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NetApp dips on weak Q4 results, Q1 forecast

NetApp Inc. (NTAP) reported a 37% jump in earnings for the fourth quarter of 2019 helped by lower costs and expenses despite a decline in revenue. However, the results missed analysts’ expectations. The data storage provider guided earnings and revenue for the first quarter of 2020 below the consensus estimates.

Net income climbed 37% to $396 million and earnings soared 50% to $1.59 per share. Adjusted earnings increased by 9% to $1.22 per share.

Revenue inched down 3% to $1.59 billion. NetApp posted a revenue increase in software maintenance but product and hardware maintenance and other services saw declines.

NetApp fourth quarter 2019 earnings snapshot

For the first quarter of 2020, NetApp expects net revenues in the range of $1.315 billion to $1.465 billion and GAAP earnings in the range of $0.56 to $0.64 per share. Adjusted earnings are anticipated to be in the range of $0.78 to $0.86 per share.

For fiscal 2020, net revenues are anticipated to grow at the low-end of the mid-single-digit range. Gross margin is predicted to be in the range of 63% to 64% on a GAAP basis and 64% to 65% on an adjusted basis. Operating margin is expected to be in the range of 20% to 21% on a GAAP basis and 23% to 24% on a non-GAAP basis.

The results were hurt by the falling revenue from the original equipment manufacturer, and tough macroeconomic scenario. Meanwhile, the company made significant progress in the strategic markets of all-flash, private cloud, and cloud data services.

Also read: Western Digital Q3 earnings report

For the fourth quarter, strategic product revenue increased by 3.6% year-over-year while mature product revenue dropped by 19.3%. In terms of geographic mix, Americas comprised 57% of revenue, with the majority coming from Americas Commercial. EMEA made up 29% while the Asia Pacific comprised 14%. Looking at pathways mix, 76% came from Indirect while 24% came from Direct.

The bottom line was benefited by the previous year quarter’s one-time charge of about $850 million. This charge was related to the mandatory transition tax on accumulated foreign earnings and a reduction of the US corporate income tax rate to 21% effective January 1, 2018.

In addition, the company said it will increase the first quarter fiscal year 2020 dividend by 20% to $0.48 per share. The quarterly dividend will be paid on July 24, 2019, to shareholders of record as of the close of business on July 5, 2019.

Shares of NetApp ended Wednesday’s regular session down 4.13% at $67.10 on the Nasdaq. Following the earnings release, the stock inched down over 6% in the after-market session.

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