Quick notes on a great cc:
Net income up 92%.
EPS 1 6m = 76% increase
2:1 stock split 12/20 = 149.3M sh
124.7M reveneue = 90% yoy.
Bookings exceeded revenue
Eur = 18%
Far est + 10%
NetCache = 7% up from 5% = 3rd consecutive growth
57% revenue slight decline
addon software + support contractys = 14% of revenue up from 10%
opex donw to 40.5% of revenue
SM expendes = 26.1 % = same
R/D =11% = same
GA= 3.6% down from 3.7%
Op income = flat as percent of rev = 18.3%
Net income = 12.9% of revenue down form last
EPS = 19% cents 16 cents
Cash increased
DSO = 57 day down form 61 days
Inventory turns = 11.7 turns
Rev increase 21% y over y
North Americe = 270 new accounts versus 200 q1
Channel mix. Indirect decreased. OEM increase (Dell and Fujitsu)
Showing raw iron dell at Oracle World
Increased demand from e-commerce businesses
Increase in clustered systems
Shipped 110 units with shift toward high end, with even distribution low to high
NetCache increased 66% in quarter over quarter basis. Netcache sales team organization is complete.
Questions:
Y2K guidance: Few customers ordered early for Y2K last quarter. In general no softness. Few customers in regulated industries have said plans are on hold, but offset by accelerating demand in e-commerce space. NetApp is not seen as an infrastructure risk. No meaningful impact seen.
Capacities at high end shipment: Avg system = 300GB, up 50% from last year.
Gross Margin expectation: Pleased with software mix movement. Strong endorsement for software products. Offsetting expansion of storage capacities. See continuing decline due to storage capacity increases.
Win/ Loss rate: Consistently will 70% at least. Expanding coverage pays back. Auspex never seen outside their accounts. DGN/Clarion causing confusion, but not losses. EMC and NTAP hitting quite a bit, but exploding storage world shows trend to NAS versus SAN. Those looking at EMC now looking at NTAP too.
Dell off to faster start than Fujitsu. Progressing as expected. Dell sales force beginning to understand, but will take a few more quarters.
R&D spending: can't be specific on new products, but working on new platforms and software. NetCache seeing growth in engineering staffing for unending list of new requirements. 36GB drives to be supported. New storage shelf required and required Q/A process.
Cellera: Don't believe that it is successful in Japan, according to Tom Mendoza. Cellera is sold almost always with EMC Symmetrix. Comfortable competing with it.
Where can you grow software business to from 14% now: We don't know where it can go. But increasing disk content is to be offset by more software. Mitigate downward pressure. Success is speculative at best. SnapMirror/Restore is particularly successful for remote copy of data. Exceeded internal forecast. New products under development, including SnapRestore for NT. New Mirroring / Synchronization products. More than half of new software going out with new systems. Big part of development is simplicity because it is simple to manage with no outsourcing compared to alternatives.
Breakout software from service: Software products growing faster than support component. Service rev is flat. Software increasing.
Hiring environment: 1,000 employees; sales getting easier as better known; sales productivity increasing as specialists are hired.
How much is success of quarter based on Y2K acceleration: about $3M only.
Anecdote from Tom: Companies are declaring that all new storage must be shared between Unix and NT. Sales force is calling higher with larger opportunities.
“Congrats on growing faster as you get larger.”
Synchronous mirroring 2h 2000.
Dynamics of winning against EMC in dot com companies Dot coms 30% of business. EMC is getting aggressive. EMC discounting heavily in this market. Market is good for NTAP because of fast growth. EMC good with young startups with at lot of money, but NTAP is more successful later. Once people understand that EMC purchase involves a lot of outsourcing for changes. NTAP is easy to expand and change without services.
SAN discussion playing to NAS strength because of heterogeneous systems. SAN definition now includes Networked Attached solution. SAN is elevating awareness.
EMC discounting is competitive buy not “bombing the prices”. Trying to come down to meet NTAP pricing.
Avg Sales Price versus last year: $70K versus $80K including netcache and addons, which are pushing ASP down. Multiple unit sales more now.
Turning up energy level to work with 3rd party software providers. 8I demo at Oracle “really neat”. On application side it is not a technical problem, just getting parties confident in appliance simplicity, relaibility, etc.
Are you saying Cache is beginning to open up on US? Up almost double in North America (70=80%). Up 66% worldwide
When are new Cache systems available? End of fiscal year, not calendar. Streaming now supported, QuickTIme, Real, and NetShow. News and NTP now supported. More and more types of objects.
Is sales cycle reducing.? New reps more productive faster because of more familiarity with NTAP in market. Partnerships helping to focus. Market focus also helping productivity.
Regarding Dell, any evidence that Dell has this thing figured out? Still pioneering with NTAP as the pioneering guide. Not fully ramped up. Sales force has “not got it” yet. Focus on SE specialists for training. Looking for improvement 3-5 quarters with steady growth. Not at max efficiency.
Dell is selling Clarion data shelves with NTAP filers, but are re-evaluating.
New strains on manufacturing? Supply issues? Etc? In good shape on capacity. More outsourcing. Linearity superb. Surge in memory prices settled down, but no real effect. Cost per MB for disks declining. Trying to stay ahead of growth curve. CRM replaced with better one. JD Edwards installing now. Lots of infrastructure headroom. Pressure on HR for recruiting.
Competitive situation for caching: Hasn't changed much. Cacheflow on low end, but not many there. No Cacheflow in highend ISPs. INKTOMI expanding sales force aggressively. Competing with INKTOMI well internationally and better and better domestically. Cobalt very low end. Don't try to compete there. INKTOMI finally adopted appliance strategy and going after corporations. Says that they admit they were wrong with general purpose solution to only ISPs. NTAP way ahead. With NTAP selling filers, synergy in sale of caching results.
Remark: perhaps we should start looking for a 2 penny upside—analyst said. “Chill” said Dan.
See any re-absorption issues for systems coming back after testing? Best judgement is that growth rate will slow a bit below 90%. Won't see that next quarter, according to Dan. Caution: do not expect 21% sequential q to q nor sustained 90% quarter over quarter. Cautiously optimistic. If there is a shortfall, it will be book to bill. Q3 is worst case for Y2K impact as Q3 ends in January, then strongest season begins.
Growth of marketplace? NTAP goal is to double every year. But we haven't, don't expect us to. 90% may be a bit of a peek. Will see 60-70% growth in a couple of years. Want to keep margins flat, but disks keep putting pressure on margin. Internal goals are more aggressive than external goals.
New companies coming after NTAP? No new companies this quarter. Sun talks about appliances, but only EMC at high end (2-3 million dollars). Why do you lose? Lose in opportunities where people don't look outside their existing vendors. |
