Network Appliance Inc ended its fiscal year on a high note, reporting fourth-quarter results that showed a surge in both revenue and earnings. The Santa Clara, California-based provider of network file serving and caching technology, posted net income up 70.5% at $10.7m on revenue that jumped 80.3% to $90.8m. On a per share basis, earnings rose 44.4% to $0.13 for the quarter, matching the consensus estimate of analysts surveyed by First Call.
Dan Warmenhoven, president and chief executive of the company, said he was very pleased with the quarter and year, especially with the spike in revenue growth to finish things off. Year-over- year top line growth was 71%, 72% and 73% in the first three quarters of the year before bumping up another 7% in the fourth quarter. Although two new software offerings – SnapMirror and SnapRestore, were launched during the quarter, they didn’t ship until the last week and therefore made no tangible contribution to revenue. For the full year, net income rose 69.9% to $35.6m on revenue up 74.1% at $289.4m. Earnings per share rose 58.6% to $0.46.
Geographically, North America accounted for 74% of sales for the quarter, with Europe bringing in 17% and Asia-Pacific 9%. Warmenhoven said that breakdown was a welcome return to normal for the company, after an abnormal third quarter in which North American sales slowed somewhat due to seasonal issues and European revenues jumped up to 33% of the total. Gross margins held more or less steady from the prior quarter, down one-tenth of a point at 59.1%. Subscriptions and services amounted to $6.5m in the quarter, or about 7% of sales, and Warmenhoven said that, going forward, he doesn’t expect that figure to go over 10%. Any more services revenue than that level, he explained, would be the sign of an unhealthy company that isn’t selling enough products.
On the customer front, Network Appliance is now deriving more of its revenue from the enterprise space, with major clients such as Nortel, Texas Instruments and Nokia, as well as an unnamed large financial services company providing a major boost for the top line growth. Corporations accounted for roughly 30% of revenue for the fourth quarter, while the company’s traditional ISP customers slipped to 70%. That breakdown represents a significant change from the 90% to 10% ISP-corporate split in the preceding quarter. Warmenhoven said he sees the overall market shifting to a 50-50 split this year and in only a few years he predicts that the corporate market will account for 80% of revenues.
