NetApp Closes Bycast Acquisition – Analyst Blog

Leading storage and data management solutions company NetApp Inc. (NTAP) has completed the acquisition of privately held object-based storage software developer Bycast Inc. in an all-cash transaction.

 

This will surely enhance the market value of NetApp, as the Bycast acquisition is expected to augment NetApp’s leadership position by enhancing its product portfolio with an object-based storage software offering. The company believes that the acquisition will enable it to expand its customer base to new markets including digital media, cloud service providers, health care and Web 2.0.

 

The Object-based storage software incorporates a new method of storage and access of data by using object names. It also helps to retrieve rich metadata that provides a detailed description of the content, which also facilitates the process of storing large objects, at the same time improving the search speed.

 

The company faces competition from tech giants such as International Business Machines (IBM) and EMC Corporation (EMC) in the data storage and management software space. We believe this acquisition will give it a much-needed competitive edge to create its own niche in this domain.

 

NetApp has delivered good third quarter results, with EPS of 40 cents exceeding the Consensus estimate of 38 cents per share. This apart, revenue grew substantially during the third quarter to reach $1.01 billion, improving by a staggering 35.5% compared with the year-ago period, attributable to the revival in all business segments after facing a year-long recession.

 

For the upcoming April 2010 quarter, the Zacks Consensus Estimate is 35 cents, implying a year-over-year growth rate of 27.90%. The company has provided an average earnings surprise of 8.62% over the last four quarters. We believe that NetApp should continue with this trend in the upcoming quarter, as the company’s non-GAAP earnings per share guidance of 42 cents to 44 cents per share is higher than the Zacks Consensus Estimate.

 

This apart, over the last 30 days, one analyst has raised the fourth quarter estimate, while another has raised the estimate for fiscal year 2010. There were no downward revisions. We are optimistic about the company’s positive outlook, its enhanced product portfolio, growing customer base and the revival in the macroeconomic scenario.

 

We currently have an Outperform recommendation on NetApp Inc.