SOURCE: NetApp, Inc.

NetApp, Inc.

February 17, 2010 16:00 ET

NetApp Announces Results for Third Quarter of Fiscal Year 2010

Record Revenues of $1.01 Billion; Non-GAAP EPS of $0.40

SUNNYVALE, CA--(Marketwire - February 17, 2010) - NetApp (NASDAQ: NTAP) today reported results for the third quarter of fiscal year 2010, which ended January 29, 2010. GAAP revenues for the third quarter of fiscal 2010 were $1.01 billion, compared to GAAP and non-GAAP revenues(1) of $746 million and $874 million, respectively, for the same period one year ago.

For the third fiscal quarter of 2010, GAAP net income was $108 million, or $0.30 per share(2) compared to GAAP net loss of $82 million, or ($0.25) per share for the same period in the prior year. Non-GAAP(3) net income for the third fiscal quarter of 2010 was $144 million, or $0.40 per share, compared to non-GAAP net income of $93 million, or $0.28 per share for the same period one year ago.

GAAP revenues for the first nine months of the current fiscal year totaled $2.76 billion, compared to GAAP and non-GAAP revenues of $2.5 billion and $2.7 billion, respectively, for the first nine months of the prior fiscal year.

GAAP net income for the first nine months of the current fiscal year totaled $255 million, or $0.73 per share, compared to GAAP net loss of $4 million, or $0.01 per share for the first nine months of the prior fiscal year. Non-GAAP net income for the first nine months of the current fiscal year totaled $350 million, or $1.00 per share, compared to non-GAAP net income of $262 million, or $0.78 per share for the first nine months of the prior fiscal year.

"The NetApp team demonstrated remarkable execution this quarter. With record revenues, record profits and record EPS, the company produced double-digit year over year revenue growth and our operations team shipped a record number of systems, despite persistent supply constraints," said Tom Georgens, president and CEO. "I am very pleased with the breadth of our progress. Business levels grew in every major geography, we gained momentum in both our channel and our direct business, and clearly gained market share this quarter."

Outlook

  • NetApp estimates revenue for the fourth quarter of fiscal year 2010 to be in the range of $1.07 billion to $1.10 billion.

  • NetApp estimates share count for the fourth quarter of fiscal year 2010 to increase by about 6 million shares.

  • NetApp estimates that the fourth quarter of fiscal year 2010 GAAP earnings per share will be approximately $0.31 to $0.33 per share. NetApp estimates that the fourth quarter fiscal year 2010 non-GAAP earnings per share to be approximately $0.42 to $0.44 per share.

Business Highlights

In the third quarter of fiscal year 2010, NetApp made several key announcements regarding new and expanded alliances with top IT industry leaders, the delivery of new products and solutions designed to drive greater efficiency in customers' shared data center infrastructures, and several industry awards and accolades. Key business highlights during the quarter included the following.

New and Expanded Strategic Alliances

  • Cisco, NetApp, and VMware Expand Longstanding Collaboration. Cisco, NetApp, and VMware collaborated to deliver new design architectures that help customers make their virtualized data centers more efficient, dynamic, and secure. The companies introduced an end-to-end secure multi-tenancy design architecture that provides enhanced security when sharing data center resources across virtualized and enterprise cloud environments. Cisco, NetApp, and VMware will also offer a cooperative support model for these pretested and validated design architectures to help customers quickly build a unified, virtualized infrastructure.

  • Microsoft and NetApp Announce Strategic Alliance. Microsoft and NetApp announced a new three-year agreement to collaborate on and deliver technology solutions that span virtualization, private cloud computing, and storage and data management. This will enable customers to increase data center management efficiencies, reduce costs, and improve business agility. The strategic alliance will deepen product collaboration and technical integration and will extend joint sales and marketing activities to customers worldwide.

