NetApp (NASDAQ:NTAP) recently released the version 8.2 of its popular storage operating system ONTAP, which has been rated the #1 storage operating system by IDC.  NetApp has simplified the upgradation to the latest version through a reduction in the required downtime, which had been a key barrier for many clients. It has also introduced new features. All of these factors should lead to higher adoption of the operating system and drive growth in its software business. NetApp is seeing slower growth as its hardware business continues to face headwinds. However, the growth in the software and services businesses is more than offsetting the decline in storage hardware. Below we take a look at how the latest version of ONTAP can help NetApp.
ONTAP has been one of the key growth drivers for NetApp. However, in the previous versions of ONTAP, companies faced a number of problems while upgrading to cluster mode as it required a significant downtime as well as data migration.  The latest version have resolved these critical issues, which should lead to higher adoption of cluster mode. Further, the latest version also includes a new feature called nondisruptive operations.  NetApp claims that the feature provides continuous data access during scheduled maintenance activities and dynamic load balancing without disruptive data migrations. Maintenance activities like software and firmware upgrades, changes in storage capacity, and other hardware upgrades for performance improvements would therefore no longer hurt operations. The feature is expected to provide NetApp an advantage over competitors, who lacks the same feature in their technologies. 
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Further, the new version also offers duplication in cluster mode. Competitive products do offer duplication, but not in the cluster mode.  These features should help NetApp gain more market share, which we already anticipate in our model. NetApp’s Share in Storage Software Market has historically remained close to ~8% before increasing to 8.7% in 2012. This was due to a rapid increase in ONTAP’s popularity and an improvement in NetApp’s share in storage hardware market, which also boosted the sales of its storage software. We forecast that NetApp’s share in the storage software market will increase slightly going forward and then remain constant till the end of our forecast period.
We are updating our $38 Trefis price estimate for NetApp to reflect the latest earnings and recent trends. NetApp’s stock has increased close to 15% this year.Notes:
- NetApp Unveils Clustered Data ONTAP Innovations that Pave the Way for Software-Defined Storage, NetApp, Jun 11 2013 [↩] [↩]
- NetApp Inc. (NTAP), EMC Corporation (EMC): Why Are Investors Happy About This Company’s Prospects?, Insider Monkey, June 19 2013 [↩] [↩] [↩]