth quarter of fiscal year 2010 to increase by about 6 million shares.
* NetApp estimates that the fourth quarter of fiscal year 2010 GAAP earnings per share will be approximately $0.31 to $0.33 per share.
* NetApp estimates that the fourth quarter fiscal year 2010 non-GAAP earnings per share to be approximately $0.42 to $0.44 per share.
Business highlights
In the third quarter of fiscal year 2010, NetApp made several key announcements regarding new and expanded alliances with top IT industry leaders, the delivery of new products and solutions designed to drive greater efficiency in customers' shared data centre infrastructures, and several industry awards and accolades.
Key business highlights during the quarter included the following:
New, expanded strategic alliances
* Cisco, NetApp, and VMware expand longstanding collaboration. Cisco, NetApp, and VMware collaborated to deliver new design architectures that help customers make their virtualised data centres more efficient, dynamic, and secure. The companies introduced an end-to-end secure multi-tenancy design architecture that provides enhanced security when sharing data centre resources across virtualised and enterprise cloud environments. Cisco, NetApp, and VMware will also offer a cooperative support model for these pre-tested and validated design architectures to help customers quickly build a unified, virtualised infrastructure.
* Microsoft and NetApp announce strategic alliance. Microsoft and NetApp announced a new three-year agreement to collaborate on and deliver technology solutions that span virtualisation, private cloud computing, and storage and data management. This will enable customers to increase data centre management efficiencies, reduce costs, and improve business agility. The strategic alliance will deepen product collaboration and technical integration and will extend joint sales and marketing activities to customers worldwide.
* Fujitsu and NetApp plan to expand their global partnership. Fujitsu and NetApp announced their intention to deepen their partnership globally and to provide more tightly integrated and automated storage and data management solutions. The companies intend to jointly develop integrated products and services specifically in the areas of virtualisation, storage and data management, and storage services and solutions. The expanded relationship will enable customers to derive greater value and efficiencies from their dynamic infrastructures.
New products, solutions
* New tools to manage virtual desktops in VMware environments. NetApp introduced new tools and support to help customers deploy and manage virtual desktops through VMware View 4. With the release of NetApp Rapid Cloning Utility 3.0, customers can simplify the way they provision VMware virtual machines and streamline their business.
* New virtualisation solutions for Microsoft environments. NetApp unveiled NetApp SnapManager for Hyper-V and SnapManager 6.0 for Microsoft Exchange Server to minimise the complexity of physical and virtualised infrastructures.
Industry awards, accolades
* NetApp named a great place to work. NetApp was ranked number seven in FORTUNE magazine's "100 Best Companies to Work For" list. This is the second consecutive year that NetApp ranked in the top 10 and the fourth consecutive year it ranked in the top 15.
* Gartner positions NetApp as leader in Midrange Enterprise Disk Array Magic Quadrant. NetApp was positioned by Gartner in the Leaders' quadrant in its recently released research note: "Magic Quadrant for Midrange Enterprise Disk Arrays". (4) Vendors in the Leaders' quadrant have the highest scores for their ability to execute and their completeness of vision.
* NetApp eBI project earns InfoWorld 100 award. NetApp's enterprise business intelligence (eBI) project was honoured as part of IDG's InfoWorld 100 Awards for 2009, which recognise the 100 most innovative uses of IT initiatives that further business goals.
* NetApp receives WRAP Award for waste management programmes. The California Integrated Waste Management Board honoured NetApp with a 2009 Waste Reduction Awards Programme (WRAP) award. The award recognises NetApp's corporate waste and recycling programme and its achievements in minimising its environmental impact through the conscientious use of products, activities, and services.
Webcast, conference call information
The NetApp quarterly results conference call will be broadcast live on the Internet at http://investors.netapp.com on Wednesday, 17 February 2010, at 2:30pm Pacific Time. This press release and any other information related to the call will also be posted on the Web site at that location. An audio replay Webcast will also be available after 5:30pm Pacific Time on our Web site at http://investors.netapp.com.
Starting this quarter, NetApp will use a new hybrid format for disclosing key financial information associated with our quarterly results. Concurrent with this press release, NetApp has posted and distributed a separate document with financial commentary and statistics that previously were disclosed during our earnings calls. These prepared remarks will now be available at http://investors.netapp.com prior to the conference call in order to provide the investment community with additional time to analyse our results. This commentary will not be read during the earnings call.
(1) Non-GAAP revenues for the third quarter and first nine months of fiscal year 2009 exclude the impact of the $128 million GSA settlement.
(2) GAAP earnings per share is calculated using the diluted number of shares for all periods presented except for the third quarter of fiscal year 2009, which is calculated using the basic number of shares.
(3) Non-GAAP results of operations exclude the GSA settlement, amortisation of intangible assets, stock-based compensation expenses, merger termination proceeds (net of related expenses), restructuring and other charges, asset impairment, non-cash interest expense associated with our convertible debt, net loss or gain on investments, and our GAAP tax provision, including discrete items, but includes a non-GAAP tax provision based upon our projected annual non-GAAP effective tax rate. Non-GAAP earnings per share is calculated using the diluted number of shares for all periods presented.
(4) "Magic Quadrant for Midrange Enterprise Disk Arrays" by Roger Cox, Stan Zaffos, and Pushan Rinnen, November 2009.
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NetApp Q3/FY10 financial commentary and statistics (XLS, 166 KB) http://www.stautner.com/data/newsfiles/q3_10_press_release_tables_final_for_marketwire.xls
NetApp creates innovative storage and data management solutions that help you accelerate business breakthroughs and achieve outstanding cost efficiency. Discover our passion for helping companies around the world go further, faster at http://www.netapp.com.
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"Safe harbour" statement Under US 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 fourth quarter of fiscal year 2010, our expectations regarding our new partnership and strategic alliances and the benefits that we expect our customers to realize from using our products and those 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 materially from those in the forward-looking statements include customer demand for our products and services; our ability to increase revenue and manage our operating costs; increased competition risks associated with the anticipated growth in network storage market; our ability to deliver new product architectures and enterprise service offerings; our ability to design products and services that compete effectively from a price and performance perspective; our reliance on a limited number of suppliers; our ability to accurately forecast demand for our products; and other important factors as 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 captioned "Risk Factors" in our most recently submitted 10-K and 10-Q. 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 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 operational performance. Non-GAAP results of operations exclude the GSA settlement, amortization of intangible assets, stock-based compensation expenses, merger termination proceeds (net of related expenses), restructuring and other charges, asset impairment, non-cash interest expense associated with our convertible debt, net loss or gain on investments, and our GAAP tax provision, including discrete items, but includes a non-GAAP tax provision based upon our projected annual non-GAAP effective tax rate.
We have excluded these items in order to enhance investors' understanding of our ongoing operations. The use of these non-GAAP financial measures has material limitations because they should not be used to evaluate our company without reference to their corresponding GAAP financial measures. As such, we compensate for these material limitations by using these non-GAAP financial measures in conjunction with GAAP financial measures.
These non-GAAP financial measures facilitate management's internal comparisons to the Company's historical operating results and comparisons to competitors' operating results. We include these non-GAAP financial measures in our earnings announcement because we believe they are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision-making, such as employee compensation planning.
In addition, we have historically reported similar non-GAAP financial measures to our investors and believe that the inclusion of comparative numbers provides consistency in our financial reporting at this time.
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