  • Fujitsu and NetApp Plan to Expand Their Global Partnership. Fujitsu and NetApp announced their intention to deepen their partnership globally and to provide more tightly integrated and automated storage and data management solutions. The companies intend to jointly develop integrated products and services specifically in the areas of virtualization, storage and data management, and storage services and solutions. The expanded relationship will enable customers to derive greater value and efficiencies from their dynamic infrastructures.

New Products and Solutions

Industry Awards and Accolades

  • NetApp Named a Great Place to Work. NetApp was ranked #7 in FORTUNE magazine's "100 Best Companies to Work For" list. This is the second consecutive year that NetApp ranked in the top 10 and the fourth consecutive year it ranked in the top 15.

  • Gartner Positions NetApp as Leader in Midrange Enterprise Disk Array Magic Quadrant. NetApp was positioned by Gartner, Inc. in the Leaders quadrant in its recently released research note "Magic Quadrant for Midrange Enterprise Disk Arrays."(4) Vendors in the Leaders quadrant have the highest scores for their ability to execute and their completeness of vision.

  • NetApp eBI Project Earns InfoWorld 100 Award. NetApp's enterprise business intelligence (eBI) project was honored as part of IDG's InfoWorld 100 Awards for 2009, which recognize the 100 most innovative uses of IT initiatives that further business goals.

  • NetApp Receives WRAP Award for Waste Management Programs. The California Integrated Waste Management Board honored NetApp with a 2009 Waste Reduction Awards Program (WRAP) award. The award recognizes NetApp's corporate waste and recycling program and its achievements in minimizing its environmental impact through the conscientious use of products, activities, and services.

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, February 17, 2010, at 2:30 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. An audio replay Webcast will also be available after 5:30 p.m. Pacific Time on our Web site at http://investors.netapp.com.

Starting this quarter, NetApp will use a new hybrid format for disclosing key financial information associated with our quarterly results. Concurrent with this press release, NetApp has posted and distributed a separate document with financial commentary and statistics that previously were disclosed during our earnings calls. These prepared remarks will now be available at http://investors.netapp.com prior to the conference call in order to provide the investment community with additional time to analyze our results. This commentary will not be read during the earnings call.

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 fourth quarter of fiscal year 2010, our expectations regarding our new partnership and strategic alliances and the benefits that we expect our customers to realize from using our products and those from our strategic alliances and partnerships. 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 customer demand for our products and services; our ability to increase revenue and manage our operating costs; increased competition risks associated with the anticipated growth in network storage market; our ability to deliver new product architectures and enterprise service offerings; 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 and 10-Q. 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) Non-GAAP revenues for the third quarter and first nine months of fiscal year 2009 exclude the impact of the $128 million GSA settlement.

(2) GAAP earnings per share is calculated using the diluted number of shares for all periods presented except for the third quarter of fiscal year 2009, which is calculated using the basic number of shares.

(3) Non-GAAP results of operations exclude the GSA settlement, amortization of intangible assets, stock-based compensation expenses, merger termination proceeds (net of related expenses), restructuring and other charges, asset impairment, 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 non-GAAP tax provision based upon our projected annual non-GAAP effective tax rate. Non-GAAP earnings per share is calculated using the diluted number of shares for all periods presented.

(4) "Magic Quadrant for Midrange Enterprise Disk Arrays" by Roger Cox, Stan Zaffos, and Pushan Rinnen, November 2009.

NetApp, the NetApp logo, Go further, faster, and SnapManager are trademarks or registered trademarks of NetApp, Inc. in the United States and/or other countries. VMware is a registered trademark of VMware, Inc. Microsoft is a registered trademark and Hyper-V is a trademark of Microsoft Corporation. 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 the GSA settlement, amortization of intangible assets, stock-based compensation expenses, merger termination proceeds (net of related expenses), restructuring and other charges, asset impairment, 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 non-GAAP tax provision based upon our projected annual non-GAAP 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, INC.
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                              (In thousands)
                                (Unaudited)

