NetApp Plunges After Sales, Forecast Fall Short of Estimates
August 18, 2011, 4:48 PM EDTBy Zachary Tracer
(Updates with closing shares in fifth paragraph.)
Aug. 18 (Bloomberg) -- NetApp Inc. dropped the most in four years in Nasdaq trading a day after the maker of data-storage products reported fiscal first-quarter sales that missed analysts’ estimates.
Sales in the quarter that ended July 29 were $1.46 billion, the Sunnyvale, California-based company said yesterday. Analysts on average predicted revenue of $1.51 billion, according to data compiled by Bloomberg. Second-quarter sales will be $1.5 billion to $1.6 billion, the company said, compared with an average estimate of $1.61 billion.
NetApp’s business “softened dramatically” toward the end of July, with the growth rate for the month half of what it was in May, the company said on a conference call yesterday after the report. Sales to the U.S. federal government were lower than expected and bookings from large financial institutions dropped, Chief Executive Officer Thomas Georgens said on the call.
“To see the business slow down quite significantly in that final month is what’s getting reflected in the stock price,” said Bill Choi, an analyst at Janney Montgomery Scott LLC. “Investors are sensitive about how all of these equipment companies will face a tougher” economic environment, he said. Choi rates NetApp shares “neutral.”
NetApp fell $5.86, or 14 percent, to $35.81 at 4 p.m. New York time on the Nasdaq Stock Market, the biggest decline in the Standard & Poor’s 500 Index. The stock’s drop was the most since August 2007. NetApp has lost 35 percent this year.
Net Income
Net income in the first quarter fell to $139.5 million, or 34 cents a share, from $150.7 million, or 40 cents, a year earlier. Profit excluding certain items was 55 cents, NetApp said. Analysts on average had projected 56 cents.
Chief Financial Officer Steve Gomo said it’s “too early to tell” whether the company will need to reduce its forecast for fiscal 2012.
“It will depend upon whether broader economic stability occurs in the coming months,” he said on the call.
The company also said Gomo will retire at the end of the year. Nicholas Noviello, currently senior vice president of finance, will replace Gomo in a planned transition.
--Editors: Jillian Ward, Nick Turner
To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net
To contact the editors responsible for this story: Tom Giles at tgiles5@bloomberg.net
