By William Fellows

Demand for network attached storage in e-commerce – where data is plugged directly into the network rather than having it accessed through a server – drove a strong first quarter at Network Appliance Inc. The company reported first quarter net income up 89% at $13.46m compared with $7.09m on revenue that increased 80% to $103.27m from $57.37m. Earnings per share were $0.16, two cents better than the average of analysts’ forecasts as reported by First Call.

The company says international sales accounted for 28% of revenue, up from 26% sequentially. Europe was 19% and Asia Pacific 9%. Revenue from its Dell Computer and Fujitsu OEM deals accounted for 5%. A decline in disk product pricing was offset by and increase in software revenue, now up at around 10%. It booked 200 new accounts, slightly less than last quarter.

Network Appliance, which has its eyes on the lucrative enterprise market says it is now meeting EMC Corp more frequently in accounts mostly because it is going after the database space where EMC is strong while EMC is going after Network Appliance’s ISP market. It says it sees longtime rival Auspex Systems infrequently. There was no significant change in any win/loss ratios against the competition.

Fibre Channel products were 80% of sales compared with 75% in the fourth quarter. Sales of the NetCache software declined to 5% of revenue from 8% in the last quarter because, the company says, it is transitioning to a new more specialized sales model that it expects to begin driving sales up again shortly. It says it never sees Novell Inc in caching software accounts but mostly meets Inktomi, Cisco and CacheFlow.

The company admitted, as we reported in June, that it has a new filing and caching product in development for the low-end, sub- $20,000 market. It promises to cut the caching entry price point in half by the end of the year. It also has new NetCache software along with new Windows products.

It says 40% of the filers it sold in the quarter shipped with two or more protocols – referring to NT CIFS and Unix NFS – Windows system sales were 9% of revenue up from 8% in the fourth quarter. Database system sales were 8% of revenue up from 6% while web sales were 25% up from 20%.