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Tickers in this Article: NTAP
NetApp (Nasdaq:NTAP) announced its results for the most recent quarter on November 14, 2012. NetApp supplies enterprise storage and data management software and hardware products and services.

Investors should care about a company's quarterly earnings because it shows the state of the business over the past 90 days and provides guidance for the following 90 days. SEE: 12 Things You Need To Know About Financial Statements

The Numbers: NetApp's EPS outpaced analyst estimates while the company's revenues came in below predictions. The company reported adjusted net income of 51 cents per share versus the 33 cents per share estimate and revenues of $1.54 billion versus the $1.68 billion estimate. Revenue climbed 2.3% from the same period last year. Year over year revenue increases in the past five quarters have averaged 12.5%. NetApp reported net income of $109.6 million during the second quarter. This is a 33.8% decline from last year. The company has now reported lower net income in each of the last four quarters.

Management Quote: "NetApp produced healthy financial results in the second quarter with revenue roughly at the midpoint of and EPS above our guidance range, despite a difficult environment. We saw a strong uptake of NetApp Data ONTAP eight and clustered Data ONTAP, as customers are looking to build agile data infrastructure environments with intelligent data management, nearly unlimited scalability, and nondisruptive operations," said Tom Georgens, president and CEO. "We also saw momentum in our partnering strategy with continued FlexPod growth and a record high revenue contribution from Arrow and Avnet. Our focus on delivering best-of-breed storage solutions and the leverage we gain through go-to-market and channel partners will enable NetApp to grow our business and gain share."

A Look Back: Last quarter was the fifth in a row that the company saw shrinking gross margins, as they fell 1.3 percentage points from the year-earlier quarter to 59.3%. In that span, margins have contracted an average of 4.6 percentage points per quarter on a year-over-year basis.

Net income has dropped 25% year-over-year on average across the last five quarters. Performance was hurt by a 54.3% decline in the first quarter from the year-earlier quarter.

Looking Ahead: The outlook for the company's results in the upcoming quarter is unfavorable. The average estimate for the third quarter is 38 cents per share, down from 41 cents 90 days ago. A decreasing earning estimate is a negative sign and usually leads to a drop in the stock price. The average estimate for the fiscal year is $1.45 per share, down from $1.52 90 days ago.

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