SOURCE: NetApp, Inc.

NetApp, Inc.

November 18, 2009 16:02 ET

NetApp Announces Results for Second Quarter of Fiscal Year 2010

Revenue Up 9% Sequentially and Nearly Flat Year Over Year

SUNNYVALE, CA--(Marketwire - November 18, 2009) - NetApp (NASDAQ: NTAP) today reported results for the second quarter of fiscal year 2010, which ended October 30, 2009. Revenues for the second quarter of fiscal 2010 were $910 million, compared to revenues of $912 million for the same period one year ago.

For the second fiscal quarter of 2010, GAAP net income was $96 million, or $0.27 per share(1) compared to GAAP net income of $43 million, or $0.13 per share for the same period in the prior year. Non-GAAP(2) net income for the second fiscal quarter of 2010 was $130 million, or $0.37 per share, compared to non-GAAP net income of $92 million, or $0.28 per share for the same period one year ago.

Revenues for the first six months of the current fiscal year totaled $1.75 billion, compared to revenues of $1.78 billion for the first six months of the prior fiscal year, a decrease of 2% year over year.

GAAP net income for the first six months of the current fiscal year totaled $147 million, or $0.43 per share, compared to GAAP net income of $78 million, or $0.23 per share for the first six months of the prior fiscal year. Non-GAAP net income for the first six months of the current fiscal year totaled $206 million, or $0.60 per share, compared to non-GAAP net income of $168 million, or $0.50 per share for the first six months of the prior fiscal year.

"NetApp delivered a strong quarter with record gross margins, record revenue from our SAN products, and overall revenue that exceeded our expectations," said Tom Georgens, president and chief executive officer. "Our value proposition resonates particularly well with customers who look to gain efficiency and streamline operations as they begin to build out their next-generation virtualized data centers. Driven by this demand, NetApp is forecasting record revenues for our next fiscal quarter."


Outlook

  • NetApp estimates revenue for the third quarter of fiscal year 2010 to be in a range of $935 million to $955 million.

  • NetApp estimates the third quarter of fiscal year 2010 share count to increase by about 5 million shares.

  • NetApp estimates that the third quarter of fiscal year 2010 GAAP earnings per share will be approximately $0.24 to $0.25 per share. NetApp estimates third quarter fiscal year 2010 non-GAAP earnings per share to be approximately $0.36 to $0.37 per share.

Quarterly Highlights

In the second quarter of fiscal year 2010, NetApp unveiled its cloud strategy and introduced several new products and solutions to help customers transform their data center architectures to achieve greater storage efficiency through innovative data management techniques. NetApp also received numerous industry accolades for its work environment, products, innovative use of technology, and executive leadership.

The makeup of the data center is changing drastically as companies seek to take advantage of virtualization and highly efficient infrastructures. NetApp is primed to take advantage of this major shift in the market by offering enterprises industry-leading storage efficiency and data management solutions that are well suited for both internal and external cloud deployments.

This quarter NetApp introduced Data ONTAP® 8, the culmination of years of engineering effort to integrate the Data ONTAP 7G operating system with a next-generation scale-out architecture. Data ONTAP 8 will provide seamless data mobility and secure multi-tenancy, both of which are key requirements for the most sophisticated cloud infrastructures. In addition, Data ONTAP 8 provides a more robust platform for the next 10 years of innovation from NetApp.

NetApp also introduced the following new products and enhancements that uniquely complement VMware® vSphere 4 and VMware View to help customers optimize their desktop and cloud computing environments: Virtual Storage Console, SnapManager® for Virtual Infrastructure, and Rapid Cloning Utility.

Showing its commitment to midsize enterprise and distributed enterprise customers, NetApp announced the new FAS2040 storage system, providing customers with increased performance and capacity to handle demanding Microsoft® Windows® consolidation and virtualization workloads all on the same system. NetApp also announced significant price reductions for its FAS2020 systems and associated software, which are now preconfigured with high-capacity drives and include all protocols.

