NetApp CEO Georgens Sees 'Re-Balancing' Ahead

That Could Have Gone Better

NetApp did not have a happy fourth fiscal quarter for 2015.

The company on Wednesday reported a fall in revenue and income, a slowdown in its U.S. commercial business, a drop in sales through the channel, and a plan to lay off about 500 employees over the rest of this year.

NetApp Chairman and CEO Tom Georgens (pictured) also said he expects a rough ride for the next two quarters but looks for a return to normal growth in the second half of fiscal 2016.

Georgens last week spent a few minutes with CRN talking about the quarter and what it means for the channel. Turn the page for the Q&A with the leader of the second-biggest independent storage vendor.

What happened this quarter?

It's clearly a challenging market. We didn't have the quarter we wanted. We had to make some adjustments. But our all-flash FAS and other businesses are strong.

As a company, we're re-balancing. We're moving resources to help with the conversion (of customers to Clustered Data Ontap). We just need to get in front of more people.

We're making investments in the transition from Ontap to Clustered Data Ontap. It's a complicated transition. We have accounts with thousands of controllers. We're also investing in the channel, and in our customer-facing, go-to-market initiatives.

How has that impacted NetApp's channel partners?

Sales via our top-10 partners, and via the overall majority of our partners, grew during the quarter. But we've seen those who didn't make the investment in (Clustered Data Ontap) training and technology were not as successful. We need to invest more in helping them.

Remember that, as customers upgrade to Clustered Data Ontap, they invest in other NetApp technologies.

Will the planned layoffs impact NetApp's channel business?

That's not the plan. There will be individual stories. But in the aggregate, our investment is going up. There will be incremental investment in increasing both direct and indirect sales.

It the cloud impacting NetApp's business?

NetApp has two approaches to the cloud. NetApp Private Storage for Cloud lets storage stay on networks controlled by the users. And Cloud Ontap runs NetApp storage on the cloud with a pay-by-the-hour model.

Both are growing. But in the context of a $6 billion NetApp, they aren't yet significant. We're on a good path. I've pitched the concepts everywhere I go. And I haven't yet seen a customer not say, "Tell me more. I want to hear more."

How is NetApp competing with companies like EMC, HP and IBM?

We're seeing the server vendors losing storage market share, while the independent storage vendors are gaining. HP and IBM are not long-term players, and are not as competitive.

I expect NetApp and EMC to be the long-term survivors.

What's happening with all-flash FlashRay after NetApp changed that part of the business?

We're now focused on our all-flash FAS solutions.

FlashRay is still in the market. It has a lot of cool technology. Some of it will remain with FlashRay, while some will be moved to all-flash FAS solutions.