Global data storage solutions provider NetApp is one of the few global IT firms that has huge exposure in the US government space. This is the reason why the Nasdaq-headquartered company saw its sales to the US government declined dramatically during the July quarter. The Sunnyvale-headquartered company’s president and CEO, Tom Georgens, told Bibhu Ranjan Mishra about the softening of demand in key geographies that gave an indication about the buyers’ behaviour. Edited excerpts:
NetApp’s July quarter results showed the demand slowness in key geographies and key sectors? What is your game plan?
We ended our fiscal year ended in April with a 30 per cent growth in our revenues, which crossed $5-billion mark for the first time. But since then, major economies have gone into turmoil. European and the US markets are very negative. We’re even concerned about China and other Asian countries. In the US, we are seeing a lot of concern in the financial services segment. The US government has its own budget issues. We’re also heading into an election year. Overall, it’s a period of uncertainty.
NetApp suffered its biggest ever jolt in 2002 after the dot-com bubble, when your revenues dropped from $1 billion to $800 million. How grave is the situation now?
I was not there with NetApp during those (post-dot-com bubble) days, but can tell you that NetApp’s journey was phenomenon in the early years when we went up from $250 million to $1 billion in revenues in two years. In post-dot-com era, NetApp diversified into newer areas. The company moved away from pure technology to focus more on the data canter, traditional business applications and database.
Is the present environment compelling you to diversify into some other areas?
If you look at the success and growth of the business, one enabling technology beneath the cloud is virtualization.
We realised virtualisation is going to have big implications not only for servers but for storage as well. We worked very hard to tailor our technology and invent some of the compelling technologies in that space. Today, NetApp is the innovation leader for storage in virtualised environments.
What kind of exposure you have in the US government space?
It varies from quarter to quarter, but it is in the vicinity of 13-14 per cent (of our overall revenues). When the US was undergoing a big debate about whether to raise the debt ceiling not, we had just finished our financial quarter. Our quarter ended on July 29, where as the deadline for raising the debt ceiling was August 2. So, I am not going to use that as an excuse but I think it’s safe to say that did not help our business.
The financial services sector in the US is also under a lot of cost pressure.
Financial services as a segment is not as big for us as the government, but it’s still one of our large sectors. We have about 23 major accounts in the US of which six are financial services companies. And all these six companies were down last quarter.
How is the Asia-Pacific (APAC) region doing for NetApp? Where does India stand in your overall strategy?
Roughly, around 10 per cent of our revenues come from Asia Pacific region. Last quarter, the pie of APAC had gone up to 13 per cent. I am clearly more excited about the Indian. It’s not because it has a large population, but a lot of IT modernisation programmes are happening in this country.
How important is your Bangalore centre from innovation point of view?
There are now more NetApp engineers in Bangalore than in Sunnyvale, our headquarters. We have made big commitment in India with our Bangalore centre touching about 2,000 in terms of headcount. NetApp Bangalore has done more patent disclosures than any of our other sites. A substantial amount of our research and new product ideas come from Bangalore. So my message to the team is NetApp Bangalore is NetApp and NetApp cannot succeed unless NetApp Bangalore succeeds.