During the quarter, NetApp extended its leadership in Ethernet storage with standards-based products that support converged Ethernet (FCoE, iSCSI, NFS, CIFS) data access and help customers streamline their data centers and maximize ROI. With partners such as Cisco and QLogic, NetApp is expanding Ethernet as a storage infrastructure.

In an effort to help customers maximize the value of their existing storage investments, NetApp unveiled a program to help customers achieve greater storage efficiency in their data centers. Under the terms of the Zero Investment Promise(3) Program ("ZIP Program"), customers with EMC and HP SANs that deploy NetApp® V-Series can reduce storage capacity and the associated costs of their existing third-party storage investments. If after 90 days the customer files an approved claim that the storage savings are not achieved, the customer will keep the equipment at no charge.

Finally, in addition to NetApp's various solution and program announcements during the quarter, the company received the following awards and industry recognition:

  • Best Channel Product 2009: The NetApp FAS2000 series was named a "Best Channel Product 2009" in the NAS Storage category by Business Solutions magazine. The FAS2000 was cited for its reliability, durability, and ease of upgrade.

  • 2009 InformationWeek 500: NetApp ranked 26th on the 2009 InformationWeek 500, which honors the nation's most innovative users of information technology. NetApp ranked number three in the information technology industry.

  • Oracle Innovation Award: Recognizing NetApp's innovative use of Oracle® Business Intelligence software, Oracle named NetApp a winner of the 2009 Innovation Awards in the Business Intelligence/Enterprise Performance Management category.

  • Morgan Stanley Leadership Award for Global Commerce: Dan Warmenhoven and Tom Mendoza received the Morgan Stanley Leadership Award for Global Commerce, which recognizes individuals whose personal leadership has made a critical contribution to the effective use of information technology throughout the world.

  • Washingtonian Magazine's 50 Great Places to Work: NetApp was selected as a winner in the "Think Big" category, for large companies, on the basis of such measures as recognition and respect given employees, great work-life balance, challenging and interesting opportunities, commitment to community, and generous pay and benefits.

Webcast and Conference Call Information

  • The NetApp quarterly results conference call will be broadcast live on the Internet at http://investors.netapp.com on Wednesday, November 18, 2009, at 2:00 p.m. Pacific Time. This press release and any other information related to the call will also be posted on the Web site at that location.

  • The conference call will also be available live in a listen-only format at (800) 510-9836 in the United States and (617) 614-3670 outside the United States. The pass code for both numbers is 11612732.

  • A replay will be available for 72 hours following the completion of the live call by dialing (888) 286-8010 in the United States and (617) 801-6888 outside the United States, using replay code 30335717. The Webcast replay will be posted on our Web site for at least one year.

About NetApp

NetApp creates innovative storage and data management solutions that accelerate business breakthroughs and deliver outstanding cost efficiency. Discover NetApp's passion for helping companies around the world go further, faster at www.netapp.com.

"Safe Harbor" Statement Under U.S. Private Securities Litigation Reform Act of 1995

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include all of the statements under the Outlook section relating to our forecasted operating results, share count and metrics for the third quarter of fiscal year 2010 and the benefits that we expect our customers to realize from using our products. These forward-looking statements involve risks and uncertainties, and actual results could vary. Important factors that could cause actual results to differ materially from those in the forward-looking statements include risks associated with the anticipated growth in network storage and content delivery markets; our ability to deliver new product architectures and enterprise service offerings; competition risks, including our ability to design products and services that compete effectively from a price and performance perspective; our reliance on a limited number of suppliers; our ability to accurately forecast demand for our products; and other important factors as described in NetApp reports and documents filed from time to time with the Securities and Exchange Commission (SEC), including the factors described under the sections captioned "Risk Factors" in our most recently submitted 10-K. We disclaim any obligation to update information contained in these forward-looking statements whether as a result of new information, future events, or otherwise.

(1) Earnings per share is calculated using the diluted number of shares for all periods presented.

(2) Non-GAAP results of operations exclude amortization of intangible assets, stock-based compensation expenses, merger termination proceeds (net of related expenses), restructuring and other charges, noncash interest expense associated with our convertible debt, net loss or gain on investments, and our GAAP tax provision, including discrete items, but includes a proforma tax provision based upon our projected annual proforma effective tax rate.

