NetApp sees low end growth

NetApp says it had "another outstanding quarter" with FlexPod, further enhancing its partnership with Cisco and the joint channel partners. This FlexPod business grew almost 90% year-over-year.

"To date, we have almost 1,300 FlexPod customers and are seeing a clear ramp in repeat business. We are seeing strong traction across the board in all geos and verticals," says CEO Thomas Georgens. 

The greatest demand for FlexPod comes from customers wanting to run mixed workloads. In Q1, NetApp and Cisco announced the launch of Premium Partner Framework, a global channel initiative to accelerate FlexPod momentum designed to deliver differentiation, streamline multi-vendor interactions and enhance profitability. "We continue to strengthen our relationship with Cisco and are seeing the results of this strong partnership in the marketplace," he says.

Business remains tough, particularly in Europe. NetApp is "trying to arrange operating expenses towards what we believe is going to generate near-term growth". So there definitely is a re-prioritization going on, but channel programmes are still being funded. And in the product mix, it has seen a "dramatic explosion of our low-end business, up 41% year-over-year".

Channels are important for NetApp, particularly in the 2000 family whcih it says is its key to the channel. The mix of direct and indirect channels remains steady from Q4 with 78% of revenue coming through the channels and OEMs. Together, Arrow and Avnet contributed 30% of total revenue, consistent with last quarter and up 15% from a year ago.

And with Cisco on board, it knows who its targets are: "The NetApp-Cisco partnership is one that's probably the most sustainable of them all. I think we are much better aligned from a product direction point of view and our belief of Ethernet base storage. I think we are much better aligned from a go-to-market perspective, and that we are very channel-centric," says Thomas Georgens. 

The ability to expand coverage on a geographical basis outside of the US is still a very large opportunity, he says. "I still think that one of the biggest challenges not only for us, but for everybody in this market, is basically coverage and to reach as many customers as we can. Clearly, in the aftermath of the breakup of the Dell relationship and EMC, clearly we see EMC in the channel, we see Dell in the channel. But we're not trying to invest to overpower those guys. I think our existing partners are doing just fine and we're looking to add more coverage to it.

On the Cisco partnership: "I think that there isn't any fundamental strategic overlap or product overlap to create tension. So as a result, I think a lot of those things are working together for us, even independent of any actions by EMC. So clearly, that was one of the bright spots of the quarter. I think there's still a lot upside as we get more and more engagement on a worldwide basis, so we get to see more repeat purchases. So clearly, I think we're very, very pleased with that relationship, and it has a very, very large amount of momentum. I think that really the key message here is that technology is positioned against the server vendors. And the server vendors' value proposition is going to be one of integration, and it isn't to say that integration doesn't add value, but the customers are willing to sacrifice only so much innovation and product functionality in order to achieve that integration."