Netapp, Inc. (MM) (NASDAQ:NTAP)
Historical Stock Chart
1 Year : From May 2012 to May 2013
NetApp Inc. (NTAP) on Wednesday joined a growing list of technology companies issuing bleak financial guidance, citing ongoing economic uncertainty--especially in Europe--for a disappointing current-quarter outlook.
Shares sank more than 20% after hours to $26 as a weak forecast overshadowed the data-storage maker's fiscal fourth-quarter earnings, which grew 13% on stronger revenue in all three major businesses. As of Wednesday's close, the stock was down 9.4% so far in 2012.
The Sunnyvale, Calif., company, which stores and manages clients' information, has continued to suffer as some customers have held back spending on data centers, especially by government and financial-services companies. Its results have contrasted with rival EMC Corp. (EMC), which has been reporting record quarterly results.
"On the enterprise side, I think caution is the watchword," NetApp President and Chief Executive Tom Georgens told Dow Jones Newswires. "If you look at (Europe, the Middle East and Africa), I think we're seeing more of that."
Georgens referred to Europe as "a complicated situation," compounded by NetApp's level of exposure there. The storage maker doesn't get much business from troubled southern European economies like Italy and Spain, but Georgens said the macroeconomic uncertainty continues to crimp spending in its big markets, including Germany and the U.K.
Normally, data-hungry financial-services companies have remained particularly cautious about spending as the euro-zone crisis weighs on the sector. Some banks also face regulatory restrictions that end up restricting how much they can spend.
At the same time, Georgens said spending among technology and manufacturing customers remains healthy. He also said revenue from NetApp's high-end offerings improved markedly.
Overall, for the fiscal first quarter, the company forecast per-share earnings of 34 cents to 39 cents on revenue of $1.4 billion to $1.5 billion. Analysts polled by Thomson Reuters most recently expected earnings of 59 cents a share and revenue of $1.61 billion.
The data-storage provider's comments echo similar warnings from other technology companies, which have blamed weak information technology spending for slowing sales growth.
Shares of Dell Inc. (DELL) hit their lowest point since September 2010 after the company on Tuesday reported its fiscal first-quarter earnings dropped by a third amid lower revenue in its consumer, public and large enterprise customer segments.
Network hardware giant Cisco Systems Inc. (CSCO) earlier this month also issued a cautious earnings projection for the current quarter. Cisco Chief Executive John Chambers has blamed "ongoing economic challenges" for the grim outlook, though he said that the company hasn't seen a significant downturn. Instead, deals are taking longer to close, requiring more sign-offs, and tend to be smaller in size--all signs of caution among buyers.
For the quarter ended April 27, NetApp reported a profit of $180.7 million, or 47 cents a share, up from $160.6 million, or 40 cents a share, a year earlier. Excluding stock-based compensation and other items, per-share earnings rose to 66 cents from 59 cents. Revenue rose 19% to $1.7 billion.
In February, the company projected adjusted per-share earnings of 60 cents to 65 cents on revenue of $1.65 billion to $1.73 billion, in line with analysts' views at the time.
Gross margin fell to 58.4% from 65%.
Products sales, which comprise more than two-thirds of the top line, grew 21%, while revenue increased 14% at its smaller software segment and 16% at its service segment.
-By Drew FitzGerald and Ben Fox Rubin, Dow Jones Newswires; 212-416-2909; Andrew.FitzGerald@dowjones.com