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Why Is the Cloud Transition Important for NetApp?

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Primarily a data storage company

NetApp (NTAP) is a data storage and data management company headquartered in Sunnyvale, California. It was founded in 1992. In the last two decades, The company has seen a number of technological transitions. NetApp, which started as a network-attached storage (or NAS) company, grew exponentially in the dot-com boom.

NetApp expanded in the enterprise segment and then added Fibre Channel technology, a core feature of its products. This opened up new markets for Windows (MSFT) servers and Oracle (ORCL) databases. NetApp sees the cloud transition as one of the most important drivers for revenue growth.

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Cloud storage continues to grow at a fast rate

NetApp is confident on the company’s transition to the cloud and is focusing on application development. According to NetApp chief information officer Phil Brotherton, NetApp is the only independent storage company that has partnered with cloud heavyweights, such as Microsoft, VMware (VMW), and Amazon (AMZN).

According to a recent report by Synergy Research, cloud infrastructure service revenues grew 52% on a YoY (year-over-year) basis in 2015. These revenues include IaaS (infrastructure-as-a-service), PaaS (platform-as-a-service), and the private and hybrid cloud.

The cloud infrastructure space is dominated by five players: Amazon, Microsoft, IBM (IBM), Google (GOOG), and Salesforce (CRM). Collectively, they command ~55% of the market share. Amazon accounts for 11% of the Consumer Discretionary Select Sector SPDR ETF (XLY).

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