EX-99.1 2 a5547412ex991.txt EXHIBIT 99.1 Exhibit 99.1 Network Appliance Announces Results for Second Quarter Fiscal Year 2008 SUNNYVALE, Calif.--(BUSINESS WIRE)--Nov. 14, 2007--Network Appliance, Inc. (NASDAQ:NTAP), the leader in advanced networked storage solutions, today reported results for the second quarter of fiscal year 2008. Revenues for the second fiscal quarter were $792.2 million, an increase of 21% compared to revenues of $652.5 million for the same period a year ago and an increase of 15% compared to $689.2 million in the prior quarter. For the second fiscal quarter, GAAP net income was $83.8 million, or $0.23 per share(1) compared to GAAP net income of $86.9 million, or $0.22 per share for the same period in the prior year. Non-GAAP(2) net income for the second fiscal quarter was $116.4 million, or $0.32 per share, compared to non-GAAP net income of $108.9 million, or $0.28 per share for the same period a year ago. Revenues for the first six months of the current fiscal year totaled $1.48 billion, compared to revenues of $1.27 billion for the first six months of the prior year, an increase of 16% year over year. GAAP net income for the first six months of the current fiscal year totaled $118.1 million, or $0.32 per share, compared to GAAP net income of $141.6 million, or $0.36 per share for the first six months of the prior fiscal year. Non-GAAP net income for the first six months of the current fiscal year totaled $192.4 million, or $0.52 per share, compared to non-GAAP net income of $205.4 million, or $0.53 per share for the first six months of the prior fiscal year. "The NetApp team delivered an outstanding quarter, with a combination of high revenue growth and good expense management," said Dan Warmenhoven, chief executive officer. "The revenue growth was driven by strength in U. S. Federal and much of Europe and Asia, and largely offset the continued sluggishness in U.S. enterprise spending. Our innovative solutions provide customers with higher utilization, simpler operations, and reduced costs, and those advantages enable us to continue to gain share in a more constrained spending environment." Outlook -- Network Appliance ("NetApp") expects revenue for the third quarter of fiscal year 2008 to be between $872 million and $883 million, with year-over-year growth of approximately 20% to 21% and sequential growth of approximately 10% to 12%. -- Including the effect of SFAS123(R) and with current information and assumptions, the company estimates that the third quarter fiscal year 2008 GAAP earnings per share will be approximately $0.23 to $0.24 per share. -- Network Appliance expects third quarter fiscal year 2008 non-GAAP earnings per share to be approximately $0.33 to $0.34 per share. Quarterly Highlights During the second quarter of fiscal year 2008, NetApp brought the market a new storage system for Midsize Enterprise customers with the unveiling of the NetApp(R) FAS2000 series. The new solutions with deployment and auditing services are designed to help simplify data management and maximize IT investments for customers and offer them the ability to accomplish more with fewer resources. The architectural advantage of all NetApp storage systems, and the new FAS2000 series in particular, allows customers to readily consolidate direct-attached storage (DAS) into a single networked solution and scale on demand. NetApp also introduced the new StoreVault(TM) S300, an all-in-one storage solution for small and medium-sized businesses (SMB), with features and capabilities at a cost that had previously been unavailable to customers in this market segment. The StoreVault S500 was named a winner of the "Editors' Best Awards" in the storage category by Penton Media's Windows(R) IT Pro and was honored as a "Best Solution" at the Government Technology Conference (GTC) East 2007. NetApp strengthened its relationship with VMware, underscoring the fact that the value of server virtualization is dramatically increased with the addition of networked storage on the back end. To make disaster recovery more affordable, flexible, and simpler to manage for customers, NetApp integrated its data protection portfolio of solutions with VMware(R) Site Recovery Manager. Also during the quarter, leveraging its experience delivering simplified storage solutions for production grid environments, NetApp joined with Oracle on the development of the Direct NFS Client, a significant innovation included in Oracle(R) Database 11g(TM) that helps provide customers with improved performance, simplified management, increased flexibility, and better application availability. For channel partners, NetApp opened more service opportunities to NetApp VIP Program