How NetApp Is Increasing Shareholder Value in 2017
Improvement in profit margins
Over the last few quarters, NetApp (NTAP) has been looking to reduce its costs and expand its profit margins in order to offset declining revenues. NetApp had reduced its cost base by $400 million in fiscal 2017. NetApp’s non-GAAP1 gross margin declined marginally from 62.5% in fiscal 2016 to 62.3% in fiscal 2017. Its operating margin rose from 13.5% to 17.2% in the same period.
In fiscal 2017, NetApp focused on reducing its SG&A (selling, general, and administrative) expenses to 32% of revenues from 35% of revenues in fiscal 2016. While NetApp’s revenues are expected to rise 1.9% YoY (year-over-year) in fiscal 2018, its non-GAAP earnings per share (or EPS) are expected to rise 11% YoY.
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Capital return and cash flow
At the end of fiscal 4Q17, NetApp’s cash, cash equivalents, and investments reached ~$4.9 billion, up from ~$4.6 billion in fiscal 3Q17. Cash flow from operations also rose to $365.0 million in fiscal 4Q17 from $235.0 million in fiscal 3Q17. NetApp repurchased shares worth $129.0 million and paid $51.0 million in dividends to shareholders in fiscal 4Q17.
Leader in Gartner’s Magic Quadrant
NetApp is rapidly growing its market share in the storage space, driven by its growth in the all-flash array market. NetApp was also the fastest-growing storage area network (or SAN) vendor in 2016. The firm has been consistently named as a leader in Gartner’s Magic Quadrant alongside tech majors Dell Technologies (DVMT), IBM (IBM), and Hewlett Packard Enterprise (HPE).
- generally accepted accounting principles ↩