Business

NetApp shares rise on better-than-expected results

Shares of data storage company NetApp closed 6 percent higher Thursday after the company posted better-than-expected bottom-line results and upped its guidance.

Krista Macomber, an analyst with Technology Business Research, noted that the company’s operating margins rose for the second consecutive quarter. Prior to that, NetApp’s operating margins had fallen for six consecutive quarters.

“NetApp has executed during 2016 on restructuring initiatives designed to preserve its bottom line and (its) future stance in customers’ quickly evolving storage environments,” Macomber wrote. However, she noted that the company’s “transformation is not complete.”

The company’s cost-cutting efforts have included two restructurings of its work force this year as it shifts its focus away from mature products to newer products with growth potential.

NetApp released its fiscal second quarter results after the markets closed Wednesday. NetApp, a major employer in Research Triangle Park, is based in Sunnyvale, Calif.

NetApp’s results provide “clear evidence of our ability to execute while we streamline the business and pivot to the growth area of the market,” CEO George Kurian said during a conference call.

Net revenue totaled $1.34 billion, down 7 percent from a year ago and slightly below the $1.35 billion expected by analysts polled by Bloomberg News.

Revenue from mature products declined 29 percent. Revenue from strategic products was “relatively flat” versus a year ago but rose 10 percent from the preceding quarter, Kurian said.

He added that he expects the headwinds from declining sales of mature products to lessen, enabling “moderated revenue growth” going forward.

Adjusted net income totaled $169 million, or 60 cents per share. That was a decline from $181 million a year ago but bested the projections of analysts polled by Bloomberg News by six cents per share.

NetApp raised its guidance for net revenue for its fiscal third quarter to $1.325 billion to $1.475 billion, up from earlier guidance of $1.265 billion to $1.415 billion. Adjusted net income is expected to range from 41 cents to 46 cents per share, up 10 cents at both the lower and upper ends of the range.

Earlier this month NetApp announced plans to lay off about 6 percent of its overall work force of about 10,700; in February it announced it was cutting 12 percent of its workers. NetApp also eliminated about 500 workers company-wide in 2015.

The impact of the latest job cuts in RTP is unclear because the company doesn’t disclose job numbers by specific sites. But, according to data the company filed with the state, it had 1,612 employees in RTP at the end of 2015, down from 1,772 employees a year earlier.

NetApp shares closed at $36.96, up $2.17. Its shares have risen 39 percent this year.

David Ranii: 919-829-4877, @dranii

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