NetApp (NTAP) CEO Departure 'Necessary First Step', Summit Research Says; Nimble Storage (NMBL) Acquisition Makes Sense Next

Summit Research analyst Srini Nandury weighed in on NetApp (NASDAQ: NTAP) amid news George Kurian was appointed interim CEO following the departure of Tom Georgens. Nandury said the move was a necessary first step and an acquisition is next.

"We have been calling for a sense of urgency and a wholesale change in strategy/direction for the company. Under the tenure of Tom Georgens, the company has made number of mistakes including acquiring Engenio, overhyping the FlashRay product, and doubling down on legacy technologies such as WAFL/clustering ONTAP," Nandury notes.

He added, "Following last quarter's disastrous earnings call, the company said that Clustering ONTAP was the company's future and painted standalone ONTAP as "legacy", a message which we think the company's competitors had surely noticed. We believe NTAP hybrid storage is fundamentally inefficient, and clustering inefficient storage boxes does not make the NetApp storage efficient. While we think appointing a new CEO is a good first step, the company has a ways to go in fixing its problems. Until then, we remain on the sidelines."

On potential acquisitions, the analyst said Nimble (NASDAQ: NMBL) proves a most attractive acquisition candidate for NetApp. "Since Hybrid storage will be the dominant storage paradigm for years to come (All Flash Arrays will likely be relegated to high-end mission critical apps), NetApp should consider acquiring a new-era hybrid storage OEM," the analyst commented. "Acquiring fast growing Nimble is probably best, given that some members of management previously worked at NetApp. Nimble also has solid first mover advantage and is growing rapidly. Finally, trading at near IPO levels, Nimble proves a most attractive acquisition candidate."

The firm maintained a Hold rating and price target of $32 on the stock.

For an analyst ratings summary and ratings history on NetApp click here. For more ratings news on NetApp click here.

Shares of NetApp closed at $33.16 yesterday.

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