NetApp financials reflect EMC challenge

NetApp (NASDAQ: NTAP) has posted revenues for the first quarter of fiscal year 2013 totalling $1.445bn offering a slight decline of 0.9 percent year-to-year.

The drop is the first time NetApp reported growth below 19 percent year-to-year since the third quarter of 2009. Storage product revenue fell seven percent in 2Q12; the segment’s revenue growth had been in gradual decline since 2Q10 when it posted 54.2 percent growth. However it had still managed to post an average of 28.1 percent revenue growth over the past four quarters.

According to Angela Lambert, research analyst at Technology Business Research, Inc, NetApp has struggled to offset EMC’s strong emergence in the channel, leading to the first quarter of revenue decline in more than three years. In the analyst’s view: “EMC (NYSE:EMC) is leveraging its scale and recognisable storage brand to chip away at NetApp’s comfort zone, launching its midmarket-centric VNXe product and creating channel-ready bundles through VSPEX.”

Lambert points to EMC’s push to increase storage sales through channel distribution throughout the Americas and EMEA as the reason for NetApp’s decline in revenue of 2.7 percent in the Americas and 2.5 percent in EMEA. Although NetApp APAC revenue was up 10.5 percent, growth has slowed considerably in the region considering APAC growth averaged 44.5 percent over the past four quarters based on estimates by the analyst firm.

Computing industry benchmark reports by Technology Business Research estimated year-to-year revenue growth for the storage industry at 1.4 percent in 1Q12, marking NetApp as a clear leader in growth. However, competitor EMC’s push to develop its distribution channel helped drive storage revenue growth of six percent this quarter.