NetApp profit beats estimates as cost cuts, cloud focus pay off

NetApp Inc reported a quarterly profit that beat analysts' estimates, as the company's cost-control measures and a shift to cloud-based storage products begin to yield results.

The data storage company has been focusing on the high-margin cloud-based products as businesses cut spending on traditional hardware storage systems.

The company has overhauled its cloud product, Data Ontap, which protects and manages data at both its customers' data centers and cloud vendors such as Amazon.com Inc.

NetApp faces strong competition from EMC Corp, which is being bought by Dell Inc in a $67 billion deal, and newer flash-based storage vendors such as Nimble Storage Inc NMBL.O.

NetApp said it sees the Dell-EMC merger as an opportunity, as it has caused "massive uncertainty" among the companies' customers, Chief Executive George Kurian said.

"We also don't see that merger addressing the fundamental IT architecture that customers want to deploy, which is hybrid cloud," Kurian, who took the helm in June, told Reuters.

The company's net income fell to $114 million, or 39 cents per share, in the second quarter ended Oct. 30, from $160 million, or 49 cents per share, a year earlier.

Excluding items, the company earned 61 cents per share, beating the average analyst estimate of 57 cents per share.

Operating expenses fell 6.4 percent in the quarter.

NetApp has been cutting costs and in May said it would lay off 500 employees.

Revenue fell 6.4 percent to $1.45 billion, but beat estimate of $1.43 billion, according to Thomson Reuters I/B/E/S.

NetApp said it expects adjusted profit of 66-71 cents per share on revenue of $1.40 billion to $1.50 billion in the third quarter.

Analysts on average were expecting a profit of 70 cents per share on revenue of $1.48 billion.

NetApp's shares were up about 1 percent in after-hours trading. Up to Wednesday's close of $31.04, the stock had fallen about 25 percent this year.