The cc is almost over.
I have not been able to take notes, but the boys are upbeat, confident, and their usual conservative selves looking forward. The analysts are not asking any hard questions, but aren't exactly cheering at the numbers.
GM is up this quarter because of upgrades to F840 by existing customers. Upgrades don't include a lot of disks, so GM is elevated. Warning (as usual) that they still expect GM to fall over time as systems contain more and more disk drives in large scale systems.
Still looking at a $1b year.
Not seeing any significant competition from the low end. Not going after SOHO market.
On a larger front, when asked about trends in telco capex, DW says telcos not a big piece of business other than ISP, which is not slowing down. Energy sector, financial services are buying big. Telcos is longer term target.
When asked about the new EMC mid-range product, DW " are your road kill?" "In fact we are not concerned with this product. We understand it well. RAID is complex and slow. Issue is fundamental. EMC leads with Symmetrix, not NAS in enterprise sale, not NAS. Will they cannabalize Symmetrix? We are!"
TM sez "This is the same conversation we had a year ago when EMC bought DGN. Their sales force is not technically competent, so they talk about road kill. Using SRDF for failover with multi-TB systems is risky. That's why we have our failover design. Let's stop shadow boxing and get at it!"
DW: Caching sales cycles seem to be speeding up to 90 days.
TM: Customers are using NTAP presence in EMC customers as a way to lower EMC prices.
DW: We're still 1/2 their price.
Asked about margins:
Jeff: Upgrade was strong, but new business on high end were very good. Bigger impact is software mofing from 15.5% to over 17%, which is good for margins.
DW: We are seeing 3rd generation of caching 1=proxy servers, 2=more sophistication, 3=content delivery management. Leaders change in each generation. Now its INKT and NTAP. NTAP will evolve as the leader as storage of content becomes important. Streaming business videos are becoming drivers for requirements. Will be settling out in industry. Standards will become unified. Deployments are not slowing down, though. Standards will be used to assess vendors going forward.
TM: Corps are pushing content to the edge. That is causing a storage problem at the edge. NTAP solves both problems.
When asked about caching business:
DW: We have not been heavily discounting like a competitor incorrectly reported.
TM: The vendor may have been surprised by NTAP's new low end products, which beat them in a market they thought they had.
Mix of sales:
DW: 40% from internet sector, including apps. But applications profile is not more database and mission critical rather than web sites.
Sales linearity and order patterns from existing customers:
JA: Shipment linearity was good. ORder linearity was light in August, but built through quarter.
DW: 35-40% from new accounts. 60% existing. No change in patterns.
Competition:
TM: Staying away from "let's make a deal" mentality with good published pricing. We have good margins to work with. We pick the leaders and set prices well below. Customers are looking for products that work from stable companies. We have proven those things. We are not seeing pricing pressure and don't expect it.
Gross Margin:
JA: Op margins in 18-19% because of our commitment to invest. My track record for predicting gross margin declines is not good. I can't tell you how fast they come down, but we will balance with op margin tradeoffs.
Netcache growth:
DW: We wer 4% last quarter 10M. This quarter it was $20M.
Sales force growth:
TM: No search forms. People are calling us. We pick the best.
Future strategy to OEM market:
DW: Fujitsu working well in Japan. Dell not sustaining the relationship, coming to an end. OEM is hard to manage because we are still in missionary mode. OEM's don't do that. Fujitsu put together a focused sales force. We will not be going for more OEM's for a while.
TM: Partnering is working well, but not as OEMs.
Revenue guidance:
10-15% seems broad.
JA: 1st quarter is order seasonal, but not revenue seasonal.
DW: Year is $1.1B. That's about 14%/q compounded. You can look at seasonality and figure it out yourself.
Deferred revenue seems to be growing.
JA: Result of NTAP taking on leasing business direct.
Update DAFS.
Hitz: First draft out. Early versions up in lab. Goal is to get into customers for software development 1H next year, then products 2H next year, roughly.
CrosStor--does that take the rug out from your competitors?
DW: We have been competing with EMC and rarely loose. The CrosStor technology does not concern me.
JA: Streaming media and content director are new. Protocol mix in base is positive this quarther. Reception is strong.
Hitz: WRT capacity, customers are pleased with 12-24TB coming year. We give more capacity due to our RAID and SNAPSHOT efficiencies. We may give 3-4 x more capacity than what competitors actually give due to their RAID and TimeSaver architectures.
TM: Our large capacity systems are easier to use.
Option creep in shares outstanding.
JA: No current plans to do stock buyback.
F840 was 8-9% of 3,000 units sold.
Larger systems result in more software options purchased by customer. More software content may or may not offset more disk drive content. Don't know yet.
TM: We are not trying to give product to dot coms that have no money. We focus on people with money and sell products to them. Our customers are healthy F1000, big ISPs, and caching in Telcos to offload bandwidth.
DW: Goal is to push caching revenues higher.
DW: Low end product to be announced and delivered before end of FY.
Much discussion about how NTAP filers are really much more scalable than the 12TB discussion. Faster networks make mulitple filer farms very viable.
JA: We are in a good spot if people's budgets contract, due to smaller price/storage and easier training.
My comments:
The cc got more and more "congratulatory" as it progressed. It think the good analysts walked away happy. |
