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Network Appliance Announces Results for Second Quarter Fiscal Year 2006

  • 17 November, 2005 15:40

<p>Achieves 29% Year-over-Year Revenue Growth and Record Operating Income</p>
<p>SUNNYVALE, Calif. – November 17, 2005 -- Network Appliance, Inc. (NASDAQ: NTAP), the leader in advanced networked storage solutions, today reported results for the second quarter of fiscal year 2006. Revenues for the second fiscal quarter were $483.1 million, an increase of 29% compared to revenues of $375.2 million for the same period a year ago and an increase of 8% compared to $448.4 million in the prior quarter.</p>
<p>For the second fiscal quarter, GAAP net income was $70.7 million, or $0.18 per share1 compared to GAAP net income of $55.3 million, or $0.15 per share for the same period in the prior year. Non-GAAP2 net income for the second fiscal quarter was $79.1 million, or $0.21 per share, compared to non-GAAP net income of $58.4 million, or $0.16 per share for the same period a year ago.</p>
<p>Revenues for the first six months of the current fiscal year totaled $931.5 million, compared to revenues of $733.6 million for the first six months of the prior fiscal year, an increase of 27% year over year.</p>
<p>For the first six months of the current fiscal year, GAAP net income increased 28% to $130.8 million, or $0.34 per share, compared with GAAP net income of $102.2 million, or $0.27 per share for the same period in the prior year. Non-GAAP net income for the first six months of the current fiscal year totaled $141.3 million, or $0.37 per share, compared to non-GAAP net income of $108.2 million, or $0.29 per share for the first six months of the prior fiscal year.</p>
<p>"We achieved significant growth in revenue and profitability during the quarter driven by the compelling value proposition of our new FAS3000 midrange product line," said Dan Warmenhoven, CEO of Network Appliance. "NetApp provides customers with the best storage utilization rates in the industry, allowing them to decrease their total cost of ownership and increase their return on investment."</p>
Network Appliance estimates that year-over-year growth in revenue for the third quarter of fiscal year 2006 will be in the range of 25% to 28%.</p>
<p>The company expects third quarter GAAP earnings per share to finish between $0.17 and $0.18 per share. Network Appliance expects third quarter non-GAAP earnings per share to be in the range of $0.20 to $0.21 per share.</p>
<p>For the full fiscal year, Network Appliance estimates that revenues will finish in the range of 26% to 28% higher than fiscal year 2005.</p>
<p>The company expects GAAP earnings per share for fiscal year 2006 to be between $0.70 and $0.73 per share. Network Appliance estimates full-year non-GAAP earnings per share to be in the range of $0.77 to $0.80 per share.</p>
<p>Quarterly Highlights
During the second quarter of fiscal year 2006, Network Appliance solidified its leadership in data security with the completion of the Decru acquisition; demonstrated growth in iSCSI, NAS, and SAN; and expanded its operations in Research Triangle Park, North Carolina.</p>
<p>This quarter, NetApp maintained its position as market leader in iSCSI, grew its capacity market share lead in NAS, and grew the fastest among vendors tracked in the Fibre Channel (FC) SAN arena.</p>
<p>According to IDC’s Worldwide Quarterly Disk Storage Systems Tracker Q2 2005, NetApp demonstrated continued leadership in its core NAS market, with a 44.6% capacity share, up almost three (3) percentage points over Q1. NetApp also maintained its strong lead in the iSCSI storage market, with number-one share positions in capacity shipped (45.2%), revenue (41.6%), and units (36%). NetApp was also the fastest growing of the vendors tracked in iSCSI revenue, with a year-over-year growth rate of 120.9%. Finally, of the vendors tracked, NetApp posted the strongest year-over-year increase in FC SAN revenue, with a growth rate of 130.2%.</p>
<p>Also according to IDC, NetApp experienced the fastest growth among the top five vendors in storage software with 49.4% year-over-year growth from Q2 2004 to Q2 2005 versus a market growth rate of 11.8% for the same period. Total NetApp market share in storage software grew from 5% in Q2 2004 to 6.6% in Q2 2005. Additional details are available in IDC’s Worldwide Quarterly Storage Software Tracker Q2 2005.</p>
<p>During the quarter, NetApp completed the acquisition of Decru, a privately held company based in Redwood City, California. The acquisition of Decru allows NetApp to offer the strongest security option in the industry. Decru is a clear market leader in storage security, helping enterprise and government customers address requirements including regulatory compliance, privacy, secure consolidation, and outsourcing. Decru DataFort™ appliances protect the core of the storage network by seamlessly inserting a layer of data encryption, authentication, key management, and compartmentalization.</p>
<p>The first new products from Decru since the completion of the acquisition occurred during the quarter with the unveiling of next-generation storage security platforms. The new 10-port and SCSI models of Decru DataFort appliances, DataFort FC1020 and DataFort S115, deliver increased enterprise-class scalability native support for legacy tape environments, simplified management, and greater price/performance.</p>
<p>Also this quarter, NetApp announced that it plans to join IBM as one of 10 founding members in a new open-source community, initially working under the project name Aperi, to give customers more choices for deploying open-standards-based storage infrastructure software. The organization plans to develop a common storage software management platform that will give customers greater flexibility in the way they manage their storage environments.</p>
