What led to NetApp Inc. (NASDAQ: NTAP) stock crash

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NetApp Inc. (NASDAQ: NTAP) stock lost over 12.5%  in the pre-market session of Feb 13th, 2020 (Source: Google finance) as the company posted lower than expected results and its chief financial officer announced his impending departure. NetApp reported fiscal third-quarter earnings of $277 million.

Meanwhile, the company’s annualized recurring revenue for Cloud Data Services increased to approximately $83 million, up 146% year-over-year. The company are now generally available with both Cloud Volumes Service and Cloud Volumes ONTAP for all the leading hyperscale cloud providers Microsoft Azure, Google Cloud, and Amazon Web Services. Further, the company has added cloud compliance as a feature to Cloud Volumes ONTAP, which help customers comply with today’s privacy and other data regulations. The company continues to see a healthy mix of customers new to NetApp in the cloud services, as they enable the company to acquire new customers and reach new buyers, as well as expand the data sets managed at existing customers.

NTAP in the third quarter of FY 20 has reported the adjusted earnings per share of $1.16, missing the analysts’ estimates for the adjusted earnings per share of $1.18. The company had reported 10 percent fall in the adjusted revenue to $1.4 billion in the third quarter of FY 20, missing the analysts’ estimates for revenue of $1.46 billion. The company had zero ELA revenue in the quarter, although the company had expected approximately $50 million.

The company expects to report the fourth quarter 2020 adjusted earnings in the range of $1.28 to $1.36 a share on revenue expected to be in the range of $1.46 billion to $1.61 billion, while analysts on average were expecting adjusted earnings of $1.39 a share on sales of $1.57 billion. The software maintenance and hardware maintenance revenue of $556 million, which is up nearly 5% year-over-year, with better execution in the renewals business starting to deliver results. Deferred revenue incre 6% year-over-year in Q3. Product revenue was of $787 million during the quarter, which reflects decline of approximately 19% year-over-year. Product gross margin was 55%, which is an increase of 2.8 points year-over-year. The year-over-year improvement was due to continued sales force discipline, which is an increase in all-flash product mix and cost reductions.

The company also announced that CFO Ron Pasek plans to retire by the end of the fiscal year, and NetApp intends to name a successor by that time.

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