NetApp First-Quarter Net Up 28% on Revenue Improvement

       By Ben Fox Rubin 

    NetApp Inc.'s (NTAP) fiscal first-quarter earnings rose 28% as the data-storage company posted stronger revenue in all its major segments, led by its service business.

    NetApp builds systems that store and manage clients' digital information, a market that has wavered over the past year as corporations' once-surging demand for storage hardware cools. The company's earnings have weakened as some customers--particularly defense and financial-services companies--avoided spending on data centers, though core earnings began recovering more recently.

    NetApp in May took steps to cut costs with a plan to lay off about 900 employees, a move the company had been expecting to trigger a charge of between $50 million and $60 million.

    For the quarter ended July 26, NetApp reported a profit of $81.6 million, or 23 cents a share, up from $63.8 million, or 17 cents a share, a year earlier. Excluding stock-based compensation, restructuring charges and other items, per-share earnings rose to 53 cents from 42 cents.

    Revenue was up 5% to $1.52 billion.

    The company in May forecast adjusted earnings of 45 cents to 50 cents a share and $1.48 billion to $1.58 billion in revenue.

    Gross margin widened to 60% from 58.8%. Operating expenses were up 5.6% amid $48.4 million in restructuring and other charges.

    Product sales, which make up the bulk of revenue, were up 3.7%. Software revenue increased 4.6% while service revenue rose 8.8%.

    For its second quarter, the company sees adjusted earnings of 60 cents to 65 cents a share and revenue of $1.56 billion to $1.66 billion. Analysts polled by Thomson Reuters most recently projected 63 cents and $1.63 billion, respectively.

    Shares closed Wednesday at $42.33 and were down 3.3% after hours. As of the close, the stock was up 26% so far this year.

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