                                                  January 29,   April 24,
                                                      2010         2009
                                                  ------------ ------------
ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                       $  1,975,826 $  1,494,153
  Short-term investments                             1,257,445    1,110,053
  Accounts receivable, net                             457,536      446,537
  Inventories                                           72,048       61,104
  Prepaid expenses and other assets                    143,950      119,887
  Short-term deferred income taxes                     110,596      207,050
                                                  ------------ ------------
      Total current assets                           4,017,401    3,438,784

PROPERTY AND EQUIPMENT, net                            797,961      807,923
GOODWILL                                               680,986      680,986
INTANGIBLE ASSETS, net                                  30,024       45,744
LONG-TERM INVESTMENTS AND RESTRICTED CASH               72,824      127,317
LONG-TERM DEFERRED INCOME TAXES AND OTHER ASSETS       369,438      283,625
                                                  ------------ ------------
                                                  $  5,968,634 $  5,384,379
                                                  ============ ============



LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                $    139,145 $    137,826
  Accrued compensation and related benefits            269,816      204,168
  Other accrued liabilities                            201,186      190,315
  Accrual for GSA settlement                                 -      128,715
  Income taxes payable                                   6,803        4,732
  Deferred revenue                                   1,064,579    1,013,569
                                                  ------------ ------------
      Total current liabilities                      1,681,529    1,679,325
                                                  ------------ ------------

LONG-TERM DEBT AND OTHER OBLIGATIONS                 1,229,751    1,219,216
LONG-TERM DEFERRED REVENUE                             730,374      701,649
                                                  ------------ ------------
                                                     3,641,654    3,600,190
                                                  ------------ ------------

STOCKHOLDERS' EQUITY                                 2,326,980    1,784,189
                                                  ------------ ------------
                                                  $  5,968,634 $  5,384,379
                                                  ============ ============




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


                              Three Months Ended      Nine Months Ended
                            ----------------------  ----------------------
                              January     January     January     January
                             29, 2010    23, 2009    29, 2010    23, 2009
                            ----------  ----------  ----------  ----------
REVENUES:
   Product                  $  618,955  $  528,198  $1,622,349  $1,646,489
   Software entitlements
    and maintenance            170,863     156,546     505,968     453,680
   Service                     221,832     189,599     631,321     554,581
   GSA settlement                    -    (128,000)          -    (128,000)
                            ----------  ----------  ----------  ----------
       Net revenues          1,011,650     746,343   2,759,638   2,526,750
                            ----------  ----------  ----------  ----------

COST OF REVENUES:
   Cost of product             253,907     252,327     665,576     762,437
   Cost of software
    entitlements and
    maintenance                  2,944       2,320       9,162       6,765
   Cost of service             113,259      98,480     314,186     301,528
                            ----------  ----------  ----------  ----------
        Total cost of
         revenues              370,110     353,127     988,924   1,070,730
                            ----------  ----------  ----------  ----------
GROSS MARGIN                   641,540     393,216   1,770,714   1,456,020
                            ----------  ----------  ----------  ----------

OPERATING EXPENSES:
   Sales and marketing         324,768     291,634     927,036     898,786
   Research and development    129,329     122,662     392,000     373,509
   General and administrative   58,079      51,048     174,569     151,523
   Restructuring and other
    charges                         68      18,955       2,743      18,955
   Merger termination
    proceeds, net                    -           -     (41,120)          -
                            ----------  ----------  ----------  ----------
        Total operating
         expenses              512,244     484,299   1,455,228   1,442,773
                            ----------  ----------  ----------  ----------

INCOME (LOSS) FROM
 OPERATIONS                    129,296     (91,083)    315,486      13,247

OTHER INCOME (EXPENSES), net:
   Interest income               7,464      12,799      23,060      45,894
   Interest expense            (18,226)    (17,674)    (55,343)    (44,993)
   Gain (loss) on
    investments, net               733      (1,691)      3,446     (26,926)
   Other expenses, net          (1,369)     (1,249)     (3,587)     (3,717)
                            ----------  ----------  ----------  ----------
         Total other
          expenses, net        (11,398)     (7,815)    (32,424)    (29,742)
                            ----------  ----------  ----------  ----------

