NetApp supply chain woes frustrate users

Filed in archive News on January 11, 2006

Supply chain issues during December left many Network Appliance Inc. (NetApp) users waiting up to eight weeks for systems, according to Wall Street analyst reports. It's unclear at this stage whether NetApp has fixed the problems or not.
A shortage of high-capacity SATA drives for the NetApp FAS 3000 midrange systems kept users waiting four to five weeks, while lead times for the Nearstore R200 were as long as eight weeks, according a recent report by RBC Capital Markets Corp.

"This view is consistent with field and customer checks that indicate mounting frustration among customers, partners and direct sales reps," the RBC note said.

Another Wall Street analyst, who preferred not to be named, said he'd heard that one customer was so tired of waiting for systems from NetApp that the company switched to EMC Corp.

NetApp downplayed the problem. "There have been several financial analysts rehashing the same rumor ... NetApp does not comment on rumors," said Jodi Baumann, senior manager of corporate public relations at NetApp, in an e-mail. "That said, keep in mind that NetApp would be legally obligated to make a public statement if we were experiencing issues that were material to our business or our quarterly results."



A user at a major airline who preferred to remain anonymous ordered $2.5 million worth of NetApp gear, including two FAS 3020s and an R200 among other products in December. "We heard about some delays, but there was no impact to us � They were close to the last systems we received in December," he said. This customer has approximately 100 terabytes of NetApp equipment.

Analysts said that smaller shops were likely to have been hit harder as NetApp satisfied its biggest customers first.

NetApp's supply chain woes are reminiscent of problems the company had last July when CEO Dan Warmenhoven attributed disappointing sales to poor timing of the rollout of the FAS 3000 system, which hurt sales of the high-end products. At the time, RBC issued a note warning investors about this issue. NetApp, meanwhile, did not tell investors about this problem until its earnings call when it lowered its guidance for the following quarter.

Another issue, which may or may not be resolved today, involves problems with a DC power supply. According to the RBC report, NetApp found a new supplier but a quality issue caused further setbacks.

NetApp's competitors have been quick to exploit these problems.

"Network Appliance's slip has presented its competitors with a real market opportunity, and we've definitely taken advantage of that opportunity," said Duncan Campbell, vice president of marketing for the StorageWorks product line at Hewlett Packard Co. (HP), in an e-mail. "We are seeing much greater traction with products, such as the EFS Clustered Gateway, which is a silver bullet for us in the marketplace versus NetApp." HP was unable to provide us with any users to support its claims by press time.

Source: Search Storage