(3) The ZIP Program is limited to the terms set forth in www.netapp.com/zip.

NetApp, the NetApp logo, Go further, faster, Data ONTAP, and SnapManager are trademarks or registered trademarks of NetApp, Inc. in the United States and/or other countries. All other brands or products are trademarks or registered trademarks of their respective holders and should be treated as such.

NetApp Usage of Non-GAAP Financials

The Company refers to the non-GAAP financial measures cited above in making operating decisions because they provide meaningful supplemental information regarding the Company's operational performance. Non-GAAP results of operations exclude amortization of intangible assets, stock-based compensation expenses, merger termination proceeds (net of related expenses), restructuring and other charges, noncash interest expense associated with our convertible debt, net loss or gain on investments, and our GAAP tax provision, including discrete items, but includes a proforma tax provision based upon our projected annual proforma effective tax rate. We have excluded these items in order to enhance investors' understanding of our ongoing operations. The use of these non-GAAP financial measures has material limitations because they should not be used to evaluate our company without reference to their corresponding GAAP financial measures. As such, we compensate for these material limitations by using these non-GAAP financial measures in conjunction with GAAP financial measures.

These non-GAAP financial measures facilitate management's internal comparisons to the Company's historical operating results and comparisons to competitors' operating results. We include these non-GAAP financial measures in our earnings announcement because we believe they are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making, such as employee compensation planning. In addition, we have historically reported similar non-GAAP financial measures to our investors and believe that the inclusion of comparative numbers provides consistency in our financial reporting at this time.

NetApp Use of Corporate Web Site

In accordance with SEC guidance published on August 22, 2008 (Release No. 34-58288), NetApp will begin to disseminate material information about the company through its corporate Web site within the next several fiscal quarters. NetApp intends to designate a separate portion of its corporate Web site for purposes of these disclosures and will include a prominent link on its Web site to allow visitors to locate this material information, which will be routinely updated. The Web site will supplement, rather than replace, NetApp's current existing channels of information distribution.

                               NETAPP, INC.
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                              (In thousands)
                                (Unaudited)


                                        October 30, 2009   April 24, 2009
                                        ----------------- -----------------

              ASSETS

CURRENT ASSETS:
    Cash and cash equivalents           $       1,728,841 $       1,494,153
    Short-term investments                      1,226,697         1,110,053
    Accounts receivable, net                      318,033           446,537
    Inventories                                    61,141            61,104
    Prepaid expenses and other assets             115,525           119,887
    Short-term deferred income taxes              140,352           207,050
                                        ----------------- -----------------
        Total current assets                    3,590,589         3,438,784

PROPERTY AND EQUIPMENT, net                       780,378           807,923
GOODWILL                                          680,986           680,986
INTANGIBLE ASSETS, net                             34,970            45,744
LONG-TERM INVESTMENTS AND RESTRICTED
 CASH                                             116,406           127,317
LONG-TERM DEFERRED INCOME TAXES AND
 OTHER ASSETS                                     361,178           283,625
                                        ----------------- -----------------
                                        $       5,564,507 $       5,384,379
                                        ================= =================



 LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
    Accounts payable                    $         118,807 $         137,826
    Accrued compensation and related
     benefits                                     220,778           204,168
    Other accrued liabilities                     179,087           190,315
    Accrual for GSA settlement                          -           128,715
    Income taxes payable                            3,020             4,732
    Deferred revenue                            1,017,067         1,013,569
                                        ----------------- -----------------
        Total current liabilities               1,538,759         1,679,325
                                        ----------------- -----------------

LONG-TERM DEBT AND OTHER OBLIGATIONS            1,217,418         1,219,216
LONG-TERM DEFERRED REVENUE                        704,836           701,649
                                        ----------------- -----------------
                                                3,461,013         3,600,190
                                        ----------------- -----------------

STOCKHOLDERS' EQUITY                            2,103,494         1,784,189
                                        ----------------- -----------------
                                        $       5,564,507 $       5,384,379
                                        ================= =================



