SolidFire Acquisition Seen as Possibly 'Too Little, Too Late' for NetApp (NTAP)
William Blair affirms NetApp (Nasdaq: NTAP) with an Underperform rating following news that the company would acquire SolidFire in an $870 million deal.
Analyst Jason Ader sees the acquisition as potentially too little, too late for NetApp. The analyst commented: From a strategic standpoint, SolidFire’s products are likely to cannibalize some of NetApp’s current revenue (especially existing AFAs), limiting short-term revenue gains. Plus, while SolidFire is a premium asset with a strong feature set, its high-end focus may not end up effectively shielding NetApp from continued competitive losses to other flash/hybrid and hyperconverged players who have been focused on the midtier and more standard enterprise customers. Financially, SolidFire’s revenue impact will be immaterial through fiscal 2017, according to NetApp management, while the dilution will be significant, and the company’s balance sheet will be weakened. In addition, NetApp’s decision to be an acquirer rather than a target may dampen its buyout prospects, which was one of the potential catalysts put forth by NetApp bulls. Notwithstanding all of these challenges, we believe this is a deal NetApp had to do, and at the very least, it gets the company in the next-generation storage game.
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