Rising Storage Market Share Should Boost NetApp Stock

by Trefis Team
-0.78%
Downside
41.51
Market
41.19
Trefis
NTAP
NetApp
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NetApp (NYSE:NTAP) creates innovative storage and data management solutions for small and medium-sized companies around the world. It competes mainly with EMC (NYSE:EMC), IBM (NYSE:IBM), HP (NYSE: HPQ) and Dell (NASDAQ:DELL) in the external disk storage systems market.

Netapp has  created a strong brand for itself over the years, winning numerous awards and building a large list of loyal customers. A recent survey by Storage magazine ranked NetApp first in enterprise array quality. And the company’s RTP data center was the first to earn the U.S. government’s Energy Star rating for superior energy efficiency.

Based on the company’s rising share of the external storage market and its promising partnerships with Microsoft, Cisco and others, we have raised the Trefis stock price estimate for NetApp from $33.54 to $41.56. Our analysis follows below.

Growing market share

NetApp’s share of the external storage market has grown steadily in recent years. NetApp is currently the third-largest external storage player after IBM and Dell, according to market research firm IDC. We expect its share to rise further during the Trefis forecast period, from around 11% in 2010 to nearly 13% by 2016.

You can drag the trend-line in the chart below to create your own storage market share forecast for Netapp and see how it impacts the company’s estimated stock price.

Productive partnerships

NetApp partners with VMware (NYSE:VMW) and Cisco (NASDAQ:CSCO) to provide integrated data center solutions. Netapp’s FCoE solutions, Cisco’s data center switches and VMware’s virtualization technology combine to help corporate data centers work more efficiently.

NetApp  has also embarked on a cloud computing partnership with Microsoft (NASDAQ:MSFT). Cloud computing is a form of IT hosting in which resources such as servers are pooled for the simultaneous use of many customers. Numerous enterprises worldwide have been moving their IT infrastructures onto the cloud, which is often cheaper and more efficient than running a proprietary data data center.

In the earnings report for the first quarter of its 2011 fiscal year, NetApp announced that it was working with Microsoft and other companies to help enterprise clients make the jump to cloud computing. The Microsoft partnership involves integrating various NetApp and Microsoft applications in an effort to help business customers navigate virtualized IT environments.

You can see the complete $41.56 Trefis price estimate for Netapp’s stock here.

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