NetApp Finds New Success

NetApp has managed a feat uncommon in the brutally competitive landscape facing todays computer software and hardware companies. It has course-corrected after its shares reached a 5 year low of $21 in January of 2016, subsequently climbing to today’s $68. The impressive comeback, however, was not easy.

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Founded in 1992 by David Hitz, Michael Malcolm and James Lau, NetApp offered data storage solutions through its NetApp filer product. Its primarily hardware centered data storage solutions featured hard drive banks managed by a networked storage controller. Although NetApp performed well during the internet bubble, topping annual revenues at $1 billion, it later declined to $800 million in revenues by 2002 after the tech bubble burst.

Fast-forward to 2015 and NetApp is continuing to struggle. NetApp was a hardware storage solution in an era where cloud computing was dominating and they failed to effectively transition to the flash storage arrays that were becoming a commonplace and obvious solution for on-location storage. When current CEO George Kurian took over from Thomas Georgens in 2015, he set out to accomplish three goals which would right the course of the sinking ship:

• Transition technology from legacy hardware systems to all-flash storage arrays and develop cloud computing offerings

• Optimize cost structure and margins

• Develop an optimal capital allocation plan combined with a share repurchasing program

Management at NetApp consolidated their products to focus on high-growth areas of the market, honing in all-flash array data storage solutions. In turn, they were quickly able to catch up to the competition by offering a compelling product suite.

By fiscal year 2018, NetApp sales volume was again growing. And in parallel with its higher ASPs, revenue was an solid footing. Further, the executive team managed to keep costs in check, allowing for greater margins. NetApp’s share repurchasing program also made a significant impact on the company’s stock performance - from 2012-2018, the average number of shares was reduced by 26.3%.

NetApp has done well in retooling their product offerings to capitalize on high-growth markets. They successfully transitioned from legacy hardware offerings to all-flash systems and to hybrid cloud data management. Given the current trend toward cloud based data storage solutions, it seems likely that NetApp has turned the corner towards a more predictable future.