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NetApp cloud-flash pivot brings cheers

NetApp attributed strong product revenue growth last quarter in part to two-a-days – it’s averaging two displacements of rivals’ all-flash SAN systems every day.

Success in NetApp cloud and flash sales fueled a strong quarter, as revenue increased eight percent year-over-year to $1.52 billion. Product revenue of $920 million increased 17% over last year.

On  NetApp’s earnings call Wednesday night, CEO George Kurian said the vendor made solid gains with its all-flash arrays, including NetApp FAS, EF and SolidFire storage. Annualized net revenue from all-flash jumped nearly 50% to $2 billion.

Demand for all-flash FlexPod – sold with partner Cisco’s compute and networking — helped to boost converged infrastructure sales by 50%.

“Our growth in all-flash has helped us gain strength in both the SAN and converged infrastructure markets,” Kurian said. “Through our competitive take-out program, we average two SAN displacements per day. That enables us to gain share in the SAN market, and expand wallet share with our existing customers.”

Central to the NetApp cloud strategy is an integrated Data Fabric that allows customers to more easily manage data across local storage and multiple hybrid clouds.  NetApp cloud Data Fabric extended last year to add NFS file storage as a service in the Microsoft Azure public cloud.

Products introduced last quarter are in preview with selected customers, including NetApp Cloud Volume for Amazon Web Services (AWS) and support for VMware on AWS. Those offerings are expected to be generally available in 2018.

Other product rollouts included a software upgrade for NetApp AltaVault backup, including the addition of Microsoft Azure Archive Blob, plus the introduction of SnapMirror for the SolidFire ElementOS operating system.

Kurian dodged questions on reports that rival Dell EMC is considering strategic options to pay down debt. Although he did not name Dell EMC directly, Kurian said NetApp’s pivot from hardware to cloud infrastructure makes it a more formidable competitor against “our largest competitor.”

Dell EMC has to figure out how to “rationalize a completely confusing product portfolio. They lack a competitive flash offering with a road map to the future, and they’ve got to get a cloud story,” he said.

NetApp took a $506 million loss, the result of an $856 million one-time charge on repatriated capital due to new tax laws.

Kurian said the new tax law will provide “added flexibility” as a result of corporate rates getting slashed to 22%. NetApp plans to bring back an additional $4 billion parked offshore during the next 12 months.

NetApp closed the quarter with $5.6 billion in cash and short-term investments. The higher domestic cash balance is being used to pay down $800 million in bonds it issued  issued last year.

NetApp’s revenue guidance for the fourth quarter ranges between $1.525 billion and $1.875 billion, or an 8% increase year over year.

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