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NetApp Rethinks The Future.

Posted by: Peter Burrows on February 11, 2009

Dan Warmenhoven is an ebullient, optimistic fellow. So when he was preparing to advise employees a few days ago that he was going to have to fire 530 of them, he went to the website of the government’s Bureau of Economic Analysis to find at a scrap of promising economic news to share with the troops as well. “I spent about an hour, and I couldn’t find a single thing. Nothing.”

That’s got one of tech’s most reliable growth companies planning for a very long, slow slog back to economic health. The downturn has surely been steep. He says the first three weeks of this year were essentially barren of sales, leading to a $50 million shortfall of orders. That contributed to a big top-line miss this quarter. Wall Street wanted $910 million. He gave them just $746 million.

But the recovery will be very slow—if you can even call it a recovery. He seems to agree with Microsoft CEO Steve Ballmer’s contention that the economy has essentially “reset” itself to a lower level. He says that in the quarter, sales to his 40 largest (and typically, most reliable) customers fell 20%. The company raced and somehow grew its new account business by 16%—but couldn’t make up for the shortfall.

Now, having very little feel for the business outlook, Warmenhoven is assuming the company will not grow for a while. And he points out that even if a company like NetApp was able to show a point or two of growth by the fourth quarter of this year, it would take that company years just to get back to the levels they were at last Fall.

I asked Warmenhoven, who has been running the company since 1994, whether he wanted to sign up to stay at the company for this protracted period. “Before I turn over the [CEO] title, I want to be sure the future is predictable. Right now, we cannot forecast our future. We don’t know if it’s going up or down, and it’s not fair to ask a new CEO to take over when there’s that much uncertainty.”

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BusinessWeek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, Douglas MacMillan, and Spencer Ante dig behind the headlines to analyze what’s really happening throughout the world of technology. One of the first mainstream media tech blogs, Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.



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