INCOME (LOSS) BEFORE INCOME
 TAXES                         117,898     (98,898)    283,062     (16,495)

PROVISION (BENEFIT) FOR
 INCOME TAXES                   10,018     (17,275)     27,841     (12,648)
                            ----------  ----------  ----------  ----------

NET INCOME (LOSS)           $  107,880  ($  81,623) $  255,221  ($   3,847)
                            ==========  ==========  ==========  ==========

NET INCOME (LOSS) PER
 SHARE:
   BASIC                    $     0.32  $    (0.25) $     0.76  $    (0.01)
                            ==========  ==========  ==========  ==========
   DILUTED                  $     0.30  $    (0.25) $     0.73  $    (0.01)
                            ==========  ==========  ==========  ==========

SHARES USED IN PER SHARE
 CALCULATION:
   BASIC                       341,439     329,026     337,478     330,067
                            ==========  ==========  ==========  ==========
   DILUTED                     360,321     329,026     349,438     330,067
                            ==========  ==========  ==========  ==========




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


                              Three Months Ended January 29, 2010
                     ------------------------------------------------------
                               Amortization                      Restructu-
                                    of     Stock-based            ring and
                        GSA     Intangible Compensation  Asset      Other
                     Settlement   Assets     Expenses  Impairment  Charges
                     ---------- ---------- ---------- ---------- ----------

Cost of product
 revenues                     - $    4,053 $    1,017          -          -
Cost of service
 revenues                     -          -      3,317          -          -
Sales and marketing
 expense                      -        848     17,175          -          -
Research and
 development expense          -          -      8,906          -          -
General and
 administrative
 expense                      -          -      6,243          -          -
Restructuring and
 other charges                -          -          -          -         68
Interest expense              -          -          -          -          -
(Gain) loss on
 investments, net             -          -          -          -          -
                     ---------- ---------- ---------- ---------- ----------
Effect on income
 before income taxes          - $    4,901 $   36,658          - $       68



                         Three Months Ended January 29, 2010
                     ------------------------------------------
                      Mergers                (Gain)
                    Termination  Non-Cash    Loss on
                     Proceeds,   Interest Investments,
                        Net      Expense      Net       Total
                     ---------  ---------- ---------  ---------

Cost of product
 revenues                    -           -         -  $   5,070
Cost of service
 revenues                    -           -         -      3,317
Sales and marketing
 expense                     -           -         -     18,023
Research and
 development expense         -           -         -      8,906
General and
 administrative
 expense                     -           -         -      6,243
Restructuring and
 other charges               -           -         -         68
Interest expense             -      12,464         -     12,464
(Gain) loss on
 investments, net            -           -      (733)      (733)
                     ---------  ---------- ---------  ---------
Effect on income
 before income taxes         -  $   12,464 ($    733) $  53,358


                             Nine Months Ended January 29, 2010
                     ------------------------------------------------------
                               Amortization                      Restructu-
                                    of     Stock-based            ring and
                        GSA     Intangible Compensation  Asset      Other
                     Settlement   Assets     Expenses  Impairment  Charges
                     ---------- ---------- ---------- ---------- ----------

Cost of product
 revenues                     - $   13,041 $    2,747          -          -
Cost of service
 revenues                     -          -     10,778          -          -
Sales and marketing
 expense                      -      2,545     56,830          -          -
Research and
 development expense          -          -     29,531          -          -
General and
 administrative
 expense                      -          -     22,201          -          -
Restructuring and
 other charges                -          -          -          -      2,743
Mergers termination
 proceeds, net                -          -          -          -          -
Interest expense              -          -          -          -          -
(Gain) loss on
 investments, net             -          -          -          -          -
                     ---------- ---------- ---------- ---------- ----------
Effect on pre-tax
 income                       - $   15,586 $  122,087          - $    2,743


                         Nine Months Ended January 29, 2010
                     ------------------------------------------
                      Mergers                (Gain)
                    Termination  Non-Cash    Loss on
                     Proceeds,   Interest Investments,
                        Net      Expense      Net       Total
                     ---------  ---------- ---------  ---------

