Network Appliance (NASDAQ:NTAP) reports second-quarter 2008 earnings tonight. Have a peek at last quarter by the numbers, then come back here for a bird's-eye view of the company's current prospects. It's OK -- we'll wait for you.

What Fools say:
Here's how NetApp's CAPS score rates against some of its peers and competitors:

Market Cap (millions)

Trailing P/E Ratio

CAPS Rating

International Business Machines (NYSE:IBM)

$144,055

15.5

***

Hewlett-Packard (NYSE:HPQ)

$128,440

20.2

****

EMC (NYSE:EMC)

$41,530

27.8

*****

Network Appliance

$9,660

37.6

**

Data taken from Motley Fool CAPS on 11/14/2007.

If NetApp looks expensive today, you should have seen it a year ago, when the P/E ratio was an artery-clogging 57. Let's hear it from our CAPS players, though.

"Storage demand will continue to go up as Internet continues to mature," says one bullish all-star stock picker. "[NetApp] is also a play for bio data analysis, the demand for which will accelerate in the next 3-5 years."

Another fan of the stock thinks that it has "taken a hit over the past year, and it's an excellent time to buy at a discount. Long-term, it doesn't get much more solid than this." On the bearish side, our players see "mediocre" management and EMC stealing market share.

What management says:
Virtual server systems are all the rage these days. EMC is doing it, IBM has virtualization built into its Unix platform by default, and EMC is certainly catering to the needs of VMware (NYSE:VMW) -- the apple in a proud parent's eye.

And of course, NetApp is on the virtual wagon too. Management has thrown its weight behind virtual platforms from VMware, Oracle (NASDAQ:ORCL), and Microsoft (NASDAQ:MSFT). The Oracle-NetApp combination, for example, should "allow our customers to automatically leverage and gain the benefits of a virtualized environment, resulting in rapid scale, application agility, and system independence," says marketing VP Patrick Rogers.

What management does:
Since corporate storage needs always seem on the rise, and since virtual server support is the current hot tamale, you might expect NetApp to do better over time. That's not quite happening, though.

Sales are rising steadily, but margins are sliding backward, and it all comes out to fewer profit dollars in the end. All is not lost, though: there's plenty of cash flow sloshing around the system here.

Margins

4/2006

7/2006

10/2006

1/2007

4/2007

7/2007

Gross

60.8%

60.6%

60.5%

60.6%

60.8%

60.9%

Operating

15.2%

13.7%

12.4%

11.1%

9.8%

8.5%

Net

12.9%

11.7%

11.5%

10.3%

10.6%

9.7%

FCF/Revenue

20.4%

20.4%

23.7%

26%

24.9%

25.2%

Y-O-Y Growth

4/2006

7/2006

10/2006

1/2007

4/2007

7/2007

Revenue

29.3%

32.7%

34.1%

35.4%

35.7%

28.3%

Earnings

18%

9.2%

9%

(1.2%)

11.7%

6.3%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Network Appliance is kind of like EMC's little brother, addressing the same customers with similar methods and materials. It's just that EMC is doing it better, with more resources, and more cheaply, to boot. And yes, virtual servers are nice, but like I said, everyone is doing it. You can't really claim that strategy as a difference-maker anymore -- just join the herd. That's what NetApp is doing now, and though the company is surrounded by great partners, so is the competition.

Fool on:

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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 is the Punxsutawney Phil of financial forecasting.