partners with a new Installation Accreditation initiative, giving partners the opportunity to sell NetApp installation services independently or utilizing NetApp best practices. The company also received a 2007 Rising Star award, presented by the Global Technology Distribution Council (GTDC), which recognizes the IT industry's fastest-growing manufacturers doing business with GTDC member distributors. In addition, channel partners and readers of CMP Technology's VARBusiness recognized NetApp for outstanding product innovation as evidenced by the Annual Report Card (ARC) award program. From a market perspective, NetApp gained share in both the storage software and hardware markets in the first half of 2007, as reported in IDC's Worldwide Quarterly Storage Software Tracker Q2 2007(3) and Worldwide Quarterly Disk Storage Systems Tracker Q2 2007(4). NetApp grew twice as fast as the overall storage software market from Q1'07 to Q2'07, and posted share gains across each submarket segment in which it provides offerings. This marks the eighth consecutive quarter in which the company outpaced the overall storage software market. IDC also found that in that time period NetApp grew fastest among the top five storage replication software vendors and that it currently holds the number two position. In addition, NetApp continues to lead the iSCSI market in terms of revenue and capacity, and gained both revenue and capacity share in the FC SAN market. NetApp also continues to lead in its core market of NAS in terms of capacity. In industry news, NetApp joined the newly created Storage Networking Industry Association (SNIA) Green Storage Initiative, dedicated to advancing energy efficiency and conservation in storage technologies in an effort to minimize the environmental impact of data storage operations. In corporate news, NetApp broke ground on an engineering lab facility located at the NetApp technology center in Research Triangle Park (RTP) to expand its engineering and development efforts in the region. Also, for the fourth year in a row, NetApp earned top workplace honors from the Triangle Business Journal, ranking as one of the top 15 "Best Places to Work" in RTP. The company was also honored as a "Top Corporate Philanthropist in Silicon Valley" by the Silicon Valley/San Jose Business Journal. As part of the company's continuing worldwide expansion and growth, NetApp announced a strengthened commitment to the Asia Pacific (APAC) region with the inauguration of a new Technical Support Center (TSC) in Dalian, China, and by opening new manufacturing and logistics centers in Shanghai and Singapore, respectively, furthering the ability of NetApp to serve more customers and partners in the region. Webcast and Conference Call Information -- The NetApp quarterly results conference call will be broadcast live via the Internet at http://investors.netapp.com on Wednesday, November 14, 2007, at 2:00 p.m. Pacific time. This press release and any other information related to the call will also be posted on the Website at that location. -- The conference call will also be available live in a listen-only format at (866) 356-4281 in the United States and (617) 597-5395 outside the United States. The pass code for both numbers is 15908718. -- A replay will be available for 72 hours following the completion of the live call by dialing (888) 286-8010 in the United States and (617) 801-6888 outside the United States, using replay code 48003480. The Webcast replay will be posted on our Web site for at least one year. About Network Appliance Network Appliance is a leading provider of innovative data management solutions that simplify the complexities of storing, managing, protecting, and retaining enterprise data. Market leaders around the world choose NetApp to help them reduce cost, minimize risk, and adapt to change. For solutions that deliver unmatched simplicity and value, visit us on the Web at www.netapp.com. "Safe Harbor" Statement Under U.S. Private Securities Litigation Reform Act of 1995 This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include all of the statements under the Outlook section relating to our forecasted operating results and metrics for the third quarter of fiscal 2008, statements regarding our growth opportunity, and statements regarding the anticipated benefits of our products, technologies, and services relative to the offerings of our competitors. These forward-looking statements involve risks and uncertainties, and actual results could vary. Important factors that could cause actual results to differ materially from those in the forward-looking statements include our ability to build non-deferred backlog to levels consistent