May 21, 2014 / 8:14 PM / 4 years ago

NetApp forecasts profit below Street, posts lower revenue

(Reuters) - NetApp Inc forecast a current-quarter profit below market estimates after reporting a 4 percent fall in quarterly revenue, hurt by lower sales of data storage products.

NetApp said it expects an adjusted profit of 53-58 cents per share on revenue of $1.42-$1.52 billion for the first quarter.

Analysts on average were expecting a profit of 62 cents per share on revenue of $1.52 billion, according to Thomson Reuters I/B/E/S.

“Revenue was a bit short as our OEM business was a bit weaker and that’s reflected in both this quarter’s results and our guidance for the next quarter,” Chief Executive Tom Georgens told Reuters.

IBM Corp, NetApp’s largest OEM (original equipment manufacturer) customer, reported its lowest quarterly revenue in five years as hardware revenue fell 23 percent.

NetApp, which competes with market leader EMC Corp, has been losing market share to newer storage technology vendors such as Nimble Storage Inc and Pure Storage.

Some of its enterprise customers have held back spending on hardware to evaluate newer flash and web-based storage and software that can store data on commodity hardware.

“(The company) is getting attacked... by all these new emerging companies. NetApp has been late with all flash arrays and does not have a product that is all flash,” Wunderlich Securities analyst Kaushik Roy told Reuters.

While EMC is buying companies, NetApp has not been very acquisitive and is therefore falling behind, Roy said.

NetApp’s revenue fell to $1.65 billion for the fourth quarter ended April 25.

Revenue at the company’s OEM business, which accounts for 7 percent of total revenue, fell 30 percent. Product revenue fell 8 percent to $1.04 billion.

Net income rose to $197 million, or 59 cents per share, from $173.8 million, or 47 cents per share, a year earlier.

Excluding restructuring and other expenses, the company earned 84 cents per share.

NetApp said in March it expects to cut about 600 jobs worldwide to save costs.

Analysts expected NetApp to earn 79 cents per share on revenue of $1.67 billion.

NetApp’s shares fell 2 percent in premarket trading. The stock, which has lost 16 percent of its value in the year so far, closed at $34.49 on Wednesday on the Nasdaq.

(This story corrects paragraph 3 to remove an extraneous word)

Editing by Joyjeet Das

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