Cost of product
 revenues                    -           -         -  $  15,788
Cost of service
 revenues                    -           -         -     10,778
Sales and marketing
 expense                     -           -         -     59,375
Research and
 development expense         -           -         -     29,531
General and
 administrative
 expense                     -           -         -     22,201
Restructuring and
 other charges               -           -         -      2,743
Mergers termination
 proceeds, net         (41,120)          -         -    (41,120)
Interest expense             -      37,755         -     37,755
(Gain) loss on
 investments, net            -           -    (3,538)    (3,538)
                     ---------  ---------- ---------  ---------
Effect on pre-tax
 income              ($ 41,120) $   37,755 ($  3,538) $ 133,513



                            Three Months Ended January 23, 2009
                     ------------------------------------------------------
                               Amortization                      Restructu-
                                    of     Stock-based            ring and
                        GSA     Intangible Compensation  Asset      Other
                     Settlement   Assets     Expenses  Impairment  Charges
                     ---------- ---------- ---------- ---------- ----------

Total revenues       $  128,000          -          -          -          -
Cost of product
 revenues                     -      6,161        775          -          -
Cost of service
 revenues                     -          -      2,889          -          -
Sales and marketing
 expense                      -      1,053     15,787      9,431          -
Research and
 development expense          -          -      8,982          -          -
General and
 administrative
 expense                      -          -      5,997          -          -
Restructuring and
 other charges                -          -          -          -     18,955
Interest expense              -          -          -          -          -
(Gain) loss on
 investments, net             -          -          -          -          -
                     ---------- ---------- ---------- ---------- ----------
Effect on income
 before income taxes $  128,000 $    7,214 $   34,430 $    9,431 $   18,955



                        Three Months Ended January 23, 2009
                     ------------------------------------------
                      Mergers                (Gain)
                    Termination  Non-Cash    Loss on
                     Proceeds,   Interest Investments,
                        Net      Expense      Net       Total
                     ---------  ---------- ---------  ---------

Total revenues               -           -         -  $ 128,000
Cost of product
 revenues                    -           -         -      6,936
Cost of service
 revenues                    -           -         -      2,889
Sales and marketing
 expense                     -           -         -     26,271
Research and
 development expense         -           -         -      8,982
General and
 administrative
 expense                     -           -         -      5,997
Restructuring and
 other charges               -           -         -     18,955
Interest expense             -      10,436         -     10,436
(Gain) loss on
 investments, net            -           -     1,691      1,691
                     ---------  ---------- ---------  ---------
Effect on income
 before income taxes         -  $   10,436 $   1,691  $ 210,157



                                Nine Months Ended January 23, 2009
                     ------------------------------------------------------
                               Amortization                      Restructu-
                                    of     Stock-based            ring and
                        GSA     Intangible Compensation  Asset      Other
                     Settlement   Assets     Expenses  Impairment  Charges
                     ---------- ---------- ---------- ---------- ----------

Total revenues       $  128,000          -          -          -          -
Cost of product
 revenues                     -     19,657      2,347          -          -
Cost of service
 revenues                     -          -      8,349          -          -
Sales and marketing
 expense                      -      3,571     44,978      9,431          -
Research and
 development expense          -          -     26,651          -          -
General and
 administrative
 expense                      -          -     16,272          -          -
Restructuring and
 other charges                -          -          -          -     18,955
Interest expense              -          -          -          -          -
(Gain) loss on
 investments, net             -          -          -          -          -
                     ---------- ---------- ---------- ---------- ----------
Effect on pre-tax
 income              $  128,000 $   23,228 $   98,597 $    9,431 $   18,955


                         Nine Months Ended January 23, 2009
                     ------------------------------------------
                      Mergers                (Gain)
                    Termination  Non-Cash    Loss on
                     Proceeds,   Interest Investments,
                        Net      Expense      Net       Total
                     ---------  ---------- ---------  ---------

