Contact: Brenon Daly
What do the Barenaked Ladies and SnapMirror for Open Systems have in common? Well, both have been canceled recently by NetApp in a bid to save money as growth rates at the storage giant continue to head south. The company is currently more than halfway through its fiscal year, which wraps at the end of April, and its projected growth rate of 9% is shaping up to be just half the level it was last year (18%), which was half the level it was the year before that (36%). And given the economic environment, estimates may well decline again between now and when it actually reports results.
Like many companies facing the current recession, NetApp’s answer has been to cut costs. In October, it scratched plans for its user conference, NetApp Accelerate (the Barenaked Ladies had been booked to play one night at the event, which was slated for February). And then last week, NetApp said in an SEC filing that it was shuttering the SnapMirror for Open Systems product line. It will take a charge of as much as $20m (roughly two-thirds of that as a straight write-down and one-third for possible payments for facilities closures and severance agreements).
SnapMirror came with NetApp’s pricey acquisition of Topio in November 2006. The company paid $160m for Topio, which we understand was generating less than $10m in sales. The curtain will fall on SnapMirror before the end of NetApp’s fiscal year, which should help its cost structure for the year. NetApp could certainly use a boost in this area. The company runs at just a 10% operating margin, and has seen the increase in operating expenses outstrip the increase in sales during the first two quarters of its current fiscal year.
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Source: The 451 M&A KnowledgeBase