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Below are key drivers of NetApp's value that present opportunities for upside or downside to the current Trefis price estimate of NetApp:
For additional details, select a driver above or select a division from the interactive Trefis split for NetApp at the top of the page.
NetApp makes money by selling storage hardware and storage software to small and medium businesses as well as large enterprises. NetApp's storage hardware helps customers manage data efficiently and keep the information available and secure. The disks are used for large, data-intensive applications like e-mail, inventory, supply chain, backups and regulatory & compliance information. NetApp's storage software enables customers to use all features and functions related to data storage. Software ships along with the hardware system but is priced separately. Features enabled by NetApp's software include back-up and recovery, replication, and retention.
Over the years NetApp has witnessed an increase in its share of the external disk storage market. In enterprise storage as well, NetApp ranks third in market share currently, third only to Dell and HPE. However, there is a competition from small companies that sell cheap white-box storage systems.
NetApp sells licenses for the software used along with NetApp storage hardware. Buyers of NetApp storage software and hardware are primarily corporate IT departments and datacenters that have to store vast amounts of user-generated data.
In addition to the initial software license, NetApp sells maintenance contracts for software updates, patches and support. NetApp has gross margins of more than 90% on software maintenance.
The storage hardware industry is characterized by a decline in dollars earned per Gigabyte (GB) as well as rising volumes of storage sold. According to our estimates, NetApp sold each GB of storage for just under $0.70 in 2013, which further fell to under $0.60 per GB in 2015, $0.50 per GB in 2016, and $0.47 per GB in 2017. We estimate that the price will fall to about 20 cents per GB in the coming years.
There has been a sharp decline in NAND pricing over the last few quarters, and several companies are transitioning to flash-based storage devices. NetApp is benefiting from the same. As of Q4 fiscal 2020, only 15% of NetApp's installed base ran all-flash arrays.