Channel Sales, Flash Storage Shipments Good News In NetApp's Q4 Revenue Dip

NetApp on Wednesday reported a fourth-quarter 2014 drop in revenue combined with growth in earnings as the company's business continued to shift away from OEM to NetApp-branded systems, which the company's top executive said is good news for its channel partners.

The storage vendor also said it is now the top vendor of flash storage technology after it shipped about 18 PBs of flash in the fourth quarter.

For its fourth fiscal quarter of 2014, which ended April 25, NetApp reported revenue of $1.6 billion, down nearly 6 percent from the $1.7 billion the company reported for the fourth quarter of 2013.

[Related: NetApp Unleashes FAS8000 Unified Scale-Out Storage System]

On a GAAP basis, NetApp earned $197 million, or 59 cents per share, up a healthy 13 percent from the $174 million, or 47 cents a share, it reported last year. Non-GAAP earnings for the quarter reached $284.0 million, or 84 cents a share, up about 12 percent from last year's $283 million, or 69 cents per share.

For all of 2014, NetApp reported revenue of $6.325 billion, down slightly from the $6.332 billion the company reported last year.

NetApp reported full-year 2014 GAAP earnings of $638 million, or $183 per share, up 26 percent from last year's $505 million, or $1.37 a share. On a non-GAAP basis, NetApp reported earnings of $968 million, or $2.78 per share, up 15 percent from the $841 million, or $2.28 per share, it reported a year ago.

Nick Noviello, NetApp's executive vice president of finance and operations, and CFO, said during the company's quarterly financial conference call on Wednesday that NetApp-branded revenue was flat in the fourth quarter and up 4 percent compared to last year, while OEM revenue fell 34 percent in the fourth quarter and 26 percent for all of 2014.

On the distribution front, Arrow accounted for about 24 percent of NetApp's revenue, while Avnet accounted for about 17 percent, Noviello said.

That's good news for the channel, said NetApp Chairman and CEO Tom Georgens.

Georgens told CRN that about 84 percent of NetApp's revenue came from indirect channels, which in NetApp's definition includes its OEM business. NetApp's federal government business is 100 percent channel, he said. "Because the OEM business is down, that means sales through the channel have risen," he said.

NEXT: Partnering With Cisco, Cleaning Up On Flash Storage

Shipments of joint NetApp-Cisco FlexPod reference architecture solutions, which go exclusively through indirect channels, grew about 71 percent in the fourth quarter over last year, Georgens told CRN. "It's clearly very popular with channel partners," he said.

Flash storage has turned out to be a fast-growing part of NetApp's business, Georgens said. "We sold 18 petabytes of flash last quarter," he said. "That's more than anyone else. EMC said it shipped 17 petabytes in their financial call."

When asked during the question-and-answer period of the quarterly conference call about the growth of flash storage startups like Nimble Storage, Georgens said those startups have a different scale and installed base, and sometimes address different markets, from more established vendors like NetApp.

NetApp is already the flash storage leader, Georgens said. "I would not trade our flash portfolio for that of any other company, whether a startup or otherwise," he said.

When asked about NetApp's support of Cisco's InterCloud strategy and Cisco's Application Centric Infrastructure (ACI) SDN technology, Georgens said the two companies continue to have a multifaceted relationship.

"Overall, Cisco is pushing very hard [on these technologies], and we continue to be part of that momentum," he said.

PUBLISHED MAY 22, 2014