NetApp Earnings: Small Layoffs, Big Flash Storage Push

NetApp (NTAP) is laying off 900 employees and struggling to grow. But flash storage and partnerships with Avnet, Arrow and Cisco Systems are gaining momentum.

The VAR Guy

May 22, 2013

2 Min Read
NetApp CFO Nick Noviello points to momentum with Flash Storage Avnet Arrow and Cisco Systems
NetApp CFO Nick Noviello points to momentum with Flash Storage, Avnet, Arrow and Cisco Systems.

NetApp (NTAP) is laying off 900 employees — a figure smaller than expected. Plus, the storage company says momentum from its AvnetArrow and Cisco Systems relationships is accelerating. And a flash storage initiative is taking hold, the company asserts. Still, NetApp faces growth challenges — Q4 2013 revenues rose only 1 percent to $1.72 billion vs. Q4 2012, and the company’s longer-term outlook didn’t really impress Wall Street.

In response, NetApp is cutting 900 employees. Some analysts had expected cuts as high as 1,300 employees. The layoffs mostly involve NetApp’s OEM (Original Equipment Manufacturing) efforts, according to CFO Nick Noviello.

Speaking with Barron’s, Noviello said NetApp would instead continue to invest in its distribution and technology partners. Indeed, he told Barron’s: “This is about looking to where NetApp sees the biggest gain. NetApp is a partner-friendly company. Some of the re-alignment is focused on those partners where we have the biggest potential gain over time. So, for example, the Cisco partnership for converged infrastructure is one where we see tremendous opportunity. Our Arrow and Avnet partnerships had big gains in the quarter and contributed 37% of revenue in the quarter.”

That sounds promising. But NetApp’s challenges are clear…

  • Narrow Focus: The world is moving toward converged storage, compute and network workloads. NetApp can’t cover all three of those bases on its own. And today’s partnerships might eventually involve tomorrow’s rivals.

  • Partnerships: Relationships with Cisco Systems and IBM involve long-term risks. Cisco also has a long-term relationship with EMC, and IBM has a big storage portfolio of its own.

  • Software-defined Storage: Everyone’s talking about that — plus software-defined networking and software-defined data centers. Here again, NetApp can’t likely cover all the bases on its own.

  • Public Clouds: Yes, NetApp’s on-premises technologies can now link out to Amazon Web Services and other public clouds. But will those connections help or harm NetApp’s long-term on-premises revenues?

The VAR Guy has plenty of additional questions to raise. But our resident blogger needs to unplug for a bit. Yes, it’s true: He has been known to sleep from time to time…


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