Total revenues               -           -         -  $ 128,000
Cost of product
 revenues                    -           -         -     22,004
Cost of service
 revenues                    -           -         -      8,349
Sales and marketing
 expense                     -           -         -     57,980
Research and
 development expense         -           -         -     26,651
General and
 administrative
 expense                     -           -         -     16,272
Restructuring and
 other charges               -           -         -     18,955
Interest expense             -      25,638         -     25,638
(Gain) loss on
 investments, net            -           -    26,926     26,926
                     ---------  ---------- ---------  ---------
Effect on pre-tax
 income                      -  $   25,638 $  26,926  $ 330,775




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

                              Three Months Ended      Nine Months Ended
                            ----------------------  ----------------------
                            January 29, January 23, January 29, January 23,
                               2010        2009        2010        2009
                            ----------  ----------  ----------  ----------

Cash Flows from Operating
 Activities:
  Net income (loss)         $  107,880  $  (81,623) $  255,221  $   (3,847)
  Adjustments to reconcile
   net income to net cash
   provided by operating
   activities:
    Depreciation and
     amortization               40,774      44,367     125,963     129,834
    Stock-based compensation    36,658      34,430     122,087      98,597
    (Gain) loss on
     investments                   108       1,691      (2,429)     17,627
    Asset impairment and
     write-offs                    577      27,505       1,717      28,265
    Allowance for doubtful
     accounts                      239         199         248       1,903
    Accretion of discount and
     issue costs on notes       12,464      11,693      37,755      28,769
    Deferred income taxes         (487)    (35,043)     (2,406)    (82,343)
    Deferred rent               (2,010)         26      (2,839)      3,037
    Tax benefit from
     stock-based compensation  (17,135)     (4,612)     (2,725)     40,937
    Excess tax benefit from
     stock-based compensation      323        (617)     (1,027)    (34,928)
    Changes in assets and
     liabilities:
      Accounts receivable     (139,663)     19,060      (7,946)    230,267
      Inventories              (11,231)     (3,945)    (10,897)    (11,959)
      Prepaid expenses and
       other assets            (26,234)     19,539     (27,305)       (463)
      Accounts payable          16,498     (25,823)       (360)    (42,156)
      Accrued compensation and
       related benefits         51,885      24,662      61,446      (6,094)
      Other accrued
       liabilities              25,504      13,807       6,048      18,716
      Accrual for GSA
       settlement                    -     128,000    (128,715)    128,000
      Income taxes payable       3,727         863       2,119         327
      Long term other
       liabilities              20,736      11,966      14,402      11,148
      Deferred revenue          74,300      49,855      60,085     137,998
                            ----------  ----------  ----------  ----------
        Net cash provided
         by operating
         activities            194,913     236,000     500,442     693,635
                            ----------  ----------  ----------  ----------
Cash Flows from Investing
 Activities:
  Purchases of investments    (451,710)   (227,526) (1,334,941)   (711,488)
  Redemptions of investments   462,688     622,928   1,243,496     886,571
  Reclassification from cash
   and cash equivalents to
   short-term investments            -           -           -    (597,974)
  Change in restricted cash        173      (1,126)       (654)       (444)
  Proceeds from
   nonmarketable securities        306           -       4,786         807
  Purchases of property and
   equipment                   (49,732)    (50,934)    (97,222)   (154,901)
                            ----------  ----------  ----------  ----------
        Net cash provided
         by (used in)
         investing
         activities            (38,275)    343,342    (184,535)   (577,429)
                            ----------  ----------  ----------  ----------
Cash Flows from Financing
 Activities:
  Proceeds from sale of
   common stock related to
   employee stock
   transactions                103,491      27,852     169,379      73,417
  Tax withholding payments
   reimbursed by employee
   stock transactions           (6,981)     (1,593)    (12,698)     (4,184)
  Excess tax benefit from
   stock-based compensation       (323)        617       1,027      34,928
  Proceeds from issuance of
   convertible notes                 -           -           -   1,265,000
  Payment of financing costs         -           -           -     (26,581)
  Sale of common stock
   warrants                          -           -           -     163,059
  Purchase of note hedge             -           -           -    (254,898)
  Repayment of revolving
   credit facility                   -     (65,349)          -    (172,600)
  Repurchases of common
   stock                             -           -           -    (399,981)
                            ----------  ----------  ----------  ----------
        Net cash provided
         by (used in)
         financing
         activities             96,187     (38,473)    157,708     678,160
                            ----------  ----------  ----------  ----------
Effect of Exchange Rate
 Changes on Cash and Cash
 Equivalents                    (5,840)     (3,698)      8,058     (22,645)
Net Increase in Cash and
 Cash Equivalents              246,985     537,171     481,673     771,721
Cash and Cash Equivalents:
  Beginning of period        1,728,841   1,171,029   1,494,153     936,479
                            ----------  ----------  ----------  ----------
  End of period             $1,975,826  $1,708,200  $1,975,826  $1,708,200
                            ==========  ==========  ==========  ==========




