By Don Clark and Maria Armental
NetApp Inc. is laying off about 500 workers as the data storage
specialist grapples with internal and external problems that hurt
results in its fourth fiscal quarter.
The Silicon Valley company reported Wednesday that profit for
the quarter ended in April fell 32%. NetApp also issued a
disappointing forecast for results in the current period.
NetApp's shares, up 4% over the past 12 months, fell nearly 9%
to $32.26 in after-hours trading, below a 52-week-low set Tuesday
during regular trading.
The company sells data storage hardware in competition with EMC
Corp. and others. Tom Georgens, its chairman and chief executive,
said sales of all data storage companies are being affected as
customers consider shifting to cloud-based storage for some
operations instead of buying and operating their own hardware.
But NetApp is also struggling with the impact of a major
product-line overhaul, shifting to a new offering it calls
Clustered OnTAP. Mr. Georgens said many of the company's largest
customers had balked at making the change, waiting until NetApp
introduced new versions with certain features they were
seeking.
"We underestimated the complexity associated with these
transitions," Mr. Georgens said during a conference call with
analysts. "That is entirely our fault, and it is up to us to fix
it."
NetApp said the job cuts come to about 4% of its global
workforce. It plans to eliminate the positions by the third quarter
and expects to record a charge of $25 million to $35 million
related to the cuts. Most of those charges are expected to be
recognized in the first quarter, the company said in a securities
filing.
Overall, for the quarter ended April 24, NetApp reported a
profit of $134.9 million, or 43 cents a share, compared with $197
million, or 59 cents a share, a year earlier. Net revenue fell
nearly 7% to $1.54 billion.
Excluding stock-based compensation and other items, earnings
fell to 65 cents a share from 84 cents a share a year earlier.
NetApp had projected earnings of 70 cents and 75 cents on revenue
of $1.55 billion to $1.65 billion.
For the current period, NetApp projected profit of 20 cents to
25 cents a share on $1.28 billion to $1.38 billion in revenue,
compared with the consensus of 59 cents on $1.46 billion in
revenue, according to Thomson Reuters.
Mr. Georgens said the company expected cost cuts and the gradual
acceptance of its new products to begin driving a rebound in
revenue in the second half of the fiscal year.
NetApp, which is based in Sunnyvale, Calif., also said it would
boost its quarterly dividend by 9% to 18 cents a share.
Write to Don Clark at don.clark@wsj.com and Maria Armental at
maria.armental@wsj.com
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