Hybrid Storage
Enterprise

1

NetApp
Power Score: 79.56 Momentum Score: 35.0 (3) HQ: Sunnyvale, CA CEO: George Kurian

Economics

Valuation: $20.02 billion (+110% YoY)

Amt. Raised: n/a

Politics

Lobbying Spend: $120,000

Industry Orgs: ITI, SNIA, CSA

People

Headcount: 12,914 (+0% YoY)

Engineering Headcount: 3,711 (-1% YoY)

Big Tech Experience: 2.9%

Open Roles: 415

Innovation

R&D Spending: $881 million (+4% YoY)

Patents Applied For: 560

Patents Owned: 2,119

Acquisitions: CloudCheckr (October 2021); Data Mechanics (June 2021)

Leadership

Exec Team Exits: No

Diversity Data?: Yes

ESG/CSR Data?: Yes

On Power

In 2016, NetApp looked like it could disappear into irrelevance. Facing declining revenue from its physical storage systems in light of increased competition from cloud providers, the company laid off 12% of its employees as part of a $400 million cost-cutting initiative. But over the last five years, the company has reinvented itself as a services business by partnering with AWS, Azure and Google and offering its storage software ONTAP on cloud infrastructure. (It probably doesn't hurt that NetApp CEO George Kurian's twin brother Thomas Kurian runs Google's cloud division). It seems that revenue growth runs in the family, with NetApp reporting a 12% year-on-year increase, all while its public cloud business grew 155%, a clear sign that NetApp's future looks much brighter now. In the last four quarters, NetApp doubled its market cap.

ONTAP's interoperability between on-prem and cloud environments underpins how the company has used hybrid data management capabilities to bolster the appeal of its core storage products. And the company's roadmap shows at least a continuation — if not an acceleration — of the strategy by focusing on NVMe storage protocols to reduce latency and ease upgrade requirements. At the end of FY20, Kurian noted that the storage market was in the "early innings" of a technological curve. But NetApp's on-prem and cloud growth in the past year have set the company up to take on the hybrid market however the next innings do unfold.

On Disruption

One company's loss is another's gain: NetApp is increasingly pivoting toward helping companies reduce their cloud bills, and charging a fee for doing so, a service that can effectively help funnel heavier public cloud users into increasingly hybrid setups. Two recent acquisitions — Spot.io, a compute optimization platform in July 2020, and CloudCheckr, a general purpose cloud optimization platform, last month — gave NetApp a critical suite of software to help enterprises cut spiraling cloud bills across the board. Before CloudCheckr was acquired, the company released research on unexpected cloud costs, which 94% of respondents reported having. Moving forward, the expansion of the audit portfolio gives NetApp more leverage to sell companies on the hybrid storage offerings, given the existing success of its Spot product and the extra nuance CloudCheckr will weave in.

Tea Leaves

While just over half of NetApp's revenue still comes from physical hardware sales and support, the company recently broke out its earnings to include "hybrid cloud" and "public cloud" as separate revenue streams, signifying the company's increasing shift away from the data center and towards the cloud. Though the hybrid cloud stream is considerably larger than the public cloud portion currently, the company highlighting its native integrations with the cloud vendors plays into a broader strategy of expanding its optimization capabilities. Expect to see more focus on those segments and less on its legacy hardware business in the coming year.

They Said It

"Our Public Cloud services not only allow us to participate in the rapidly growing cloud market, they also make us a more strategic data center partner to our enterprise customers, driving share gains in our Hybrid Cloud business." CEO George Kurian in an August 2021 earnings call

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https://roar-assets-auto.rbl.ms/documents/12560/PowerIndex_PowerSheets_ENT_HybridStorage_NetApp-2021-1109.pdf
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