Network Appliance, Inc. (NASDAQ: NTAP) sells hardware and computer software and services used to store and manage large amounts of data. Its customers range from small and medium businesses to Fortune 10 companies. Network Appliance's flagship product is a piece of hardware that can store hundreds of terabytes of data (1 terabyte = 1000 gigabytes). The company's hardware is technologically more advanced than traditional storage devices (such as local hard drives) because it automatically optimizes storage space with its internal operating system and uses networks to connect to a company's computers that are far away. Corporations and government agencies are demanding large data storage capacities because of an explosion of electronic information from scientific and population growth. In addition to high storage capacities, these institutions also demand products that keep their data safe, especially in a world where more and more confidential information is transferred through computer networks. NetApp sells software packages, such as data reduction services and disk-to-disk backup software, along with its core hardware product, to address this demand.
Furthermore, to help NTAP meet all of its customers' needs, it has partnerships with many industry leaders such as Cisco Systems (CSCO), International Business Machines (IBM), Microsoft (MSFT), Symantec (SYMC), among others.
For fiscal year 2010 (NTAP's fiscal year ended April 30, 2010), NTAP posted total sales of $3.93 billion, a substantial increase from the previous year's sales of $3.41 billion. Furthermore, it was largely able to keep its total costs the same as 2009, enabling NTAP to increase its operating income from $47.2 million in 2009 to $488.4 million in 2010. As a result, its net income increased to $400.4 million in 2010, compared to $64.6 million in 2009.
NetApp's product line can be divided into hardware and software, sold to both small and large enterprises (SMEs) and large corporations. The company's intercore business is its network-based data storage hardware.
In addition to its products, NetApp also provides consulting services, such as helping a company use its IT software to maximize storage space, as well as technical support.
The growth of information that is transferred electronically creates high demand for hardware and software like those sold by NetApp: by some estimates, the growth rate of data needed to be stored has reached 100% a year. Sources of this growth include scientific advancements (such as genomic data in the field of bioengineering), higher standards for products/services (such as new categories of financial data kept by banks), and population growth (such as social security data). NetApp's products store hundreds of terrabytes of data efficiently using its built-in data mangement software. At optimum levels, a NetApp NAS system reduces the required raw data storage space by 80% in comparison to standard storage devices. Furthermore, since NetApp systems centralize all of a company's data, they make information more accessible in comparison to traditional hardware. For example, an employee in New York would be able to access changes to a document made by an employee in Hong Kong. Effective data management lets a company spend less time/money on IT and increases the productivity of the company's employees.
More and more pieces of sensitive information, ranging from social security numbers to credit card numbers, are being stored electronically. In light of this trend, geopolitical events such as terrorist attacks, natural disasters such as hurricane season (both of which threaten to damage servers where data is physically stored), and laptop theft pose a challenge to the security of sensitive data. NetApp sells hardware devices and software packages that help companies minimize the cost of recovering from such calamaties. Therefore, as the value of a company's data increases, so does the company's demand for data protection products.
While high-end data storage products improve the handling of a company's data, they are not an essential component of the company's business. Many companies see no need to purchase expensive, high-end data storage devices or spend money upgrading their preexisting data management systems. This is especially manifest during times of recession, since IT is an easy place for companies to save money. NetApp is also vulnerable to slow-downs in consumer spending in the media/entertainment and telecommunications industries.
NetApp competes in the high-performance networked storage market. It competes against several large corporations, such as Hewlett-Packard Company (HPQ), International Business Machines (IBM), and Sun Microsystems (JAVA), that have business units in the data storage market. In addition, Dell (DELL) is a competitor through its reseller partnership with EMC (EMC) (see below). In comparison to these corporations, NetApp is more focused on data storage technology, letting it develop hardware that uses raw storage space more efficiently, and complementing the hardware with more software packages. To compete with larger corporations, NetApp offers discounts to attract retailers. Smaller competitors in the high-performance market segment follows. In addition to the following companies, NetApp competes against venture capital-backed companies that also focus on developing advanced data storage technology.