UPDATE: NetApp Names New CEO; 1Q Profit Up 49%

NetApp Inc. (NTAP) named President and Chief Operating Officer Tom Georgens as its next chief executive, replacing long-tenured CEO Dan Warmenhoven, as the company reported a surge in fiscal first-quarter profit on higher margins and lower expenses.

The promotion of Georgens, 49, follows the company's failed attempt to acquire Data Domain Inc. in a bidding war with rival EMC Corp. (EMC), but comes as NetApp and other technology companies are beginning to see signs of recovery after months of spending cuts by customers.

NetApp's first-quarter profit rose 49%, and revenue, adjusting for foreign-exchange fluctuations, was roughly flat from the year-earlier period.

"Our revenue performance clearly outpaced the storage industry at large," said Georgens. His promotion is effective immediately. Warmenhoven, who has held the top spot at NetApp for 15 years, will remain as executive chairman.

"When we hired Tom four years ago, it was with the hope that he would potentially be the successor," said Warmenhoven.

The former chief executive said Georgens' promotion last year to president and operating chief signaled that he was ready to take up the lead role, though economic conditions delayed the succession.

"I did not want to leave when the markets were in freefall," Warmenhoven said.

NetApp shares fell 3.2% to $22.15 in after-hours trading as the storage and data-management company said it wouldn't provide fiscal second-quarter revenue guidance because of reduced visibility. Several other information-technology companies have begun to provide estimates for the current quarter after declining to do so because of uncertainty earlier in the year.

The stock has doubled from a five-year low in November but is still down more than 10% from a year ago.

NetApp's business has held up relatively well amid the recession. But earlier this summer, the company was dealt a strategic blow when it dropped out of a bidding war with larger rival EMC to acquire fellow data-storage company Data Domain. Georgens said the failed bid wouldn't affect NetApp's core business.

Still, the company is likely to face greater competition from a strengthened EMC in the future.

For the quarter ended July 31, NetApp reported a profit of $51.7 million, or 15 cents a share, up from $34.7 million, or 10 cents a share, a year earlier.

Excluding stock-based compensation, acquisition-related costs and other items, earnings were flat at 22 cents.

Revenue dropped 3.5% to $838 million.

The results topped Wall Street analysts' estimates, which called for per-share earnings of 20 cents on revenue of $829 million, according to a poll by Thomson Reuters.

Gross margin rose to 62.4% from 59.5%, above NetApp's target of 61% and the highest in more than five years.

-By Jerry A. DiColo, Dow Jones Newswires; 212-416-2155; [e-mail]

(Kathy Shwiff contributed to this report.)