NetApp named Tom Georgens CEO Wednesday night while reporting better earnings than expected for the last quarter. The company also dropped hints that the release of its long-awaited Data Ontap 8 operating system is weeks away.
Georgens was promoted from chief operating officer (COO) and president to replace Dan Warmenhoven, who will become executive chairman after 15 years as CEO. Georgens was widely considered Warmenhoven's likely successor, and Warmenhoven said Wednesday his intention was to retire before he turned 60 in little more than a year.
Georgens joined NetApp in 2005 from LSI Corp. (then LSI Logic), where he was CEO of its Engenio storage systems division. He was viewed as the heir apparent to Warmenhoven as early as 2006, and was promoted to COO last year.
Storage analysts don't predict many big changes in strategy for NetApp after the executive shift. However, Georgens did announce one change during Wednesday's earnings conference call. He said NetApp is transferring some of its low-end professional services to channel partners to cut costs while moving some internal professional services people to sales to try and capture more business.
Georgens takes over in the wake of NetApp's failed bid to acquire data deduplication specialist Data Domain. NetApp said it would buy Data Domain last May for $1.5 billion, but its chief rival EMC Corp. eventually acquired Data Domain for $2.1 billion.
Georgens said the final price for Data Domain "was beyond reasonable," but "I don't think that opens up a void that we feel any compelling nature to fill with something else."
David Russell, a research vice president at Stamford, Conn.-based Gartner Inc., said the timing is right for the CEO change. "Now is the best time to bring about the change," Russell wrote in an email to SearchStorage.com. "NetApp had a good quarter, and company recognition is high -- and actually favorable -- after the Data Domain bidding war, so now is a wonderful time to formalize Georgens' ascendancy and give him a nice starting point while also causing the least amount of customer and market fear."
Despite losing Data Domain, the public bidding war with EMC "generated new buzz and consideration from customers, and a lot of institutional investors started looking again at NTAP [NetApp] and concluded that the business was actually in better shape than the street was giving them credit for," Russell wrote.
Data Ontap 8 finally on tap
NetApp chief financial officer Steve Gomo said Data Ontap 8 will be released in a few weeks. NetApp executives have said Ontap 8 would add the ability to scale out NetApp's network-attached storage (NAS) heads with technology the company acquired from Spinnaker Networks Inc. in 2003. Georgens also mentioned Ontap 8 several times on the call, and recent posts from one of NetApp's corporate bloggers led to speculation that Ontap 8 was imminent. Last July, NetApp officials said the new operating system would be released this calendar year.
Economy still not out of the woods yet, execs say
From a sales perspective, NetApp rallied last quarter, beating analysts' expectations with $838 million in revenue. That revenue represents a 5% decline sequentially and a 4% decline compared to the same quarter last year. However, competitors EMC, Hewlett-Packard (HP) Co., Hitachi Data Systems and IBM all reported steeper year-over-year declines.
Gomo said spending in the quarter had stabilized vs. the first calendar quarter of this year. "The predictability of our close rates is improving," he said of NetApp's sales pipeline, "but we certainly aren't returning to a normal spending environment."
Still, NetApp executives refused to give guidance for this quarter. "Things are improving, but we're not where we were two years ago that gave us the confidence to be able to predict [things]," Georgens said.