Leading storage and data management solutions company NetApp Inc. (NTAP), recently disclosed that it will be acquiring a privately held object-based storage software developer Bycast Inc. Bycast was a rival company of NetApp, which will be acquired in an all-cash transaction, although the amount involved in the deal was not disclosed.
We believe that this deal will be beneficial for 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 this acquisition, will enable it to expand its customer base to new markets including digital media, cloud service providers, healthcare and Web 2.0.
The Object-based storage software incorporates a new method of storage and access of data by using object names and 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 is already facing stiff competition from technical behemoths like International Business Machines (IBM) and EMC Corporation (EMC) in the data storage and management software space and we believe this acquisition will give it a much-needed competitive edge to create its own space in this domain.
NetApp has rolled out encouraging third quarter 2010 numbers, 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 to 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 34 cents, implying a year-over-year growth rate of 26.42%. The company has provided an average earnings surprise of 8.6% 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 $0.42 to $0.44 per share is higher than the Zacks Consensus.
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