NetApp Still Figuring Out How To Cloud

The NetApp logo adorns the wall at NetApp’s headquarter’s in Sunnyvale, CA

Last week I heard from NetApp Co-Founder Dave Hitz, CTO Mark Bregman, and Cloud Business Unit SVP Anthony Lye about NetApps’s latest adventures in cloud as part of the Cloud Field Day 2 event.

It’s no secret that NetApp has been working to reinvent itself as the industry moves away from talking about the prosaic details of on-site storage infrastructure and spends a great time of time and energy on the nebulous concept of cloud. NetApp has been trying to chart a course to the cloud for some time, talking up its NetApp Dynamic DataCenter concept many years ago, and its Data Fabric since 2014, but nothing seems to have resonated strongly with the cloud world.

NetApp is still fixed in people’s minds as an on-site storage company, which isn’t a surprise to Hitz or Bregman, who were candid with the Cloud Field Day attendees about NetApp’s need to change. Nor are they shying away from the magnitude of the task.

“I joined the company about two years ago,” said Bregman, “Part of what attracted me was the realization that the company had at the time that we really had to transform ourselves from a very successful enterprise storage systems company to a data company.”

“Our existing business is not going away,” says Bregman. “It’s going to be around for a long time. It’s just not where the growth is.”

Growth is something with which NetApp has struggled in recent years. NetApp was growing sales strongly up until fiscal 2012 when revenues stalled at $6.2 billion, hitting a high of $6.3 billion in 2014 before falling back to $5.5 billion in fiscal 2017.

[ychart exchange=”NASDAQ” ticker=”NTAP” calc=”revenue_growth” zoom=”5″ format=”real”]

In looking over the financials, there’s nothing obviously wrong with NetApp’s operations. Overheads are broadly in line with what they were when NetApp was growing strongly. Services now make up a higher proportion of sales (up from 19.4% in 2012 to 28% in 2017) and those services come with higher margins.

The issue appears to be the simplest of all, and yet also the most worrying: what NetApp sells just isn’t as compelling any more.