                               NETAPP, INC.
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
            (In thousands, except net income per share amounts)
                                (Unaudited)


                           Three Months Ended         Six Months Ended
                        ------------------------  ------------------------
                        October 30,  October 24,  October 30,  October 24,
                            2009         2008         2009         2008
                        -----------  -----------  -----------  -----------

REVENUES:
   Product              $   525,148  $   570,436  $ 1,003,394  $ 1,118,291
   Software
    entitlements and
    maintenance             169,815      152,722      335,105      297,134
   Service                  215,064      188,473      409,489      364,982
                        -----------  -----------  -----------  -----------
       Net revenues         910,027      911,631    1,747,988    1,780,407
                        -----------  -----------  -----------  -----------

COST OF REVENUES:
   Cost of product          199,134      260,332      411,669      510,110
   Cost of software
    entitlements and
    maintenance               3,106        2,259        6,218        4,445
   Cost of service          101,106      102,884      200,927      203,048
                        -----------  -----------  -----------  -----------
       Total cost of
        revenues            303,346      365,475      618,814      717,603
                        -----------  -----------  -----------  -----------
GROSS MARGIN                606,681      546,156    1,129,174    1,062,804
                        -----------  -----------  -----------  -----------

OPERATING EXPENSES:
    Sales and marketing     300,835      304,045      602,268      607,152
    Research and
     development            132,354      125,496      262,671      250,848
    General and
     administrative          56,939       51,011      116,490      100,474
    Restructuring and
     other charges            1,179            -        2,675            -
    Merger termination
     proceeds, net                -            -      (41,120)           -
                        -----------  -----------  -----------  -----------
       Total operating
        expenses            491,307      480,552      942,984      958,474
                        -----------  -----------  -----------  -----------

INCOME FROM OPERATIONS      115,374       65,604      186,190      104,330

OTHER INCOME
 (EXPENSES), net:
    Interest income           6,979       17,619       15,596       33,094
    Interest expense        (17,916)     (17,807)     (37,117)     (27,319)
    Loss (gain) on
     investments, net         2,805      (22,613)       2,713      (25,234)
    Other expenses, net      (1,270)        (479)      (2,218)      (2,468)
                        -----------  -----------  -----------  -----------
       Total other
        expenses, net        (9,402)     (23,280)     (21,026)     (21,927)
                        -----------  -----------  -----------  -----------

INCOME BEFORE INCOME
 TAXES                      105,972       42,324      165,164       82,403

PROVISION (BENEFIT) FOR
 INCOME TAXES                10,295         (729)      17,823        4,627
                        -----------  -----------  -----------  -----------

NET INCOME              $    95,677  $    43,053  $   147,341  $    77,776
                        ===========  ===========  ===========  ===========

NET INCOME PER SHARE:
    BASIC               $      0.28  $      0.13  $      0.44  $      0.24
                        ===========  ===========  ===========  ===========
    DILUTED             $      0.27  $      0.13  $      0.43  $      0.23
                        ===========  ===========  ===========  ===========

SHARES USED IN PER
 SHARE CALCULATION:
    BASIC                   336,667      327,319      335,602      330,587
                        ===========  ===========  ===========  ===========
    DILUTED                 349,751      333,385      344,313      337,253
                        ===========  ===========  ===========  ===========



                               NETAPP, INC.
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
                              (In thousands)
                                (Unaudited)


                           Three Months Ended         Six Months Ended
                        ------------------------  ------------------------
                        October 30,  October 24,  October 30,  October 24,
                            2009         2008         2009         2008
                        -----------  -----------  -----------  -----------

