The CEO of NetApp says the trade war won't end this year and the tech company is preparing for 'a variety of difficult outcomes'
- The CEO of NetApp, George Kurian, said the company is preparing for “a variety of difficult outcomes” amid growing market uncertainty, caused in part by the US-China trade tensions.
- He said the company is seeing more caution in enterprise IT spending and he does not expect the trade dispute to be resolved within the year.
- But NetApp posted better-than-expected results that pushed its stock higher.
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NetApp CEO George Kurian had reason to be upbeat on Wednesday when his company reported quarterly results that cheered Wall Street, sparking a late rally in the tech company’s shares.
But while the report beat expectations, and Kurian could point to signs that the data storage company was adapting to a changing enterprise market, he also warned of a hazy road ahead.
Major enterprises had grown more cautious on IT spending amid growing economic uncertainty, which has been aggravated by the US-China trade war.
“We have taken a variety of difficult scenarios into account,” Kurian told Business Insider in an interview. “I don’t want to predict the worst case outcomes, but we have taken a variety of difficult outcomes into account.”
A key concern is still the raging trade dispute between the US and China, which escalated recently when theTrump Administration said it would impose a new round of tariffs on Chinese goods.
“Customers, especially large global enterprises, continue to be a bit cautious about making large capital investments, given the uncertainty about the trade and global economic outlook,” he said. “The sooner there’s clarity on what would be the potential resolution of the trade regime, as well as clarity in terms of the economic outlook, people can make spending decisions and move forward.”
For the current quarter, NetApp said it expects adjusted income of 91 cents to 99 cents a share, on revenue in the range of $1.33 billion to $1.48 billion. That’s stronger than the average analyst expectation, which called for EPS of 90 cents a share on revenue of $1.35 billion.
But NetApp didn’t have a very high bar to clear, given the lackluster expectations surrounding its business in the current climate.
NetApp makes networking equipment used for private data centers and the cloud. Its business is especially vulnerable to the bumps and jolts of enterprise tech spending, which has been hurt by worries that the trade war could cause an economic downturn.
Despite the tweet diplomacy between Trump and Beijing over everything from tariffs to currency rates, Kurian doesn’t expect the situation to be resolved in the coming months. “We don’t expect normalization of the trade regime this calendar year and that is factored into our calculations,” he said.
Kurian,who’s identical twin brother Thomas is the CEO of Google Cloud, has been in the top job at NetApp since 2015.
NetApp’s results were better than expected, and the company’s stock rallied 4% to $46.50 in after-hours trades. The shares are still down more than 30% this year.
NetApp reported fiscal first quarter income of $103 million, or 42 cents a share, compared with a profit of $283 million, or $1.05 a share for the year-ago quarter. Revenue fell to $1.24 billion from $1.47 billion. Adjusted income was 65 cents a share. Analysts expected NetApp to report earnings of 61 cents a share on revenue of $1.24 billion.
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