(NTAP) NetApp: Analyst Day Glimpses

NetApp Inc. (NTAP) held its analyst day on June 30, wherein it discussed multiple growth opportunities to double its earnings. The storage vendor is exploring many under-penetrated geographical regions to expand its international footprint.

Moreover, management is also keen on capturing a large share of the storage market through strategic acquisitions of companies with parallel business lines.

Recently, NetApp took over the external storage systems business (the Engenio product line) of  LSI Corporation (LSI). The Engenio business unit will be integrated into NetApp’s business functions and sales teams of both companies will join hands to maximize opportunities in the storage vertical. Management is confident that the combined entity would significantly to expand NetApp’s addressable market and generate higher revenue.

Apart from this positive commentary, NetApp also roused investor interest with strong guidelines for fiscal 2012. NetApp now expects revenue in the range of $6.60–$6.94 billion, representing a year-over-year increase of 29.0–35.0%.

The company also expects a gross margin of roughly 62.5%, operating expenses to be roughly 42.5% of total revenue, operating profit margin of approximately 19.0%, a tax rate of 18.5% and net margin of roughly 15.7%. Earnings per share will be between $2.46 and $2.62 ($2.20 reported in FY11), including an expected positive impact of 8 cents from Bond Hedge Accounting. GAAP earnings per share are expected in the range of $1.76–$1.92.

However, NetApp reaffirmed the first quarter outlook that was provided during the last reported quarter.

NetApp also announced its intention to buy back $200.0 million of common stock by this month. The company now has $1.1 billion remaining under the current authorization.

Given NetApp’s robust product demand, increasing information technology spend and uptrend in virtualized data center upgrades, we believe that the goals set in the analyst day will be fulfilled. NetApp’s initiative to return shareholder value is also encouraging. The company is performing impressively, despite stiff competition from industrial heavyweights like International Business Machines Inc. (IBM) and EMC Corporation (EMC).

NetApp currently carries a Zacks #2 Rank (short-term Buy recommendation).

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