with our past results and to increase our revenue over the next several quarters; general economic and industry conditions, including expenditure trends for storage-related products; risks associated with the anticipated growth in network storage and content delivery markets; our ability to deliver new product architectures and enterprise service offerings; competition risks, including our ability to design products and services that compete effectively from a price and performance perspective; risks with new product introductions; our reliance on a limited number of suppliers; our ability to accurately forecast demand for our products and successfully manage our relationships with our contract manufacturers; our ability to expand our direct sales operations and reseller distribution channels; our ability to develop, maintain, and strengthen our relationships and product offerings with strategic partners; risks associated with international operations; our ability to successfully acquire and integrate complementary businesses and technologies; foreign currency exchange rate fluctuations; and other important factors as described in Network Appliance, Inc. reports and documents filed from time to time with the Securities and Exchange Commission, including the factors described under the sections captioned "Risk Factors" in our most recently submitted 10-K and 10-Q. We disclaim any obligation to update information contained in these forward-looking statements whether as a result of new information, future events, or otherwise. (1) Earnings per share represents the diluted number of shares for all periods presented. (2) Non-GAAP results of operations exclude amortization of intangible assets, stock-based compensation expenses, acquisition-related retention costs, gain on sale of investment, restructuring charges/recoveries, prior acquisition-related costs, and the related effects on income taxes as well as certain discrete GAAP provisions for income tax matters recognized ratably for non-GAAP purposes. (3) IDC Worldwide Quarterly Storage Software Tracker Q2 2007. (4) IDC Worldwide Quarterly Disk Storage Systems Tracker Q2 2007. NetApp is a registered trademark and Network Appliance and StoreVault are trademarks of Network Appliance, Inc. in the U.S. and other countries. All other brands or products are trademarks or registered trademarks of their respective holders and should be treated as such. Network Appliance Usage of Non-GAAP Financials The Company refers to the non-GAAP financial measures cited above in making operating decisions because they provide meaningful supplemental information regarding the Company's operational performance. These non-GAAP results of operations exclude amortization of intangible assets, stock-based compensation expenses, acquisition-related retention costs, gain on sale of investment, restructuring charges/recoveries, prior acquisition-related costs, and the related effects on income taxes as well as certain discrete GAAP provisions for income tax matters recognized ratably for non-GAAP purposes. We have excluded these items in order to enhance investors' understanding of our ongoing operations. The use of these non-GAAP financial measures has material limitations because they should not be used to evaluate our company without reference to their corresponding GAAP financial measures. As such, we compensate for these material limitations by using these non-GAAP financial measures in conjunction with GAAP financial measures. These non-GAAP financial measures facilitate management's internal comparisons to the Company's historical operating results and comparisons to competitors' operating results. We include these non-GAAP financial measures in our earnings announcement because we believe they are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making, such as employee compensation planning. In addition, we have historically reported similar non-GAAP financial measures to our investors and believe that the inclusion of comparative numbers provides consistency in our financial reporting at this time. NETWORK APPLIANCE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) October 26, 2007 April 27, 2007 ---------------- -------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $625,707 $489,079 Short-term investments 357,370 819,702 Accounts receivable, net 427,854 548,249 Inventories 62,690 54,880 Prepaid expenses and other assets 94,684 99,840 Short-term restricted cash and investments 84,034 118,312 Short-term deferred income taxes 116,324 110,741 ---------------- -------------- Total current assets 1,768,663 2,240,803 PROPERTY AND EQUIPMENT, net 646,157 603,523 GOODWILL 601,056 601,056 INTANGIBLE