NetApp Q2 Profit Down, But Tops View; Outlook Weak

(RTTNews) - Data-storage systems maker NetApp Inc. (NTAP), Wednesday reported a drop in profit for the second quarter, as revenues declined and operating costs increased. Earnings for the quarter came in line with analysts' expectations, but revenues fell short of estimates. Moving ahead, the company detailed a weak outlook for the third quarter.

Sunnyvale, California-based NetApp's second-quarter profit dropped to of $159.8 million or $0.49 per share from $166.8 million or $0.48 per share last year. Earnings increased on a per share basis due mainly to a lower count of shares outstanding.

Adjusted earnings for the quarter were $226.4 million or $0.70 per share, compared with $231.5 million or $0.66 per share last year. On average, 33 analysts polled by Thomson Reuters expected earnings of $0.70 per share for the quarter. Analysts' estimates typically exclude special items.

NetApp's second-quarter revenues edged down to $1.54 billion from $1.55 billion last year. Analysts had a consensus revenue estimate of $1.55 billion for the quarter.

"We are pleased with our performance in the second quarter with revenue and non-GAAP EPS coming in above the mid-point of our guidance range. We have dramatically expanded the NetApp portfolio at an unprecedented pace," said Chief Executive Tom Georgens.

Product revenues, the biggest contributor to the top line, dropped to $929.1 million from $955.3 million last year. Software entitlements and maintenance revenues declined to $224.2 million from $231.8 million, while service revenues increased to $389.2 million from $362.8 million last year.

Revenue costs dropped to $560.0 million from $584.7 million last year. Sales and marketing costs rose to $488.0 million from $479.5 million last year, while research and development expenses increased to $229.0 million from $228.2 million a year ago.

Looking forward, the company expects third-quarter adjusted earnings of $0.74 to $0.79 per share with revenues of $1.56 billion to $1.66 billion. Analysts currently estimate third-quarter earnings of $0.80 per share on revenues of $1.62 billion for the quarter.

NTAP closed Wednesday's trading at $42.31, up $0.04 or 0.09%, on the Nasdaq. The stock further dropped to $1.60 or 3.78% in the after-hours trade.