Storage network specialist Network Appliance
What analysts say:
- Buy, sell, or waffle? Twenty-three analysts follow the company. Twelve of them carry a "buy" rating, 10 advocate a hold, and one wants to sell. In our Motley Fool CAPS community, it's a two-star stock these days, based on 150 player ratings.
- Revenues. $798 million would satisfy the Wall Street consensus target, 33% higher than the $598 million produced a year ago.
- Earnings. The average analyst expects about $0.30 per share, up from $0.23 per share last year.
What management says:
In the latest earnings call, CEO Dan Warmenhoven held up the company's "partner ecosystem" as a major growth driver. I think you're allowed a bit of pride in a partnership roster as strong as this one -- Network Appliance has active co-distribution and support programs going with such companies as Microsoft
What management does:
You see how the revenue and earnings growth trends crossed paths about a year ago? The margin numbers will help you follow the reasoning ahead, too.
Last year, NetApp started hiring massive amounts of salespeople. That increased the cost of operations, but the extra marketing efforts also nudged the sales numbers higher. Hence, the rising revenues and lower net income are connected, and explain each other.
|
10/2005 |
1/2006 |
4/2006 |
7/2006 |
10/2006 |
1/2007 |
|
|---|---|---|---|---|---|---|
|
Gross |
61.3% |
61.3% |
60.8% |
60.7% |
60.8% |
61.0% |
|
Operating |
15.8% |
16.0% |
15.8% |
16.2% |
16.5% |
16.0% |
|
Net |
14.2% |
14.1% |
12.9% |
11.7% |
11.5% |
10.3% |
|
FCF/Revenue |
22.2% |
19.5% |
20.4% |
20.4% |
23.7% |
26.0% |
|
YOY Growth |
10/2005 |
1/2006 |
4/2006 |
7/2006 |
10/2006 |
1/2007 |
|---|---|---|---|---|---|---|
|
Revenue |
31.3% |
29.5% |
29.3% |
32.7% |
34.1% |
35.4% |
|
Earnings |
42.3% |
36.2% |
18.0% |
9.2% |
9.0% |
(1.2%) |
One Fool says:
In that same conference call, management pointed out that the company is a market leader in places like Israel and Ethiopia, unexpected markets with plenty of growth potential.
It's not that EMC
With a $14 billion market cap, this isn't exactly a small company. It is, however, smaller and nimbler than the established competition, and it's way easier to double $14 billion than HP's $122 billion -- especially with a much tighter focus on one sector, rather than HP's sprawling operations.
Microsoft is a Motley Fool Inside Value selection.
Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure always has space for you.