ASSETS, net 69,321 83,009 LONG-TERM RESTRICTED CASH AND INVESTMENTS 304,937 3,639 LONG-TERM DEFERRED INCOME TAXES AND OTHER ASSETS 167,880 126,448 ---------------- -------------- $3,558,014 $3,658,478 ================ ============== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $47,770 $85,110 Accounts payable 119,099 144,112 Income taxes payable 9,962 53,371 Accrued compensation and related benefits 149,727 177,327 Other accrued liabilities 100,936 97,017 Deferred revenue 702,134 630,610 ---------------- -------------- Total current liabilities 1,129,628 1,187,547 ---------------- -------------- LONG-TERM DEBT 250,000 - LONG-TERM DEFERRED REVENUE 516,445 472,423 OTHER LONG-TERM OBLIGATIONS 74,105 9,487 ---------------- -------------- 1,970,178 1,669,457 ---------------- -------------- STOCKHOLDERS' EQUITY 1,587,836 1,989,021 ---------------- -------------- $3,558,014 $3,658,478 ================ ============== NETWORK APPLIANCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except net income per share amounts) (Unaudited) Quarter Ended Six Months Ended ----------------- -------------------- October October October October 26, 27, 26, 27, 2007 2006 2007 2006 -------- -------- ---------- --------- REVENUES: Product $541,392 $481,284 $1,004,725 $946,895 Software entitlements and maintenance 117,134 82,253 225,061 157,083 Service 133,672 88,986 251,647 169,833 -------- -------- ---------- --------- Total revenues 792,198 652,523 1,481,433 1,273,811 -------- -------- ---------- --------- COST OF REVENUES: Cost of product 217,396 186,261 404,147 374,226 Cost of software entitlements and maintenance 1,914 2,456 3,998 4,748 Cost of service 88,883 62,499 172,086 120,460 -------- -------- ---------- --------- Total cost of revenues 308,193 251,216 580,231 499,434 -------- -------- ---------- --------- GROSS MARGIN 484,005 401,307 901,202 774,377 -------- -------- ---------- --------- OPERATING EXPENSES: Sales and marketing 255,374 204,264 500,017 399,782 Research and development 108,964 90,360 215,520 179,038 General and administrative 39,507 35,217 80,956 67,613 Restructuring recoveries - - - (74) Gain on sale of assets - (25,339) - (25,339) -------- -------- ---------- --------- Total operating expenses 403,845 304,502 796,493 621,020 -------- -------- ---------- --------- INCOME FROM OPERATIONS 80,160 96,805 104,709 153,357 OTHER INCOME (EXPENSES), net: Interest income 16,296 17,478 33,332 34,134 Interest expense (1,410) (5,170) (2,492) (9,042) Net gain (loss) on investments 13,619 (2,000) 13,619 (2,000) Other income, net 231 1,878 1,062 2,657 -------- -------- ---------- --------- Total other income, net 28,736 12,186 45,521 25,749 -------- -------- ---------- --------- INCOME BEFORE INCOME TAXES 108,896 108,991 150,230 179,106 PROVISION FOR INCOME TAXES 25,138 22,060 32,135 37,506 -------- -------- ---------- --------- NET INCOME $83,758 $86,931 $118,095 $141,600 ======== ======== ========== ========= NET INCOME PER SHARE: BASIC $0.24 $0.23 $0.33 $0.38 ======== ======== ========== ========= DILUTED $0.23 $0.22 $0.32 $0.36 ======== ======== ========== ========= SHARES USED IN PER SHARE CALCULATION: BASIC 355,665 370,659 360,061 372,264 ======== ======== ========== ========= DILUTED 365,458 388,226 371,544 389,773 ======== ======== ========== ========= NETWORK APPLIANCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (In thousands) (Unaudited) Quarter Ended Six Months Ended ------------------- --------------------- October October October October 26, 2007 27, 2006 26, 2007 27, 2006 --------- --------- --------- ----------- Cash Flows from Operating Activities: Net income $83,758 $86,931 $118,095 $141,600 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 28,282 20,666 55,016 39,380 Amortization of intangible assets 6,299 4,687 12,697 9,373 Amortization of patents 496 496 991 991 Stock-based compensation 38,370 42,423 78,781 85,445 Net (gain) loss on investments (13,619) 2,000 (13,619) 2,000 Gain on sale of assets - (25,339) - (25,339) Net loss on disposal of equipment 128 221 245 302 Allowance for doubtful accounts 164 50 248 194 Deferred income taxes (17,376) (22,634) (35,179) (22,634) Deferred rent 113 541 512 740 Excess tax benefit from stock-based compensation (7,247) (19,356) (15,586) (23,845) Changes in assets and liabilities: Accounts receivable (22,364) (89,508) 165,708 (19,593) Inventories (4,558) (513) (7,703) 8,195 Prepaid expenses and other assets 6,173 64,452 (21,219) 38,115 Accounts payable (26,095) 8,344 (40,177) 7,205 Income taxes payable 38,352 41,849 56,786 34,935 Accrued compensation and related benefits 40,005 32,637 (29,884) (6,327) Other accrued liabilities 10,942 5,963 (9,538) (5,017) Deferred revenue 65,849 