How a Focus on Strategic Solutions Benefited NetApp in 2016

Modernizing IT infrastructure

Storage and data management giant NetApp (NTAP) has aligned its strategic solutions to meet the IT demands of its enterprise users. The company believes this can help it take a leadership position in the high-growth segments of the market.

In fiscal 2Q17,[1. quarter ended October 28, 2016] NetApp’s Strategic Solutions business accounted for 62% of its net product revenues and rose 10% quarter-over-quarter to $439 million. Revenue from this business segment was flat YoY (year-over-year) in fiscal 2Q17.

How a Focus on Strategic Solutions Benefited NetApp in 2016

However, NetApp’s (NTAP) net product revenues from its Mature Solutions segment fell 29% YoY in fiscal 2Q17. NetApp expects growth in its Strategic Solutions business to offset declining revenues in its Mature Solutions business over the next few quarters.

Notably, NetApp stock has risen almost 27% since the company declared its fiscal 1Q17 results on August 17, 2016. NetApp’s revenues fell 7% YoY in fiscal 2Q17 to ~$1.3 billion, and the company announced EPS (earnings per share) of $0.60.

What did analysts expect in fiscal 2Q17?

Analysts estimated that NetApp (NTAP) could post revenues of $1.36 billion, with a low estimate of $1.33 billion and a high estimate of $1.39 billion.

The company’s earnings per share were expected to be $0.55, with a high estimate of $0.60 and a low estimate of $0.51.

The president and CEO of NetApp, George Kurian, noted during the fiscal 2Q17 earnings call, “Our second quarter fiscal year 2017 revenue was at the midpoint of our prior guidance range, with both operating margin and earnings per share above our previous guidance….These results are clear evidence of our ability to execute while we streamline the business and pivot to the growth areas of the market.”

NetApp (NTAP) has a market cap of $10.2 billion. Its peer companies Oracle (ORCL), IBM (IBM), and Hewlett-Packard Enterprise (HPE) have market caps of $166 billion, $157 billion, and $38 billion, respectively.