Investopedia: NetApp Down But Far From Out

Few things feel as rewarding in the market as riding a hot beat-and-raise story. As corporate tech spending has rebounded sharply from the recession, storage technology provider NetApp (Nasdaq:NTAP) has been on a strong run of late. With an apparent pothole in the beat-and-raise story, though, will investors continue to hang on to this quality growth name, or will they abandon it in favor of a hotter table at the stock market casino? 

The Quarter That Was
For the most part, NetApp's fiscal third quarter came in as analysts thought it would. Revenue rose 25% from last year and 5% from last quarter, though a slowdown in the low-end and some supply constraints robbed the quarter of a little bit of its momentum. Still, the company has found that demand for the new FAS3200 has outstripped their ability to supply it, so that's a relatively good problem to have (at least so long as customers are willing to wait).

On the profitability side, performance was a little more mixed but still solid. Gross margin rose more than a full point from last year, but fell 143 basis points from the prior quarter and equipment margins were slightly disappointing. Operating margin offered a similarly mixed picture, as the year-on-year improvement was solid but there was sequential softness. Still, the company delivered GAAP operating income growth of over 50%, so that is hardly a poor performance. (For more, see Analyzing Operating Margins.)

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