75,700 112,397 137,682 --------- --------- --------- ----------- Net cash provided by operating activities 227,672 229,610 428,571 403,402 --------- --------- --------- ----------- Cash Flows from Investing Activities: Purchases of investments (111,097) (653,152) (439,990) (1,527,568) Redemptions of investments 145,116 638,134 592,138 1,544,557 Redemptions of restricted investments 20,496 36,316 35,426 52,638 Decrease (increase) in restricted cash 324 153 (1,443) 405 Proceeds from sale of assets - 23,914 - 23,914 Proceeds from sales of nonmarketable securities - - - 17 Proceeds from sales of marketable securities 18,256 - 18,256 - Purchases of property and equipment (37,572) (43,729) (71,158) (76,013) Purchases of nonmarketable securities - (150) (4,035) (1,333) --------- --------- --------- ----------- Net cash provided by investing activities 35,523 1,486 129,194 16,617 --------- --------- --------- ----------- Cash Flows from Financing Activities: Proceeds from sale of common stock related to employee stock transactions 16,076 55,629 66,067 92,460 Tax withholding payments reimbursed by restricted stock (2,460) (3,343) (5,202) (4,323) Excess tax benefit from stock-based compensation 7,247 19,356 15,586 23,845 Proceeds from revolving credit facility 249,754 - 249,754 - Repayment of debt (21,380) (78,706) (37,340) (106,572) Repurchases of common stock (499,973) (143,908) (699,973) (363,908) --------- --------- --------- ----------- Net cash used in financing activities (250,736) (150,972) (411,108) (358,498) --------- --------- --------- ----------- Effect of Exchange Rate Changes on Cash (10,742) 885 (10,029) 561 Net Increase in Cash and Cash Equivalents 1,717 81,009 136,628 62,082 Cash and Cash Equivalents: Beginning of period 623,990 442,329 489,079 461,256 --------- --------- --------- ----------- End of period $625,707 $523,338 $625,707 $523,338 ========= ========= ========= =========== NETWORK APPLIANCE, INC. SUPPLEMENTAL INFORMATION (In thousands) (Unaudited) QUARTER ENDED OCTOBER 26, 2007 ---------------------------------------------------------------- - --- Amortization Stock-based Acquisition- Restructuring of Compensation Related Recoveries Intangible Expenses Retention Assets Cost ------------ ------------- ------------ ------------- Cost of product revenues $5,278 $768 - - Cost of service revenues - 2,606 - - Sales and marketing expense 971 17,135 1,162 - Research and development expense - 12,332 - - General and administrative expense 50 5,529 - - Net gain on investments - - - - ------------ ------------- ------------ ------------- Effect on pre- tax income $6,299 $38,370 $1,162 - Prior Gain on Net Gain on Total Acquisition- Sale Investments related of Costs Assets ------------- ------- ------------ -------- Cost of product revenues - - - $6,046 Cost of service revenues - - - 2,606 Sales and marketing expense - - - 19,268 Research and development expense - - - 12,332 General and administrative expense - - - 5,579 Net gain on investments - - (13,619) (13,619) ------------- ------- ------------ -------- Effect on pre-tax income - - ($13,619) $32,212 SIX MONTHS ENDED OCTOBER 26, 2007 ---------------------------------------------------------------- - - - Amortization Stock-based Acquisition- Restructuring of Compensation Related Recoveries Intangible Expenses Retention Assets Cost ------------ ------------- ------------ ------------- Cost of product revenues $10,556 $1,713 - - Cost of service revenues - 5,277 - - Sales and marketing expense 1,941 34,626 2,324 - Research and development expense - 25,507 - - General and administrative expense 200 11,658 - - Net gain on investments - - - - ------------ ------------- ------------ ------------- Effect on pre- tax income $12,697 $78,781 $2,324 - Prior Gain on Net Gain on Total Acquisition- Sale Investments related of Costs Assets ------------- ------- ------------ -------- Cost of product revenues - - - $12,269 Cost of service revenues - - - 5,277 Sales and marketing expense - - - 38,891 Research and development expense - - - 25,507 General and administrative expense 2,800 - - 14,658 Net gain on investments - - (13,619) (13,619) ------------- ------- ------------ -------- Effect on pre-tax income $2,800 - ($13,619) $82,983 NETWORK APPLIANCE, INC. SUPPLEMENTAL INFORMATION (In thousands) (Unaudited) QUARTER ENDED OCTOBER 27, 2006 -------------------------------------------------------------- - - - - Amortization Stock-based Acquisition- Restructuring of Compensation Related Recoveries Intangible Expenses Retention Assets Cost ------------ ------------- ------------ ------------- Cost of product revenues $3,866 $1,069 - - Cost of service revenues - 2,489 - - Sales and marketing expense 