Cash Flows from
 Operating Activities:
 Net income             $    95,677  $    43,053  $   147,341  $    77,776
 Adjustments to
  reconcile net income
  to net cash
  provided by
  operating
  activities:
  Depreciation and
   amortization              42,148       43,918       85,189       85,467
  Stock-based
   compensation              33,245       27,763       85,429       64,167
  Loss (gain) on
   investments               (2,835)      13,315       (2,537)      15,936
  Asset impairment and
   write-offs                   846          581        1,140          760
  Allowance for
   doubtful accounts            144        1,740            9        1,704
  Accretion of discount
   and issue costs on
   notes                     12,211       11,509       25,291       17,076
  Deferred income taxes         163      (36,041)      (1,919)     (47,300)
  Deferred rent                (434)       2,184         (829)       3,011
  Income tax benefit
   from stock-based
   compensation              (4,638)      25,690       14,410       45,549
  Excess tax benefit
   from stock-based
   compensation              (1,350)     (24,169)      (1,350)     (34,311)
  Changes in assets and
   liabilities:
   Accounts receivable       14,462       60,915      131,717      211,207
   Inventories                  774      (14,756)         334       (8,014)
   Prepaid expenses and
    other assets            (13,347)     (29,504)      (1,071)     (20,002)
   Accounts payable          (2,357)      13,740      (16,858)     (16,333)
   Accrued compensation
    and related
    benefits                 82,579       23,683        9,561      (30,756)
   Other accrued
    liabilities               7,174        6,312      (19,456)       4,909
   Accrual for GSA
    settlement                    -            -     (128,715)           -
   Income taxes payable         970        1,857       (1,608)        (536)
   Long term other
    liabilities               6,234          401       (6,334)        (818)
   Deferred revenue          (4,371)      35,249      (14,215)      88,143
                        -----------  -----------  -----------  -----------
        Net cash
         provided by
         operating
         activities         267,295      207,440      305,529      457,635
                        -----------  -----------  -----------  -----------
Cash Flows from
 Investing Activities:
 Purchases of
  investments              (722,334)    (219,024)    (883,231)    (483,962)
 Redemptions of
  investments               386,288      155,711      780,808      263,643
 Reclassification from
  cash and cash
  equivalents to
  short-term
  investments                     -     (597,974)           -     (597,974)
 Change in restricted
  cash                          967          457         (827)         682
 Proceeds from
  nonmarketable
  securities                  3,115          932        4,480          807
 Purchases of property
  and equipment             (22,776)     (27,354)     (47,490)    (103,967)
                        -----------  -----------  -----------  -----------
        Net cash used
         in investing
         activities        (354,740)    (687,252)    (146,260)    (920,771)
                        -----------  -----------  -----------  -----------
Cash Flows from
 Financing Activities:
 Proceeds from sale of
  common stock related
  to employee stock
  transactions               27,385       10,038       65,888       45,565
 Tax withholding
  payments reimbursed
  by employee stock
  transactions                 (490)         (37)      (5,717)      (2,591)
 Excess tax benefit
  from stock-based
  compensation                1,350       24,169        1,350       34,311
 Proceeds from issuance
  of convertible notes            -            -            -    1,265,000
 Payment of financing
  costs                           -       (1,136)           -      (26,581)
 Sale of common stock
  warrants                        -            -            -      163,059
 Purchase of note hedge           -            -            -     (254,898)
 Repayment of revolving
  credit facility                 -      (65,416)           -     (107,251)
 Repurchases of common
  stock                           -            -            -     (399,981)
                        -----------  -----------  -----------  -----------
        Net cash
         provided by
         (used in)
         financing
         activities          28,245      (32,382)      61,521      716,633
                        -----------  -----------  -----------  -----------
Effect of Exchange Rate
 Changes on Cash and
 Cash Equivalents             3,653      (19,172)      13,898      (18,947)
Net Increase (Decrease)
 in Cash and Cash
 Equivalents                (55,547)    (531,366)     234,688      234,550
Cash and Cash
 Equivalents:
 Beginning of period      1,784,388    1,702,395    1,494,153      936,479
                        -----------  -----------  -----------  -----------
 End of period          $ 1,728,841  $ 1,171,029  $ 1,728,841  $ 1,171,029
                        ===========  ===========  ===========  ===========



                               NETAPP, INC.
                         SUPPLEMENTAL INFORMATION
                              (In thousands)
                                (Unaudited)


