NetApp next week will roll out the latest version of its ONTAP storage operating system as it hones its focus on software and all-flash arrays.
The company's ONTAP 9 falls into a strategic product category that's designed to enable NetApp to grow revenue into the future. For now, NetApp's financials have been lumpy as it fends off a bevy of players in the storage market.
In a nutshell, ONTAP 9 is optimized for flash and can offer 15TB solid state drives in an array. In addition, NetApp's data compaction technology allows more information to be stored in a smaller footprint. ONTAP 9 is roughly focused on storage efficiency.
NetApp's biggest challenge is to grow its new products faster than its legacy ones decline. The company on Wednesday reported mixed fourth quarter results.
For the fourth quarter, NetApp reported a net loss of $8 million, or 3 cents a share, on revenue of $1.38 billion. Non-GAAP earnings for the quarter were 55 cents a share.
Wall Street was expecting fourth quarter non-GAAP earnings of 58 cents a share on revenue of $1.38 billion.
As for the outlook, NetApp projected first quarter non-GAAP earnings of 34 cents a share to 39 cents a share on revenue of $1.2 billion to $1.35 billion. Wall Street expected first quarter earnings of 45 cents a share on revenue of $1.26 billion.
CEO George Kurian said on NetApp's earnings conference call that the company saw cautious spending due to an iffy economy. Some workloads were also shifting to the cloud.
Strategic products like ONTAP accounted for 61 percent of product revenue. The plan for NetApp is to base its turnaround on those new product lines.
We are facilitating our customers' success as they navigate through their own IT transformations, which leverage modern architectures and hybrid cloud environments. Our strategic solutions cluster data ONTAP, branded E-Series, all flash arrays including SolidFire, hybrid cloud solutions and OnCommand Insight enable these transformations and are the basis of our pivot to the growth segments of the market.
In fiscal year 16, we accelerated the adoption of clustered ONTAP and moved into a leadership position in the flash market and we expect to break away from the pack with the next generation of ONTAP.
The catch is that NetApp's turnaround will take time to play out. JMP Securities analyst Erik Suppiger said:
Management attributed the relatively weak results to a slow spending environment, as well as an ongoing transition within NetApp. We believe the results also reflect a share shift away from legacy players, and toward next-gen vendors. Of note, our checks suggest NetApp continues to struggle in competitive engagements due to its disjointed product portfolio and weak sales execution. We feel NetApp's current pace of cost cutting has left the company without levers to pull as revenues continue to decline.