IDC reports that the storage software market is starting to show signs of recovery as it reported return of sequential and y-o-y growth. The exponential growth of data makes storage management a top priority. Let’s take a closer look at storage and data management solutions provider NetApp (NASDAQ:NTAP) and Red Hat (NYSE:RHT), the open source giant.
According to IDC, network attached storage (NAS) accounts for 20% of external disk storage systems as users look for storage solutions to help deal with unstructured, file-based data. The company adds, “The growing number of unified storage solutions has made it easier for customers to implement one platform for multiple file-based and block-based storage workloads.” The NAS market grew 12.6% year over year, led by EMC with a 50.5% revenue share and followed by NetApp with a 20.2% share.
Deduplication is another growing trend in the storage industry, made clear by the bidding war for deduplication specialist Data Domain between EMC and NetApp. EMC ultimately won the war with a $2.1 billion deal. EMC, Symantec, and IBM dominate software-based deduplication while EMC (including Data Domain) and NetApp dominate hardware-based deduplication. To increase its presence in the sector, NetApp might consider other alternatives like CommVault, FalconStor, ExaGrid, and Permabit.
While on acquisitions, the recently completed Sun-Oracle deal has upset the balance in the storage industry. Oracle will now be competing with EMC and HP, and no doubt NetApp will also be affected. And Oracle’s presence in the storage industry creates more of a psychological impact. What is going to be its next move? Whom will it acquire next? And that might result in some counter-moves. The New York Times suggests that IBM should start up its deal machine with possibilities that include EMC and NetApp.
Meanwhile, IBM is working with Red Hat to woo Sun’s customer base. IBM made away with 800 Sun customers during the long time it took to complete the Oracle–Sun deal. IBM also recently announced that its Development and Test Cloud will run Red Hat’s Enterprise Virtualization.
Red Hat recently reported an 18% increase in its fourth quarter revenue to $195.9 million. For the full year, total revenue was $748.2 million, an increase of 15%, and net income was $87.3 million or $0.45 per share, compared with $78.7 million or $0.39 per share in last year. Q4 net income was $23.4 million, or $0.12 per share versus $16 million, or $0.08 per share last year. Q3 coverage is available here.
It ended with cash of $970.2 million after repurchasing shares for $90.1 million in the quarter. For the full fiscal year, Red Hat repurchased $236.4 million, or 10 million shares, of common stock. It also announced a further $300 million stock repurchase program. I suggested earlier that Red Hat should strengthen its market position with an open source roll-up with companies like Collabnet and SugarCRM.
It is currently trading around $30 with market cap of about $6 billion. It hit a 52-week high of $31.76 on December 23.
NetApp, on the other hand, reported third quarter revenue of $1.01 billion, a 35% increase. Annual revenue was $3.4 billion last year. Net income was $108 million, or $0.30 per share compared to GAAP net loss of $82 million, or ($0.25) per share last year. Q2 coverage is available here.
For the fourth quarter, NetApp expects revenue of $1.07 to $1.10 billion and EPS of $0.31. It ended the quarter with $3.2 billion in cash. NetApp recently celebrated the shipment of 150,000 unified storage systems. It is trading around $35 with market cap of about $12 billion. Its 52-week high was $34.57 on December 30.