                        Three Months Ended October 30, 2009
        ------------------------------------------------------------------
                                                          Loss
                   Stock-   Restru-                       (Gain)
        Amortiza-  based    cturing  Mergers               on
        tion of    Compen-  and    Termination  Non-Cash  Invest-
        Intangible sation   Other   Proceeds,   Interest  ments,
        Assets     Expenses Charges    Net      Expense    Net     Total
        ---------- ------- ------- -----------  -------- -------  --------
Cost of
 product
 reve-
 nues   $    4,273 $   510       -           -         -       -  $  4,783
Cost of
 service
 revenues        -   2,942       -           -         -       -     2,942
Sales
 and
 marketing
 expense       849  15,690       -           -         -       -    16,539
Research and
 development
 expense         -   7,909       -           -         -       -     7,909
General
 and
 administrative
 expense         -   6,194       -           -         -       -     6,194
Restructuring
 and
 other
 charges         -       -   1,179           -         -       -     1,179
Interest
 expense         -       -       -           -    12,211       -    12,211
Gain on
 investments,
 net             -       -       -           -         -  (2,805)   (2,805)
        ---------- ------- ------- -----------  -------- -------  --------
Effect on
 income
 before
 income
 taxes  $    5,122 $33,245 $ 1,179           -  $ 12,211 $(2,805) $ 48,952



                      Six Months Ended October 30, 2009
        ------------------------------------------------------------------
                                                          Loss
                   Stock-   Restru-                       (Gain)
        Amortiza-  based    cturing  Mergers               on
        tion of    Compen-  and    Termination  Non-Cash  Invest-
        Intangible sation   Other   Proceeds,   Interest  ments,
        Assets     Expenses Charges    Net      Expense    Net     Total
        ---------- ------- ------- -----------  -------- -------  --------
Cost of
 product
 reve-
 nues   $    8,988 $ 1,730       -           -         -       -  $ 10,718
Cost of
 service
 revenues        -   7,461       -           -         -       -     7,461
Sales
 and
 marketing
 expense     1,697  39,655       -           -         -       -    41,352
Research and
 development
 expense         -  20,625       -           -         -       -    20,625
General
 and
 administrative
 expense         -  15,958       -           -         -       -    15,958
Restructuring
 and
 other
 charges         -       -   2,675           -         -       -     2,675
Mergers
 termination
 proceeds,
 net             -       -       -     (41,120)        -       -   (41,120)
Interest
 expense         -       -       -           -    25,291       -    25,291
Gain on
 investments,
 net             -       -       -           -         -  (2,805)   (2,805)
        ---------- ------- ------- -----------  -------- -------  --------
Effect
 on
 pre-
 tax
 income $   10,685 $85,429 $ 2,675  $  (41,120) $ 25,291 $(2,805) $ 80,155



                       Three Months Ended October 24, 2008
        ------------------------------------------------------------------
                                                          Loss
                   Stock-   Restru-                       (Gain)
        Amortiza-  based    cturing  Mergers               on
        tion of    Compen-  and    Termination  Non-Cash  Invest-
        Intangible sation   Other   Proceeds,   Interest  ments,
        Assets     Expenses Charges    Net      Expense    Net     Total
        ---------- ------- ------- -----------  -------- -------  --------
Cost of
 product
 reve-
 nues   $    6,748 $   624       -           -         -       -  $  7,372
Cost of
 service
 revenues        -   2,419       -           -         -       -     2,419
Sales
 and
 marketing
 expense     1,259  12,849       -           -         -       -    14,108
Research
 and
 development
 expense         -   7,482       -           -         -       -     7,482
General
 and
 administrative
 expense         -   4,389       -           -         -       -     4,389
Interest
 expense         -       -       -           -    10,265       -    10,265
Loss on
 investments,
 net             -       -       -           -         -  22,613    22,613
        ---------- ------- ------- -----------  -------- -------  --------
Effect
 on
 income
 before
 income
 taxes  $    8,007 $27,763       -           -  $ 10,265 $22,613  $ 68,648



