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What: Shares of network storage provider NetApp (NASDAQ:NTAP) slumped on Thursday after the company reported disappointing fourth-quarter earnings, along with weak guidance and the announcement of job cuts. At noon, the stock was down about 12%.
So what: NetApp reported fourth-quarter revenue of $1.54 billion, down 6.7% year-over-year and $50 million short of the average analyst estimate. Product revenue declined by 12.4%, while software maintenance revenue was essentially flat. Revenue from other sources, such as hardware maintenance and professional services, rose by 5.6%.
Non-GAAP net income for the fourth quarter came in at $0.65 per share, down from $0.84 per share during the fourth quarter of 2014 and seven cents short of analyst estimates. Backing out restructuring charges, operating expenses were nearly flat year-over-year despite the revenue decline, leading to a decline in operating profit. As a cost-cutting measure, the company announced that it will be cutting approximately 500 jobs, about 4% of NetApp's workforce.
NetApp's guidance for the first quarter was also disappointing. The company expects revenue between $1.275 billion and $1.375 billion, with non-GAAP EPS between $0.20 and $0.25. The consensus analyst estimate was for revenue of $1.46 billion and non-GAAP EPS of $0.60.
Now what: NetApp's management was not happy with the company's results, but they provided little reason to believe that things will turn around anytime soon. NetApp slashed jobs through restructurings in both 2013 and 2014, and it's almost becoming an annual ritual. Growth essentially ground to a halt in fiscal 2013, and beyond job cuts, there doesn't seem to be much of a plan from management to right the ship.
NetApp did announced a 9% increase in its quarterly dividend, but this wasn't enough to prevent investors from fleeing the stock. And with product sales driving future maintenance sales, the big decline in product sales during the fourth quarter may mean that more pain lies ahead for investors.