NTAP CC 3FQ02 notes, and my comments:
Notes:
revenues: 198M, down 30% YOY, but up 2% sequentially
BTB >1; they don't disclose backlog.
EPS: GAAP: 0.02 ; Pro Forma: 0.04
gross margins: 62.2%. The customer shift to our newer products, which happened faster than expected, contributed to the increase in GM. 1.5% of this GM increase is non-recurring, due to: Operating expenses will be up next quarter, as we reverse the partial shutdown of some of our production facilities. Also, we had some revenue this quarter from inventory we had previously written off.
The pricing environment was very stable for the quarter. We are not seeing pricing pressure from our competitors, although we expected it.
Another contribution to higher margins was the increasing amount of software in our sales.
cash and investments up 59M this quarter.
We continued to make good progress in the enterprise space. Visibility increased this quarter.
Business outlook: Until the IT spending environment improves, our outlook will be cautious, and we will give guidance only for the next quarter. Expect 2-5% increase in revenues, and flat EPS, next quarter. EPS will be flat (while revenue goes up), because of the non-recurring gross margin increase that happened this quarter.
Our customers are very interested in data replication and disaster recovery, we are well positioned here, and expect this to be a fast-growing part of our business.
Overall IT budgets are flat among our customers. However, storage budgets are up modestly, and there is an ongoing transition from DAS to NAS.
We will continue to broaden our offerings for the higher-end enterprise market. Our alliance with IBM is helping a lot with our success in this area. Services revenue are up, but still only 5% of our revenue.
Question: What do you see coming out of your competitors, in NAS?
Answer: Our competitors have been talking a lot about what they were going to do, then being unable to do it. They are building overly-complicated systems that are more expensive than ours. Back in 1998-2000, customers didn't care about pricing, so our lower total ownership costs didn't help us as much. Now, they care a lot, and so we are getting wins.
My comments:
The bottom is in. NTAP's management is saying this, and I'm hearing this in numerous CCs. From here on out, the surprises will be of the pleasant kind. We no longer need to fear earnings season.
Increasing gross margins (to the top of the range achieved at the height of the Bubble), while increasing sales Q-on-Q, is an impressive achievement. Further, they expect to be able to maintain GMs at around 60%. For comparison, Cisco currently has GMs of 57%, QCOM 66%, EMC 37% (and doesn't expect to ever get better than the 50-54% area). Anyone know what MSFT's GMs are?
A little bit of Creative Accounting, writing off some inventory in a "trough" quarter, and then selling it and recognizing the revenue in a "recovery" quarter. Not a big deal.
This CC makes me more likely to hold my position (a longer time, and/or till higher prices). I had considered selling my 2003 LEAPs the next time NTAP hits 25 or so, but I think now I'll just hold them, till they get to LT cap gains territory, in June and July 2002. My 2004s, all bought in 9/18-27/01, I won't even consider selling until mid-2003. |
