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February 17, 1999

EUROPE BOOSTS THIRD QUARTER FOR NETWORK APPLIANCE

By CBR Staff Writer

Network Appliance Inc, the network attached storage server company, reported its third straight quarter in a row of 70% plus year-over-year growth yesterday. Its $75.6m in revenues for the third quarter 1999 were up 72% from the $44.0m it reported over the same period last year. Income was up 69% to $9.4m. Revenues for the nine month period were also 72% up from the previous year, to $198.6m, while income was up 70% to $24.9m. Gross margins stayed steady on 59.2%. NetApp president and CEO Dan Warmenhoven said that international sales saw the most dramatic increase, with the company’s international business now accounting for 33% of the total. Europe was the strongest, where fiscal end of year buying, pent-up demand for NetApp’s cluster failover products, and increased sales resources boosted shipments. Potentially lucrative OEM deals from Dell Computer Corp and Fujitsu Ltd won’t begin to affect the company’s figures until the first quarter of fiscal 2000, but this quarter, business from indirect sales grew from 22% to 30% compared to the previous quarter. The three sizes of S700 file servers made up 92% of sales, with the newer NetCache proxy servers rising from 5% last quarter to 8% this. Warmenhoven said that he hadn’t yet seen any of a new crop of potentially competitive start-ups – such as CacheFlow Inc, and at the low-end Cobalt Networks Inc, Encanto Networks Inc and Whistle Communications Inc – in the marketplace. As for NetApp’s arch- enemy Auspex Systems Inc, which announced, but is not yet shipping a new line of workgroup and departmental network attached storage devices last month, Warmenhoven said he was appropriately paranoid, cautiously positive over the potential threat. Auspex’s 4Front systems (CI No 3,590) promise the same bilingual Unix and NT support offered by NetApp, through an OEM deal Auspex set up last year with Santa Clara, California-based Creative Design Solutions Inc. The are set to begin shipping next month. Having upgraded both its core hardware and disk capacity over the last two quarters, NetApp promises software upgrades in both its operating system and value-added software areas over the next quarter, including Unicode support for Japanese characters for its OEM partner Fujitsu. á

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