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NetApp CEO George Kurian says things have never been better for the storage vendor since he joined the company in 2011.
Kurian maintains NetApp’s all-flash platform is a hit, it’s the first major vendor with end-to-end NVMe array, it has solid connections with all major cloud vendors and now has a viable hyper-converged product. And he said NetApp is still making two SAN array displacements a day, while its main rival Dell EMC is struggling with its midrange storage and cloud strategies.
“What a difference a year makes,” Kurian said during NetApp’s Wednesday evening earnings call, reporting a better than expected 11% year-over-year revenue increase to $1.64 billion last quarter. “We improved the consistency of our results, expanded our market opportunities, and successfully accelerated our momentum. We are undoubtedly in the best position since beginning the transformation of NetApp.”
NetApp’s forecast failed to capture Kurian’s optimistic words, though. Investors were disappointed by NetApp’s guidance range of $1.365 billion to $1.465 billion for this quarter, a significant drop from last quarter. The stock price fell 3.9% to $66.79 Wednesday after the earnings report and then dropped more to $64.00 at today’s opening.
When asked about the tepid guidance, Kurian said: “We are very bullish on the strength of our product portfolio. Our philosophy is to build a plan that we can meet or beat and provide you more updates as we see more visibility through the course of the year.”
When Kurian became NetApp CEO three years ago, the vendor was a laggard in the emerging all-flash market. He said all-flash revenue grew 43% year-over-year last quarter and is at a $2.4 billion run rate for the year, putting it at or near the top of the overall storage market for that segment. He said most new arrays that ship now are all-flash configurations.
NetApp this month launched its All-Flash FAS (AFF) 800, part of a wave of NVMe arrays from major vendors. Dell EMC, Hewlett Packard Enterprise, Pure Storage and IBM also have new NVMe arrays out or coming, as do several startups specifically targeting that market.
Speaking of competitors, Kurian said Dell EMC still has a lot of work to do following its 2016 merger. He said the market leader needs to do more than rationalize its overlapping midrange arrays to stem share losses.
“I think what Dell has to do is not only rationalize their portfolio, but then to develop a coherent cloud strategy. That takes years of work. They’re years behind on everything from flash to cloud,” he said.
NetApp’s cloud strategy revolves around its Data Fabric and Cloud Volumes, which make its file services available in public clouds. NetApp Cloud Volumes is generally available for Amazon Web Services and in private previews for Microsoft Azure and Google Cloud Platform.
“The opportunity created by this part of our business is incredibly exciting,” Kurian said.
Kurian said NetApp’s FlexGroup feature that allows customers to cluster FlexVols has helped the vendor win deals from Dell EMC’s Isilon scale-out NAS product. “We have taken back several footprints from Isilon, and frankly, they’re trying to chase us now,” he said.
NetApp HCI is still in its early days, less than a year after launching. Kurian said the vendor is not chasing traditional hyper-converged use cases but concentrating on enterprises running mixed workloads. NetApp uses its SolidFire all-flash platform as the storage for HCI.
“We are not targeting the entire hyper converged market, but a very specific large segment of it where we think we’ve got a winning architecture,” he said.
Should we believe Kurian’s words or NetApp’s guidance? Either he is not as optimistic as he sounds, or he is setting things up for NetApp to beat expectations again. Check back in three months to find out.