NetApp – we used to be a contender
It is eerie to watch the decline of NetApp. Here is company that spends hundreds a millions of dollars to purchase Spinnaker, Alacritus, Decru and yet does not spend money on listening to its customers. It is like watching GM’s decline in many ways. GM thought that by purchasing Hummer, part of Fiat, and Saab they could stop the decline of their company. But the problem is not the brands it is that the company does not listen to its customers. NetApp likens itself to a New Economy company, but it is really the same old story. Listen to your customers, they will tell you what they want and what they are willing to pay for it.
So what will happen over the next few years? Competition will force NetApp to lower its prices, I predict that because they have a very high overhead they will slowly cut into their currently very high gross margins. As their current customers smell that their salesman are getting more desperate the customers will demand higher discounts. This will cause NetApp to reduce its workforce and offload unprofitable divisions and projects. Will NetApp’s shareholders ever see a return for their investment in the Spinnaker purchase? I strongly doubt it.
It will take a couple of years, but competition will reduce NetApp to a memory, just like Wang, DEC, Compaq, and so many others.