NetApp Delivers a Mixed Bag in Fourth Quarter Report

Andrew Klips |

NetappIn a tale of good news/bad news shares of storage and data management company NetApp Inc. (NTAP) closed Tuesday trading down by 1.5 percent at $36.63, marking their third straight red close, but are making up a bit of lost ground in extended trading after reporting results for its fourth quarter and full year ended April 26. Quarterly earnings nipped past expectations of analysts, but revenue came up short and outlook for the current quarter was also below predictions. The company also said it is also laying-off about 900 employees, but upped its share repurchase program and unveiled a quarterly dividend aimed to improve shareholder returns.

For the fourth quarter, Sunnyvale, California-based NetApp said revenue was $1.72 billion, compared to $1.70 billion in last year’s quarter. Net income was $174 million, or 47 cents per share, versus $181 million, or 47 cents per share, in last year’s quarter, as the number of fully diluted shares decreased. Excluding special items and stock-based compensation, adjusted net income was $253 million, or 69 cents per share, compared to $252 million, or 66 cents per share in the fourth quarter of fiscal 2012.

Wall Street was expecting adjusted earnings of 68 cents per share on revenue of $1.76 billion.

Product sales, which make up the majority of revenue, decreased during the quarter to $1.138 billion from $1.165 billion in last year’s quarter. Software sales increased from $212.5 million to $227.0 million while service sales improved to $351.7 million from $324.9 million in the year earlier quarter.

Total operating expenses rose by 7 percent to $827.8 million. Gross margins expanded from 58.4 percent to 60.1 percent.

"We are also pleased to announce enhancements to our capital allocation program, reflecting our confidence in our underlying business as well as our commitment to enhancing shareholder value,” said Tom Georgens, president and chief executive at NetApp.

NetApp said that it is increasing its stock buyback plan, which currently has $1.4 billion remaining, to $3.0 billion, with $2 billion expected to be repurchased in the next 12 months and the remainder of the subsequent two years.

A dividend of 15 cents per share was also initiated for shareholders of record as of July 11 with payment scheduled for July 23.

The company is also re-aligning resources and restructuring, including reducing its staff by 900 employees. NetApp expects to recognize an estimated $50-$60 million in pretax charges as a result of the moves.

For all of fiscal 2013, NetApp notched total revenue of $6.33 billion, compared to total revenues of $6.23 billion for fiscal year 2012. GAAP net income for the year was $505 million, or $1.37 per share, compared to $605 million, or $1.58 per share, the year earlier. Adjusted net income was $841 million, or $2.28 per share, versus $926 million, or $2.41 per share, for fiscal year 2012.

Looking ahead, the company said it expects first-quarter revenue in the range of $1.475 billion to $1.575 billion. Non-GAAP earnings are guided for 45 cents to 50 cents per share as the company buys-back 367 million shares.

Analysts were expected EPS of 53 cents on revenue of $1.6 billion.

So far in 2013, shares of NTAP are ahead about 8.5 percent through the close of regular trading on Tuesday. In after hours trading, the stock price has climbed back up to about $37.50, recovering the day’s losses and a little bit more.

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Companies

Symbol Name Price Change % Volume
VICL Vical Incorporated 2.46 0.12 5.13 61,049
NTAP NetApp Inc. 36.33 -0.16 -0.42 2,271,205

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