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NetApp's Georgens: Be multiprotocol or be obsolete

NetApp CEO Tom Georgens said 2010 is "the year of multiprotocol storage." Points to popularity of unified storage as reason for revenue growth. Said arrays need to handle file and block storage or they'll become obsolete.

NetApp CEO Tom Georgens proclaims 2010 "the year of multiprotocol storage," and said he welcomes rival EMC Corp.'s renewed push of that technology.

NetApp has offered block and file capabilities on its core FAS platform since 2002. During the vendor's earnings call Wednesday evening, Georgens pointed to recent financial results as evidence of the popularity of unified storage. NetApp reported $1.172 billion in overall revenue, and its $759 million in product revenue grew 50% over last year — far outpacing its rivals.

Georgens said storage that supports either file or block only will soon become obsolete.

"This will be the year of unified storage," he said. "The ability to do both block and file access will become even more important in the future. As people realize the full potential of a shared homogeneous infrastructure running multiple applications, multiprotocol capability will be a requirement. Products without this capability will eventually be relegated to legacy and niche status."

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Georgens said virtualization and storage clouds are making multiprotocol systems mandatory. He said approximately 80% of NetApp systems deployed in virtual environments are running multiple protocols. He added that the cloud — or what he calls a shared infrastructure — requires running different types of applications, and some of those are best served by SAN and others by NAS protocols. NetApp reported 42% of its systems sold last quarter included SAN and NAS capabilities.

Customers looking for storage systems with SAN and NAS protocols have had a lot to choose from in recent years. EMC offers block and file protocols on its Celerra platform, but last month during its earnings call and at EMC World 2010 Boston detailed plans to consolidate Celerra and its Clariion SAN system while denying it would kill either platform.

When asked about EMC's focus on a converged platform, Georgens said, "We've been doing this since 2002. Certainly, we've learned a few things along the way. I'm sure they have learned a few things from us. And when this [EMC] product ultimately emerges, I think we'll know more about how well unified it really is, or is it really just two things in one box? By the end of the day, I expect them to have a product, and we'll meet them in the market and we'll see how it shakes out."

NetApp's results impressed financial analysts who cover the company. Stifel Nicolaus Equity Research analyst Aaron Rakers pointed out in a note to his clients today that NetApp's product revenue growth dwarfed that of rivals Compellent Technologies Inc., Dell Inc., EMC and Hewlett-Packard (HP) Co. "Overall, we believe NetApp's results highlight the strength in the company's unified storage strategy, in which EMC looks to increase its competitive presence in thru 2010," he wrote.

IBM still key, expect more smaller acquisitions

Sales through OEM partner IBM accounted for only 3% of NetApp's revenue last quarter, down from 6% the previous quarter. Georgens said IBM remains a key OEM partner, although IBM in recent years has added its own branded systems such as XIV block storage and a clustered NAS platform that are more competitive with NetApp products.

"Clearly, they would like to position their own products where they can," Georgens said of IBM. "But there's a lot of customer demand for our product and that continues to grow. So, obviously, there's complexity. I'm not going to deny it."

Georgens also said NetApp will continue to pursue acquisitions, mainly for "tuck-in" products that can become part of its existing portfolio. The Bycast object storage acquisition that closed this month is an example of that type of deal. But he said NetApp proved it could grow without larger acquisitions along the lines of its failed attempt to buy Data Domain last year.

"Last summer there was a lot of speculation about whether NetApp could grow without acquiring," he said. "I think we've proven that we can. So I expect to do more tuck-in acquisitions. Larger ones, we may or may not do."

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