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NETAPP INC. (NTAP)

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NetApp Inc. : NetApp Grows Third-Quarter Profit 32%

02/13/2013 | 06:14pm US/Eastern

--Core earnings top guidance

--Midpoint of adjusted profit range seen above analysts' expectations

--Product sales slip

(Updates to add CEO quotes in the second and third paragraphs.)

 
   By Drew FitzGerald and Ben Fox Rubin 
 

NetApp Inc.'s (NTAP) fiscal third-quarter earnings jumped 32% as the data-storage firm's smaller software and services segments made up for a slight decline in product sales.

Chief Executive Tom Georgens said he was particularly pleased with better adoption of the company's Data Ontap storage platform, which helps enterprises manage information stored in different configurations.

"This is something that we've been investing in for a while," Mr. Georgens said in an interview. "It's a big innovation."

The Sunnyvale, Calif., company also provided a bright view of core earnings between 65 cents and 70 cents a share, a range ahead of analysts' average 65-cent target, according to a poll by Thomson Reuters. The company projected $1.7 billion to $1.8 billion of revenue, bracketing analysts' $1.75 billion estimate.

NetApp, which stores and manages clients' information, had been reporting sharply lower earnings since August as some customers--particularly defense and financial-services companies--avoided spending on data centers. Uncertainty in Europe also hurt the company's ability to predict future sales, executives had said.

Revenue in the latest quarter grew in all the company's major geographic areas, Mr. Georgens said, including government spending, which was treated as a separate area.

For the quarter ended Jan. 25, the company reported earnings of $158.1 million, or 43 cents a share, up from $119.6 million, or 32 cents a share, a year earlier. Excluding stock-based compensation and other items, per-share earnings were up at 67 cents from 58 cents.

Revenue improved 4.1% to $1.63 billion.

The company in November forecast adjusted earnings of 53 cents to 58 cents a share on revenue of $1.58 billion to $1.68 billion.

Gross margin widened to 59.2% from 58%, though input costs grew 1.2%.

Product sales, which make up the bulk of revenue, slipped 0.2%. Software revenue rose 12%, and service revenue grew 14%.

Separately, the company reported it closed its acquisition of ionGrid, a privately-held software provider that helps employees access files from mobile devices. Terms of the deal weren't disclosed.

Shares were off 7 cents at $35.75 after hours. As of the close, the stock was up 36% over the past three months, buoyed in part by November's better-than-feared fiscal second-quarter results.

Write to Drew FitzGerald at andrew.fitzgerald@dowjones.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

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