<p>Earlier this quarter, NetApp introduced NetApp® SnapManager® for Oracle® Database environments, which leverages the unique power of NetApp Snapshot™ technology and is a tightly integrated disk-based backup and granular recovery solution for Oracle customers using Oracle Automatic Storage Management technology. The solution provides customers with continuous uptime for online backups. NetApp SnapManager turns a multi-step backup and restore process into two simple commands from a single host machine.</p>
<p>On the partner front, NetApp unveiled several new solution enhancements and partner offerings with Bus-Tech Inc., Cisco, NeoPath Networks, Network Intelligence, NuView, Oracle, SAP, and Symantec to address a variety of data concerns, including management and monitoring of enterprise grid environments, data replication, enterprise compliance, ILM management, data analysis, file storage management and utilization, mainframe tape replacement, storage virtualization, and consolidation of remote office/branch office (ROBO) data.</p>
<p>Also this quarter, NetApp and Kazeon, a leading provider of information classification and management solutions for the enterprise, signed an OEM, development, and marketing agreement to integrate the intelligent data classification and search capabilities of Kazeon’s Information Server with Network Appliance™ storage systems. Additionally, NetApp will resell Kazeon’s Information Server as part of a jointly marketed solution.</p>
<p>In corporate news, NetApp expanded to a new facility in Research Triangle Park, North Carolina. The company currently employs 360 employees in the Kit Creek Road facility and operates a 24x7 global service and support center in addition to a state-of-the-art data center with a capacity of multiple petabytes.</p>
<p>Conference Call and Webcast Information
The NetApp quarterly results conference call will be broadcast live via the Internet at on Wednesday, November 16, 2005, at 2:00 p.m. Pacific Time. This press release and any other information related to the call will also be posted to the Web site at that location. The conference call will also be available live in a listen-only format at (800) 299-7089 in the United States and (617) 801-9714 outside the United States. The passcode for both numbers is 19259021.</p>
<p>A replay will be available for seven days following completion of the live call by dialing (888) 286-8010 in the United States and (617) 801-6888 outside the United States, with replay code 51378149. The Webcast replay will be posted on our Web site for at least one year.</p>
<p>About Network Appliance
Network Appliance is a world leader in unified storage solutions for today's data-intensive enterprise. Since its inception in 1992, Network Appliance has delivered technology, product, and partner firsts that simplify data management. Information about Network Appliance solutions and services is available at</p>
<p>"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 and metrics for the third quarter of fiscal 2006 and for all of fiscal 2006, statements regarding the anticipated benefits our FAS3000 product line, Decru network storage platforms, the Aperi open source community, our partner offerings and solution enhancements and our OEM, development and marketing agreement with Kazeon. 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 general economic and industry conditions, including expenditure trends for storage-related products; risks associated with the anticipated growth in network storage and content delivery markets; our ability to deliver new product architectures and enterprise service offerings, competition risks, including 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 successfully manage our relationships with our contract manufacturers; our ability to expand our direct sales operations and reseller distribution channels; our ability to develop, maintain and strengthen our relationships with strategic partners; our ability to successfully acquire and integrate complementary businesses and technologies; foreign currency exchange rate fluctuations; and other important factors as described in Network Appliance, Inc.'s reports and documents filed from time to time with the Securities and Exchange Commission, 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.</p>
<p>Press Contact:
Mark Heers, Director Marketing and Alliance, Network Appliance Australia
(61 2) 9779 5623,</p>
<p>Fiona Martin, Managing Director, Max Australia
(61 2) 9954 3492,</p>
<p>Investor Contacts:
Network Appliance, Inc. Network Appliance, Inc.
Tara Calhoun Billie Fagenstrom
Ph: (408) 822-6909 Ph: (408) 822-6428</p>
<p>1Earnings per share represent the diluted number of shares for all periods presented.
2 Non-GAAP results of operations exclude amortization of intangible assets, in process research and development, stock compensation, restructuring charges/recoveries, net gain/loss on investments and the related effects on income taxes, as well as certain discrete GAAP provision for income tax matters recognized ratably for non-GAAP purposes.</p>
<p>NetApp and SnapManager are registered trademarks and Network Appliance and Snapshot are trademarks of Network Appliance Inc. in the United States and other countries. Decru DataFort is a trademark of Decru Inc., a Network Appliance company, in the United States and other countries. Oracle is a registered trademark of Oracle Corporation. All other trademarks belong to their respective owners and should be treated as such.</p>
<p>Network Appliance 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. In addition, 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.</p>

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