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Strategies & Market Trends : Sharck Soup -- Ignore unavailable to you. Want to Upgrade?

To: 2MAR$ who wrote (15665)	4/11/2001 12:19:29 AM
From: heronwater	Respond to of 37746

Gilder was good as gold both ways :-)

To: 2MAR$ who wrote (15665)	4/12/2001 5:14:32 AM
From: 2MAR$	Read Replies (1) \| Respond to of 37746

Store This: NTAP Drops Fourth-Quarter Bomb By Thomas Lepri Senior Writer 4/11/01 6:53 PM ET Joining industry giant EMC (EMC:NYSE - news), Network Appliance (NTAP:Nasdaq - news) became the second major storage infrastructure firm to warn Wednesday, sharply reducing its guidance for fiscal fourth-quarter sales and earnings after the close of trading. Related Stories Ugly 2001 Slowly Coming Into Focus at EMC Network Appliance Beats Earnings Estimates on Soft Sales Storage Companies Still Smiling as the Bits and Bytes Keep Piling Up Store this: NetApp said that it now expects sales in the fourth quarter, ending this month, to plunge 20% to 25% from the third quarter's $288.4 million. That puts the Sunnyvale, Calif., company's expected sales in the area of $212 million -- a gargantuan $100 million short of what analysts polled by Thomson Financial/First Call were looking for. Meanwhile, NetApp said earnings per share will come in between 1 and 3 cents a share, nowhere near the 10 cents a share that analysts had expected. "The direction of the global economy remains uncertain, and as our current quarter progresses, we have experienced greater delays in customer orders than anticipated, requiring us to revise our outlook for the fourth quarter fiscal year 2001," CEO Dan Warmenhoven said in a press release. Earlier Wednesday, NetApp competitor EMC (EMC:NYSE - news) released disappointing preliminary first-quarter results and lowered its outlook for the remainder of 2001. Like NetApp, EMC blamed the economy. But next to NetApp's, EMC's warning -- by no means minor in scope on its own terms -- was nothing more than a blip. Why was NetApp's business hit so much harder than EMC's? According to Warmenhoven, NetApp's greater reliance on new customers made it particularly vulnerable. "In tough economic times, it's easier to have a customer expand his existing capacity than to penetrate with a new technology." Much of EMC's business comes from existing customers seeking to attach new storage servers to the application servers on their networks. Choosing NetApp's storage appliances, which attach directly to networks themselves rather than single application servers, involves choosing an entirely new storage architecture. CFO Jeff Allen noted that 35% to 40% of NetApp's business comes from new customers each quarter. In good times, those customers have shown themselves extremely willing to embrace the network-attached storage, or NAS, architecture. NetApp has put together 21 straight quarters of more than 70% revenue growth. But that streak is about to end. Another factor the company cited was its heavy exposure to a handful of large, ailing enterprises -- names like Motorola (MOT:NYSE - news), Yahoo! (YHOO:Nasdaq - news) and Texas Instruments (TXN:NYSE - news), the last of which was cited as a reason NetApp's sales came in lower than expected when the company reported its third-quarter earnings in February. "I haven't heard a lot of good news out of any of them lately," said Warmenhoven of those large customers. Investors weren't without warning signs. NetApp's third-quarter results showed very large increases in both accounts receivables and inventories, the latter of which grew by 67% from the prior quarter. But few, if any, observers were prepared to see a quarter like this: a revenue miss of about 30%, an earnings shortfall of 70% to 90% and the almost certain downward revision of fiscal 2002 sales that the company will give investors when it reports its earnings next month. Considering all that, the stock was holding up remarkably well in after-hours trading. After gaining 5.6% in regular trading, NetApp was falling $1.96, or 11%, to $14.60 on Island.