“Cloud storage” could be a strong positive for NetApp

+3.32%
Upside
25.70
Market
26.55
Trefis
EMC: EMC logo
EMC
EMC

NetApp makes money by selling storage hardware and software primarily to small and medium sized businesses.  Companies are increasingly adopting cloud storage. Cloud Storage is a term for a system of flexible storage services allowing businesses to avoid spending money on storage hardware, by using outsourced storage resources owned by a cloud provider (e.g. Amazon).

Small and medium business customers are more likely to adopt cloud storage due to their limited IT resources. In addition, cloud providers will need to purchase more hardware to satisfy their end-customer demands. As a result, NetApp’s storage customer base may shift from small and medium businesses, to cloud providers, over time.

If NetApp is able to sell higher-end storage devices to cloud providers, this trend could have positive consequences for NetApp’s pricing and gross margins.  However, if cloud providers continue to primarily purchase the simpler storage devices (e.g. NAS type) that NetApp is known for, the pricing and margin consequences may be negative.  NetApp will also face stiff competition from EMC, its primary competitor, which is better known for selling high-end storage devices.

Relevant Articles
  1. Dell-EMC Deal Finally Closes: A Look At How The Merger Could Impact HPE & IBM
  2. EMC Earnings Takeaways: Flash Array, VMware, Services Continue Growth
  3. EMC Earnings Preview: Storage Hardware Sales To Remain Suppressed, Services To Drive Growth
  4. Why You Should Take A Closer Look At EMC’s EPS Growth
  5. How A Worldwide Decline In Storage Systems Sales Impacts EMC
  6. How Valuable Is EMC’s Information Storage Business?

Within NetApp’s content on our platform, you can see how NetApp’s stock would be impacted if Storage Hardware Gross Margins increased or decreased due to the growing adoption of cloud storage.