Network Appliance Q2 profit drops with demand
(UPDATE: adds byline, analyst quote, company comment, detail)
By Caroline Humer
NEW YORK, Nov 12 (Reuters) - Data storage systems maker Network Appliance Inc. (NasdaqNM:NTAP - news) on Tuesday reported fiscal second-quarter results that were lower than a year ago due to weak technology spending and the economic downturn.
Network Appliance doesn't see those tough times changing any time soon. Chief Executive Dan Warmenhoven said he expects earnings and revenues to be relatively flat in the third quarter compared with the second quarter.
``I would certainly hope that we would be profitable next quarter,'' Warmenhoven said in an interview.
For the quarter ended Oct. 26, Sunnyvale, California-based Network Appliance said its profit, excluding charges, fell to $7.7 million, or 2 cents per share, from net income of $36.9 million, or 10 cents per share, a year earlier. Sales fell to $194.7 million from $200.4 million.
The maker of stand-alone storage systems for computer networks said that including charges and write-downs, the company's loss for the quarter was $11.2 million, or 3 cents per share, compared with net income of $35.4 million, or 10 cents per share, a year earlier.
The charges include $8 million for a restructuring Network Appliance announced last quarter that included cutting 200 jobs. It also included $13 million to write down the value of equity investments and $7 million for the amortization of certain assets.
Analysts had expected the maker of stand-alone storage systems for computer networks to post break-even per-share results on sales of $192 million, according to Thomson Financial/First Call.
After the events of Sept. 11 sidelined many U.S. businesses, Wall Street lowered estimates for the company. Then, as signs grew that demand picked up in October, some analysts said they started to raise their hopes.
``Coming in at $195 million, I'd say they kind of met the lower end of what they had to do to meet the increased expectation that people have had here over the past couple of weeks,'' said Glenn Hanus, an analyst at Needham & Co.
Warmenhoven told Reuters in an interview that while the company didn't have a lot of visibility, it expects revenues to come in at $195 million to $200 million in the third fiscal quarter. Network Appliance for the second quarter reported revenue of $194.7 million.
He also foresees operating earnings relatively unchanged in the third quarter from the second quarter, in which the company posted earnings of 2 cents per share, or $7.7 million. He said that may mean earnings of around 1 cents to 2 cents per share.
The company had said to expect operating earnings of 1 cents to 2 cents per share in the second quarter.
Shares of Network Appliance fell in after-hours trading on Instinet to $17.20 after having risen 71 cents, or 4.1 percent, to $18.19 before the results were released after the close of regular U.S. trading. The stock has soared 167 percent since Oct. 1 compared with a 38 percent rise in competitor EMC Corp. (NYSE:EMC - news) in the same time period.
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