Buying opportunity seen in NetApp after supplier lowers outlook

theflyonthewall.com

NetApp (NTAP), which develops data storage technology, is falling after one of its suppliers, Xyratex (XRTX), lowered its third quarter revenue guidance last night. Xyratex said it was seeing reduced demand from large original equipment manufacturers, or OEMs, that incorporate Xyratex's enterprise data solutions into their products. NetApp is one of those OEMs. However, Xyratex added that it had also failed to meet "specific technical and performance requirements." These failures, in turn, caused Xyratex to delay recognition of some revenue, the company explained. However, in a note to investors earlier today, Piper Jaffray analyst Andrew Nowinski said he sees any weakness in NetApp's stock resulting from Xyratex's announcement as a buying opportunity. The analyst thinks that NetApp could report strong results for its quarter ended October, as he believes that the government's interest in the company's products increased last month. Moreover, the analyst remains optimistic that NetApp's share of end of year government spending will be similar to prior years. Finally, Nowinski notes that NetApp's increased its spending on "purchased components" by 111% during its quarter ended in July. This increase may have caused NetApp to reduce its purchases from Xyratex during the current quarter, the analyst wrote. In mid-morning trading, Netapp declined 0.43% to $35.06.

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