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NetApp Inc. (NTAP), EMC Corporation (EMC): Why Are Investors Happy About This Company’s Prospects?

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NetApp Inc. (NASDAQ:NTAP) released a new OS for its clustered data solution that should lead to gains in market share, possibly at the expense of EMC Corporation (NYSE:EMC). Additionally, the company recently decided to issue dividends and approved a $3 billion share repurchase program. NetApp Inc. (NASDAQ:NTAP) is a data storage company offering data management and enterprise storage solutions. It partners with International Business Machines Corp. (NYSE:IBM), VMware, Inc. (NYSE:VMW)Cisco Systems, Inc. (NASDAQ:CSCO), Microsoft Corporation (NASDAQ:MSFT) and Fijitsu.

NetApp Inc.

Dividend and Repurchase Program

Last quarter the company announced a $0.15 per share dividend, 1.6% yield, somewhat to the surprise of investors. The company also increased the repurchase plan by $1.6 billion to $3 billion. Management indicated aggressive activity over the next four months, planning to spend $1 billion on repurchases and another billion over the eight months after that. The company has a market cap of about 13.5 billion.

Share Gains Possible Behind ON TAP 8.2 Release

NetApp Inc. (NASDAQ:NTAP) is positioned to begin gaining market share behind an update to its operating system for ON TAP, its clustered data solution. NetApp Inc. (NASDAQ:NTAP) recently released the latest version of its operating system ON TAP 8.2 earlier this week. Initial feedback has been positive, and users are finding value, particularly in the new iteration’s ability to eliminate downtime during upgrades. Previously, clients ran into problems when upgrading to cluster-mode. It required downtime as well as data migration. The new version should accelerate adoption of cluster mode since this headwind was eliminated for customers. Also in cluster mode, NetApp Inc. (NASDAQ:NTAP)’s new OS offers duplication. Competitors offer duplication but not in this mode.

The new OS also includes a feature titled Non-Disruptive Operations (NDO). This allows the hardware and software system to remain operational during maintenance activities. For example, software upgrades and firmware upgrades no longer require downtime. An increase in storage capacity, performance improvements and other hardware upgrades also no longer require downtime. This is the second feature in the new OS that focuses on less downtime for its clients. It is an advantage over competitive technologies and should contribute to share gains.

NetApp Inc. (NASDAQ:NTAP) now has an entry into Software-Defined Storage. Its offerings previously had the ability to virtualize third-party storage into pools. The new Software-Defined Storage gives users a tool to control and manage data on any storage hardware and use any storage protocol, including SAN and NAS protocols. The virtualization of data storage also includes hardware that is not NetApp’s.

NetApp Increasingly Competitive With EMC

EMC Corporation (NYSE:EMC) competes for much of the same business as NetApp. NetApp’s Software-Defined Storage includes EMC’s ViPR. EMC Corporation (NYSE:EMC) will not introduce its offering until 2H13, giving NetApp an advantage. However, EMC’s system is expected to support object protocols like HDFS. This will present a challenge according to analysts when trying to penetrate mega-capacity environments. That said, NetApp is not in this space currently, but this could act as a barrier to penetrating that market.

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