                        Six Months Ended October 24, 2008
        ------------------------------------------------------------------
                                                          Loss
                   Stock-   Restru-                       (Gain)
        Amortiza-  based    cturing  Mergers               on
        tion of    Compen-  and    Termination  Non-Cash  Invest-
        Intangible sation   Other   Proceeds,   Interest  ments,
        Assets     Expenses Charges    Net      Expense    Net     Total
        ---------- ------- ------- -----------  -------- -------  --------
Cost of
 product
 reve-
 nues   $   13,496 $ 1,572       -           -         -       -  $ 15,068
Cost of
 service
 revenues        -   5,460       -           -         -       -     5,460
Sales
 and
 marketing
 expense     2,518  29,191       -           -         -       -    31,709
Research
 and
 development
 expense         -  17,669       -           -         -       -    17,669
General
 and
 administrative
 expense         -  10,275       -           -         -       -    10,275
Interest
 expense         -       -       -           -    15,202       -    15,202
Loss on
 investments,
 net             -       -       -           -         -  25,234    25,234
        ---------- ------- ------- -----------  -------- -------  --------
Effect
 on
 pre-tax
 income $   16,014 $64,167       -           -  $ 15,202 $25,234  $120,617



                               NETAPP, INC.
                    RECONCILIATION OF NON-GAAP AND GAAP
          IN THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
            (In thousands, except net income per share amounts)
                                (Unaudited)


                           Three Months Ended         Six Months Ended
                        ------------------------  ------------------------
                        October 30,  October 24,  October 30,  October 24,
                            2009         2008         2009         2008
                        -----------  -----------  -----------  -----------

SUMMARY RECONCILIATION
 OF NET INCOME
NET INCOME              $    95,677  $    43,053  $   147,341  $    77,776

Adjustments:
  Amortization of
   intangible assets          5,122        8,007       10,685       16,014
  Stock-based
   compensation expenses     33,245       27,763       85,429       64,167
  Restructuring and
   other charges              1,179            -        2,675            -
  Merger termination
   proceeds, net                  -            -      (41,120)           -
  Non-cash interest
   expense                   12,211       10,265       25,291       15,202
  Loss (gain) on
   investments, net          (2,805)      22,613       (2,805)      25,234
  Discrete GAAP tax
   provision items             (645)       3,816       (7,837)       4,308
  Income tax effect         (13,848)     (23,410)     (13,591)     (34,655)

                        -----------  -----------  -----------  -----------
NON-GAAP NET INCOME     $   130,136  $    92,107  $   206,068  $   168,046
                        ===========  ===========  ===========  ===========


NET INCOME PER SHARE    $     0.274  $     0.129  $     0.428  $     0.231

Adjustments:
  Amortization of
   intangible assets          0.015        0.024        0.031        0.047
  Stock-based
   compensation expenses      0.095        0.083        0.248        0.190
  Restructuring and
   other charges              0.003            -        0.008            -
  Merger termination
   proceeds, net                  -            -       (0.119)           -
  Non-cash interest
   expense                    0.035        0.031        0.073        0.045
  Loss (gain) on
   investments, net          (0.008)       0.068       (0.008)       0.075
  Discrete GAAP tax
   provision items           (0.002)       0.011       (0.023)       0.013
  Income tax effect          (0.040)      (0.070)      (0.039)      (0.103)

                        -----------  -----------  -----------  -----------
NON-GAAP NET INCOME
 PER SHARE              $     0.372  $     0.276  $     0.599  $     0.498
                        ===========  ===========  ===========  ===========



                               NETAPP, INC.
                RECONCILIATION OF NON GAAP GUIDANCE TO GAAP
                      EXPRESSED AS EARNINGS PER SHARE
                            THIRD QUARTER 2010
                                (Unaudited)



                                                            Third Quarter
                                                                 2010
                                                           ---------------

Non-GAAP Guidance                                          $ 0.36 - $ 0.37


Adjustments of Specific Items to
     Earnings Per Share for the Third
     Quarter 2010:

   Non cash interest expense                                    (0.03)
   Amortization of intangible assets                            (0.01)
   Stock based compensation expense                             (0.10)
   Income tax effect                                             0.02
                                                           ---------------
Total Adjustments                                               (0.12)

GAAP Guidance - Earnings Per Share                         $ 0.24 - $ 0.25

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