Why NetApp posted 10% drop in revenue and a net loss

NetApp CEO George Kurian
NetApp CEO George Kurian explained the reasons for the 10 percent drop in revenues and a $30 million net loss in Q1 FY 2016 — during an analyst call.

NetApp today said its revenues dropped 10.34 percent to $1.34 billion in the first quarter of fiscal year 2016, ended July 31, 2015, while it posted a net loss of $30 million against net income of $88 million. “As customers transform their IT environments, they are reducing their spend on traditional storage, which has put pressure on our ONTAP 7-Mode business. The 7-Mode storage operating system was shipped in only 35 percent of FAS units in the quarter against 75 percent a year ago,” said said George Kurian, CEO of NetApp during an analyst call.

NetApp CEO said enterprise customers are slowing investment in the capacity expansion of their traditional storage environments. Negative market sentiments that lowered new unit shipments and lower incremental capacity in ONTAP 7-Mode systems put downward pressure on product revenue.

NetApp posted significant drop in products revenue to $664 million from $883 million, and $248 million ($221 million) from software maintenance and $423 million ($385 million) from hardware maintenance and other services.

56 percent revenue came from Americas, 31 percent from EMEA and 13 percent from Asia Pacific.

Clustered ONTAP, which enables customers to seamlessly manage their applications and data across flash, disk and cloud footprints, was deployed on 65 percent of the FAS systems shipped in Q1 against 25 percent a year ago. Unit shipments of Clustered ONTAP systems grew approximately 115 percent.

The number of customers using Clustered ONTAP grew by more than 130 percent in Q1 from Q1 a year ago. New NetApp customers grew 225 percent.

NetApp said its net revenues are expected to be in the range of $1.40 billion to $1.50 billion in the second quarter of fiscal year 2016.

For fiscal 2016, NetApp expects revenue to dip 5 percent with impact from FX.

Baburajan K
[email protected]

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