Despite a drop in revenue from last year, NetApp executives painted a rosy picture of their outlook during their earnings call Wednesday evening. They expressed optimism over the pending FlashRay release, a new version of Clustered Data OnTap and a rise in enterprise and government spending.
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On the downside, NetApp is still feeling the sting of decreased revenue from the loss of its OEM deal with IBM, and that problem will get worse until the vendor finds alternative channels for the products that IBM sold.
On the product front, NetApp CEO Tom Georgens said the vendor is on track to launch its long-awaited FlashRay all-flash array this year and there will be shipments to select customers in September. NetApp already sells an EF-Series high-performance flash array, all-SSD versions of its high-end FAS8000 system and hybrid FAS arrays, but FlashRay is its first system designed from the ground up for flash.
“We’ve been saying for quite some time that [FlashRay] is a this-year product, and we’ll actually see customer shipments next month,” Georgens said. “We think flash will live in many incarnations – in hybrid storage, as standalone devices and as a compelling component of all-flash FAS, which is an all-flash node in a broader cluster leveraging all the data management and transparent volume migration that comes with it.”
Georgens also talked about the next release of Clustered Data OnTap. Clustered Data OnTap 8.3 will have OnTap features that did not make it into previous releases of the Cluster mode such as MetroCluster for high availability.
“MetroCluster allows us to compete with recovery times that are superior to all of our competitors,” he said. “It’s a clear differentiator for us.”
Georgens said NetApp experienced an increase in spending from enterprises last quarter, and when is the last time you heard a CEO from a large storage company say that? He said there was an increase in deals over $1 million from last year. That includes a $9 million deal with an energy company involving OnCommand Insight software.
“We saw strength back in the enterprise,” he said. “I won’t say it’s universal but I think probably the biggest indicator of confidence in the future is large transactions and enterprise license agreements, which is a long-term commitment to NetApp.”
Georgens said cloud service providers are also spending – “enterprise is where the money is, cloud service providers are where the growth is” – and he expects federal government spending to be higher at the end of this year without the impact of a shutdown.
Its product revenue last quarter of $1.49 billion declined two from last year, and branded revenue ticked up only one percent. And the mid-point of its guidance for this quarter will be a bit down from the $1.55 billion in revenue from a year ago.
So why isn’t NetApp selling more?
When asked that by an analyst on the earnings call, Georgens said much of NetApp’s recent business is deferred revenue – such as the large OnCommand deal. He said these sales will show up as future revenue.
NetApp’s OEM revenue of $109.8 million was down 23 percent from last year, and Georgens said he expects to see 40 percent declines in coming quarters. OEM revenue is now 8.6 percent of NetApp’s overall revenue, down from 11 percent last year and 14.5 percent two years ago.
Branded revenue of $1.36 billion increased one percent – the same as EMC’s product revenue increase last quarter – and Georgens said he a mid-single digit increase in product revenue for the fiscal year (which ends next April.)