Number of the day 51%
That’s how much NetApp shares have dropped from last year’s peak in February. The Sunnyvale company, which sells data-storage hardware and software, is becoming attractive to potential acquirers as its market value sinks and may draw interest from IBM, Oracle or Cisco, according to Thrivent Financial for Lutherans. The stock has been hurt as NetApp’s sales have disappointed and the company has lost ground to rival EMC.
Netapp Inc., viewed as a takeover target for almost a decade, is becoming increasingly attractive for potential acquirers as the data storage company nears its cheapest valuation on record.
With a market capitalization as high as $21.9 billion last year, Netapp has lost 51 percent of its value as sales disappointed and it gained less market share than larger rival EMC Corp. The almost $11 billion company, with a record $4.1 billion in net cash, was valued last week at 6.2 times earnings before interest, taxes, depreciation and amortization, approaching its all-time low of 5.1 reached during the financial crisis in 2008, according to data compiled by Bloomberg.
The maker of hardware and software to more efficiently store and access data may finally be affordable enough to draw interest from International Business Machines Corp., Oracle Corp. or Cisco Systems Inc., said NetApp shareholder Thrivent Financial for Lutherans. The Sunnyvale company would likely command as much as $45 a share in a takeover, said FBN Securities Inc., a 53 percent premium to last week’s close.
“NetApp is very cash rich and has a phenomenal balance sheet,” said Brian Marshall, an analyst for ISI Group. “2011 was a tough year for NetApp. It’s a wounded bird, so people can get it on the cheap.”
Dave Black, a spokesman for NetApp, declined to comment on whether the company would consider a sale or has been approached by buyers.
Through last week, the 51 percent decline in NetApp’s shares since last year’s peak market value on Feb. 11, 2011, was the sixth steepest in the S&P 500 Information Technology Index.
On May 24 the stock tumbled 12 percent after NetApp said fiscal firstquarter revenue will be $1.4 billion to $1.5 billion, trailing analysts’ estimates at that time for $1.6 billion. The company cited the “deteriorating macro-environment” in Europe and the “slow-growing U.S. economy.”
“They’ve kind of been serial underperformers with respect to delivering on their guidance over the last 18 months,” said Mark Moskowitz, an analyst with JPMorgan Chase & Co. in San Francisco. “A lot of investors are like, ‘I don’t need this.’ ”
Investors have become concerned about overall growth in the storage market, increased competition and management’s ability to accurately forecast, Moskowitz said.
A takeover would make sense for IBM, Oracle or Cisco as businesses require more data-storage capacity and turn to NetApp’s network-attached storage, or NAS, which gives quick access to frequently used files, said Peter Karazeris, an analyst at Thrivent.