                               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     Nine Months Ended
                                --------------------  --------------------
                                 January    January    January    January
                                29, 2010   23, 2009   29, 2010   23, 2009
                                ---------  ---------  ---------  ---------
SUMMARY RECONCILIATION OF NET
 INCOME
NET INCOME (LOSS)               $ 107,880  ($ 81,623) $ 255,221  ($  3,847)

Adjustments:
  GSA settlement                        -    128,000          -    128,000
  Amortization of intangible
   assets                           4,901      7,214     15,586     23,228
  Stock-based compensation
   expenses                        36,658     34,430    122,087     98,597
  Asset impairment                      -      9,431          -      9,431
  Restructuring and other
   charges                             68     18,955      2,743     18,955
  Merger termination proceeds,
   net                                  -          -    (41,120)         -
  Non-cash interest expense        12,464     10,436     37,755     25,638
  (Gain) loss on investments,
   net                               (733)     1,691     (3,538)    26,926
  Discrete GAAP tax provision
   items                              572     (3,880)    (7,265)       428
  Income tax effect               (17,955)   (31,197)   (31,546)   (65,851)

                                ---------  ---------  ---------  ---------
NON-GAAP NET INCOME             $ 143,855  $  93,457  $ 349,923  $ 261,505
                                =========  =========  =========  =========


NET INCOME (LOSS) PER SHARE     $   0.299  ($  0.248) $   0.730  ($  0.012)

Adjustments:
  GSA settlement                        -      0.387          -      0.382
  Amortization of intangible
   assets                           0.013      0.022      0.045      0.069
  Stock-based compensation
   expenses                         0.102      0.104      0.349      0.294
  Asset impairment                      -      0.029          -      0.028
  Restructuring and other
   charges                              -      0.057      0.008      0.057
  Merger termination proceeds,
   net                                  -          -     (0.118)         -
  Non-cash interest expense         0.035      0.032      0.108      0.077
  (Gain) loss on investments,
   net                             (0.002)     0.005     (0.010)     0.080
  Discrete GAAP tax provision
   items                            0.002     (0.012)    (0.021)     0.001
  Income tax effect                (0.050)    (0.094)    (0.090)    (0.197)

                                ---------  ---------  ---------  ---------
NON-GAAP NET INCOME PER SHARE   $   0.399  $   0.282  $   1.001  $   0.779
                                =========  =========  =========  =========




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

                                                         Fourth Quarter
                                                               2010
                                                       -------------------
Non-GAAP Guidance                                         $0.42 - $0.44


Adjustments of Specific Items to
     Net Income Per Share for the Fourth
     Quarter 2010:

     Stock based compensation expense                        (0.10)
     Amortization of intangible assets                       (0.01)
     Non cash interest expense                               (0.04)
     Income tax effect                                        0.04
                                                       -------------------
Total Adjustments                                            (0.11)

GAAP Guidance -Net Income Per Share                       $0.31 - $0.33

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