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Network Appliance Profit Falls on Stock Option Expenses

Reuters
Wednesday, 14 Feb 2007 | 7:12 PM ET

Network Appliance, a maker of network storage equipment, said on Wednesday that its quarterly profit fell 13% due to expenses for employee stock options, which offset a rise in revenue.

The company, the largest U.S. firm specializing in data storage after EMC, gave a revenue forecast that was above average analyst expectations, though its net profit estimate was roughly in line.

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Its shares, which rose 2.9% in Nasdaq trading ahead of the earnings report, fell 3% afterwards. The stock had risen 49% since hitting a 52-week low in July.

Net income in the company's fiscal third quarter ended Jan. 26 fell to $66.5 million, or 17 cents a share, from $76.4 million, or 20 cents a share, a year earlier.

Revenue advanced 36% to $729.3 million, beating the average forecast of $703.4 million from analysts surveyed by Reuters Estimates.

Excluding certain items, profit was 29 cents a share, a penny more than the company's earlier forecast.

Chief Executive Dan Warmenhoven said the company benefited in the fiscal third quarter from demand for storage used to recover data in emergencies. Such storage equipment costs less than other types of data gear, he said.

"We had strength across the board," Warmenhoven said in an interview, pointing especially to Germany and Britain. The company's sales to U.S. federal government agencies slowed, however, he added.

IBM, which resells Network Appliance products, accounted for 6% of revenue, double the second quarter's level, Warmenhoven said, and helped the company exceed analysts' revenue expectations.

Sunnyvale, Calif.-based NetApp, the trademarked short form of Network Appliance's formal name, forecast fiscal fourth-quarter net income per share of 19 cents to 20 cents. That compared to the average analyst forecast of 20 cents, according to Reuters Estimates.

NetApp saw year-over-year revenue growth of 32% to 34% in the quarter, which translates to $789.4 million to $801.3 million in revenue. Wall Street was looking for $776.1 million, according to Reuters Estimates.

NetApp said it expects earnings before certain items of about 30 cents a share in the fiscal fourth quarter.

The company's shares fell to $37.25 in extended trading following the earnings report, from their Nasdaq close of $38.41

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