583 18,715 - - Research and development expense - 13,022 - - General and administrative expense 238 7,128 - - Restructuring recoveries - - - - Gain on sale of assets - - - - Net loss on investments - - - - ------------ ------------- ------------ ------------- Effect on pre- tax income $4,687 $42,423 - - Prior Gain on Net Loss on Total Acquisition- Sale of Investments related Assets Costs ------------- --------- ------------ -------- Cost of product revenues - - - $4,935 Cost of service revenues - - - 2,489 Sales and marketing expense - - - 19,298 Research and development expense - - - 13,022 General and administrative expense - - - 7,366 Restructuring recoveries - - - - Gain on sale of assets - (25,339) - (25,339) Net loss on investments - - 2,000 2,000 ------------- --------- ------------ -------- Effect on pre-tax income - ($25,339) $2,000 $23,771 SIX MONTHS ENDED OCTOBER 27, 2006 -------------------------------------------------------------- - - - - Amortization Stock-based Acquisition- Restructuring of Compensation Related Recoveries Intangible Expenses Retention Assets Cost ------------ ------------- ------------ ------------- Cost of product revenues $7,731 $1,739 - - Cost of service revenues - 5,124 - - Sales and marketing expense 1,167 37,431 - - Research and development expense - 26,891 - - General and administrative expense 475 14,260 - - Restructuring recoveries - - - (74) Gain on sale of assets - - - - Net loss on investments - - - - ------------ ------------- ------------ ------------- Effect on pre- tax income $9,373 $85,445 - ($74) Prior Gain on Net Loss on Total Acquisition- Sale of Investments related Assets Costs ------------- --------- ------------ -------- Cost of product revenues - - - $9,470 Cost of service revenues - - - 5,124 Sales and marketing expense - - - 38,598 Research and development expense - - - 26,891 General and administrative expense - - - 14,735 Restructuring recoveries - - - (74) Gain on sale of assets - (25,339) - (25,339) Net loss on investments - - 2,000 2,000 ------------- --------- ------------ -------- Effect on pre-tax income - ($25,339) $2,000 $71,405 NETWORK APPLIANCE, INC. RECONCILIATION OF NON-GAAP AND GAAP IN THE CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except net income per share amounts) (Unaudited) Quarter Ended Six Months Ended ----------------- ----------------- October October October October 26, 27, 26, 27, 2007 2006 2007 2006 -------- -------- -------- -------- SUMMARY RECONCILIATION OF NET INCOME ---------------------------------- NET INCOME $83,758 $86,931 $118,095 $141,600 Adjustments: Amortization of intangible assets 6,299 4,687 12,697 9,373 Stock-based compensation expenses 38,370 42,423 78,781 85,445 Acquisition-related retention cost 1,162 - 2,324 - Prior acquisition-related costs - - 2,800 - Restructuring recoveries - - - (74) Gain on sale of assets - (25,339) - (25,339) Net (gain) loss on investments (13,619) 2,000 (13,619) 2,000 Tax effect on sale of investments 5,477 - 5,477 - Tax effect on sale of assets - 4,606 - 4,606 Discrete GAAP tax provision items (1,127) (2,159) (684) (2,159) Income tax effect (3,906) (4,284) (13,470) (10,033) -------- -------- -------- -------- NON-GAAP NET INCOME $116,414 $108,865 $192,401 $205,419 ======== ======== ======== ======== NET INCOME PER SHARE $0.229 $0.224 $0.318 $0.363 Adjustments: Amortization of intangible assets 0.017 0.012 0.034 0.024 Stock-based compensation expenses 0.105 0.109 0.212 0.219 Acquisition-related retention cost 0.003 - 0.006 - Prior acquisition-related costs - - 0.008 - Restructuring recoveries - - - - Gain on sale of assets - (0.065) - (0.065) Net (gain) loss on investments (0.037) 0.005 (0.037) 0.005 Tax effect on sale of investments 0.015 - 0.015 - Tax effect on sale of assets - 0.012 - 0.012 Discrete GAAP tax provision items (0.003) (0.006) (0.002) (0.006) Income tax effect (0.011) (0.011) (0.036) (0.026) -------- -------- -------- -------- NON-GAAP NET INCOME PER SHARE $0.318 $0.280 $0.518 $0.526 ======== ======== ======== ======== NETWORK APPLIANCE, INC. RECONCILIATION OF NON GAAP GUIDANCE TO GAAP EXPRESSED AS EARNINGS PER SHARE THIRD QUARTER 2008 (Unaudited) Third Quarter 2008 ----------------- Non-GAAP Guidance $0.33 - $0.34 Adjustments of Specific Items to Earnings Per Share for the Third Quarter 2008: Amortization of intangible assets (0.02) Stock based compensation expense (0.10) Income tax effect 0.02 ----------------- Total Adjustments (0.10) GAAP Guidance - Earnings Per Share $0.23 - $0.24 CONTACT: Network Appliance, Inc. Press: NetApp PR Hotline, 408-822-3287 xdl-uspr@netapp.com Investor: Tara Dhillon, 408-822-6909 tara@netapp.com Billie Fagenstrom, 408-822-6428 billief@netapp.com