Thursday, June 25, 2009

NetApp paints a positive picture at their recent analyst meeting.

Earlier this month I had the pleasure of attending the NetApp annual analyst meeting. This was the first I had attended and was well worth the investment. It was very well organized and orchestrated and my congratulations go out to Kris Newton and the team for a job well done.

The initial main tent session on the first day was focus on delivering a snapshot of company performance with Dan Warmenhoven (Chairman and CEO) kicking the session off followed by Tom Georgens (COO) and the rest of the senior executive team. Some of the key points delivered were.

  • By end of FY2009 NetApp has 7893 employees, 39,100 customers with 150,000 systems installed in 138 countries, 514PB of usable capacity installed, a $5.2B balance sheet and $2.5B in cash and investments. Warmenhoven expressed considerable confidence that they had the fundamentals in place to weather the current downturn. Obviously lessons have been learned from their pain during the dot-com bust.
  • Data was presented that suggested NetApp were making progress in the awareness battle. The recent TheInfoPro Storage Study, Spring 2009, places them 2nd behind EMC when the survey respondents where asked who was the most exciting vendor. Jay Kidd reinforced this notion when he outlined the progress his team is making on the current multi-million dollar branding and awareness effort. Perhaps a tangible measure of Jay’s success is the 147 net new storage 5000 customers and the 2000 new MSE accounts they logged FY2009. Apparently the best account acquisition year in the last 5 years. Note 80% of the new accounts came through the channel with 79% of the customers IBM won, net new to NetApp.
  • Great pride was expressed in their winning the #1 slot in Fortunes “Great Places to Work in America”. If you look at the Data Domain/EMC/NetApp dialog that has been circulating you will see this theme surface in more than one occasion.
  • On the product front I was impressed with their storage efficiency story which NetApp credit with driving significant business. As a proof point the statement was made that Oracle has 10PB of NetApp running at 90% efficiency, a powerful statement indeed in support of the technologies that make up their efficiency portfolio. Worth noting that they have shipped 39,993 data dedup licenses in FY09 up from 6,641 in FY08 (+270%). One piece that is missing however is compression which apparently is a future deliverable with the next release of ONTAP. Virtualization is another success story with adoption up 200% and market share up 5 points. Shipments of V-series, with four record quarters in a row, are up Y/Y 100% representing $100M+ in revenue.
  • As would be expected little was said about Data Domain. However there were a couple of interesting observations made; Data Domain competes with tape, that is where they see their competition; Data Domain would not be integrated with ONTAP; NetApp and Data domain are great complements, see point one. As the saga unfolds we will learn who the new owners will be but the group currently smiling is the Data Domain shareholders who have watch the companies value jump up to $2B.
  • The convergence of ONTAP 7 and GX was the subject of a number of discussions. NetApp presented a two step process to complete the integration process.
    Step 1; ONTAP 8.0 would have two selectable personalities, 7 mode (7G) and cluster mode (GX). The number of nodes supported will move from 2 to 24 with a maximum supported capacity of 14PB when using 1TB drives. Support for 2TB drives is scheduled by year end, although I believe only in 7 mode. As I understand it, this is the release that will support compression which will increase their storage efficiency toolbox.
    Step 2; ONTAP 8.1, a “late” 2010 deliverable, will be the fully integrated version.
  • On the downside. The NetApp’s cloud strategy is at best cloudy. I would probably go as far as to say they do not have a cloud strategy. What they have is a strategy to be an infrastructure supplier to cloud suppliers. Absolutely nothing wrong with that approach, in fact it can be a very attractive business model; but please call it as it is, no cloud-wash please.
  • The second disappointment was the customer facing NetApp green strategy or lack thereof. Dave Robbins gave an excellent overview of NetApp green from an IT practitioner’s perspective and his efforts and those of his team are to be applauded. However what about a customer facing green strategy. If there is one it is not obvious. In the product presentations there was no mention of driving environmental and energy efficiency even when discussing data reduction technologies. I was left with the sense that this was not on the radar and that I have some difficulty in accepting. Mopre to come on this sublect.

Looking forward, NetApp sees three areas where they believe they can innovate and drive leadership; data protection, storage efficiency and simplified data management. However it is not their strategic direction that is the question that keeps surfacing but whether or not NetApp can survive on its own or will it become an acquisition statistic. Warmenhoven was quite clear in his position which was that none of the five likely suitors, EMC, IBM, HP, DELL or Cisco were either interested or capable of acquiring them. A situation that appears more than acceptable to Mr. Warmenhoven.

No comments: