WEBVTT - NetApp CEO Says Data Provides a Competitive Advantage 0:00:00.040 --> 0:00:03.600 You're listening to Bloomberg Business Week with Carol Messer and 0:00:03.680 --> 0:00:08.400 Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Also reporting 0:00:08.640 --> 0:00:12.719 net App uh net adjusted first quarter EPs a dollar 0:00:12.760 --> 0:00:14.720 twenty beat. The estimate of one ten sales came in 0:00:14.760 --> 0:00:17.200 at one point five nine billion, better than the one 0:00:17.239 --> 0:00:19.520 point came at one point five nine billion, better than 0:00:19.560 --> 0:00:21.560 the one point five five billion estimates. So some good 0:00:21.640 --> 0:00:26.560 numbers there. Let's bring in the CEO of uh net App, 0:00:26.640 --> 0:00:30.520 George Curian. He joins us on Zoom from Menlo Park, California. 0:00:30.840 --> 0:00:34.080 George talked to us about the quarter you just reported. 0:00:34.120 --> 0:00:36.240 The stocks up about three percent and after market trading. 0:00:37.840 --> 0:00:40.840 Good afternoon, Thanks for having me. We are excited. We're 0:00:40.840 --> 0:00:43.760 off to a great start to our new fiscal year. 0:00:43.840 --> 0:00:47.440 We just completed the first uh fiscal quarter of the 0:00:47.520 --> 0:00:51.599 year and saw broad based demand and strength across all 0:00:51.640 --> 0:00:55.720 our geographies. We have set record highs pretty much across 0:00:55.800 --> 0:01:00.200 the board in terms of revenue, billings, gross margin, dollar is, 0:01:00.240 --> 0:01:03.640 operating margin dollars and EPs for Q one, So I'm 0:01:03.680 --> 0:01:05.959 really pleased. It's always good to get off to a 0:01:05.959 --> 0:01:08.399 good start in the year. Yeah. Absolutely, that's a great 0:01:08.400 --> 0:01:11.680 way better than the alternative. UM Paul did break down 0:01:11.680 --> 0:01:14.240 some of your numbers. Your customer base has concluded the 0:01:14.280 --> 0:01:19.120 likes of Amazon, Microsoft, Alphabet, Hitachi, Intel, Tata. It's global 0:01:19.160 --> 0:01:21.840 in nature. It really gives us a good clue in 0:01:21.920 --> 0:01:24.080 terms of what's going on in the economy. How would 0:01:24.080 --> 0:01:26.800 you describe in terms of more color, demand for your 0:01:26.840 --> 0:01:31.760 core products from your big customers. We're involved in helping 0:01:31.760 --> 0:01:37.800 our customers store, protect and use their data for business advantage. 0:01:38.040 --> 0:01:41.560 We do that not only with data center equipment for 0:01:41.720 --> 0:01:45.720 their data centers, but as you mentioned, with cloud based 0:01:45.760 --> 0:01:49.360 services that are deeply integrated into the world's leading cloud 0:01:49.400 --> 0:01:53.600 providers Amazon, Microsoft, Google, IBM and others. And we saw 0:01:54.000 --> 0:01:58.320 a really good portfolio balance across all of our geographies 0:01:58.360 --> 0:02:02.360 and customer segments. Data. As you know, it's foundational to 0:02:03.000 --> 0:02:08.160 competitive advantage, understanding customers, working with your supply chain, UH 0:02:08.200 --> 0:02:11.480 and so on. And so we continue to see demand 0:02:12.000 --> 0:02:15.520 strong and we've had to work really hard to have 0:02:15.639 --> 0:02:18.400 all the supply to meet it, and we continue to 0:02:18.440 --> 0:02:20.880 do that work. Talk to us about the supply chain. 0:02:20.919 --> 0:02:23.120 It's it's been such an issue for so many businesses 0:02:23.560 --> 0:02:25.960 across so many parts of the economy, and and it's 0:02:26.000 --> 0:02:28.840 a global issue here. How is it for your company 0:02:29.120 --> 0:02:31.360 now versus maybe in a year or two ago, and 0:02:31.480 --> 0:02:34.840 kind of how do you think it's gonna progress? I 0:02:34.880 --> 0:02:37.840 think a year ago was the really difficult time. We've 0:02:37.840 --> 0:02:42.680 seen kind of steady improvements in silicon availability, and I 0:02:42.680 --> 0:02:48.160 would say cautiously that we've seen stabilization. Uh in terms 0:02:48.240 --> 0:02:52.240 of you know, the silicon supply chain. It's still not 0:02:52.760 --> 0:02:55.560 where it is needed to be to meet all of 0:02:55.600 --> 0:02:59.840 our demand, but at least it's stopped backsliding. We have 0:03:00.280 --> 0:03:03.720 also been doing work to deal with some of the 0:03:03.880 --> 0:03:08.240 freight and logistical challenges. I think, as you know, the 0:03:08.280 --> 0:03:12.760 sort of the gap between demand and supply continues to 0:03:12.840 --> 0:03:16.680 get a little bit smaller. We demand still ahead of supply. 0:03:16.840 --> 0:03:19.160 We hope that these things get better over the course 0:03:19.200 --> 0:03:22.160 of our next twelve months. Well, I do wonder. I 0:03:22.200 --> 0:03:25.280 do wonder to George, how did supply chain issues or 0:03:25.360 --> 0:03:29.519 pressures or constraints impact your ability to you know, in 0:03:29.639 --> 0:03:32.640 terms of your adjustments or your outlook. Are raising your 0:03:32.639 --> 0:03:36.600 outlook estimates for the full year? You know? I think 0:03:37.120 --> 0:03:40.119 we have had to do a huge amount of work 0:03:40.200 --> 0:03:42.880 to be able to meet demand. We've had to re 0:03:43.000 --> 0:03:47.320 engineer products, We've had to source supply in multiple parts 0:03:47.320 --> 0:03:50.680 of the world, and sort of extraordinary measures to meet demand. 0:03:51.600 --> 0:03:55.040 I would say that backlog is still ahead of pre 0:03:55.160 --> 0:03:59.000 pandemic levels, So we're still in elevated sort of backlog 0:03:59.120 --> 0:04:02.000 situations and love to be able to you know, sort 0:04:02.000 --> 0:04:05.960 of make those uh products available to customers. Were working 0:04:06.000 --> 0:04:09.120 closely with our suppliers to do that. We did in 0:04:09.200 --> 0:04:14.320 our press release reconfirmed the full year guidance, which, given 0:04:14.480 --> 0:04:18.640 the currency movements subsequent to when we guided, is actually 0:04:18.680 --> 0:04:21.640 taking up guidance as you noted, by about a you know, 0:04:21.680 --> 0:04:24.560 one or two points. So we feel good about you know, demand. 0:04:24.720 --> 0:04:27.559 We feel that we've got to go do the work 0:04:27.560 --> 0:04:29.760 and supply and continue to do the work to need it. 0:04:30.760 --> 0:04:33.520 We still have George Curry, he stays with us. He's 0:04:33.520 --> 0:04:36.200 a chief executive officer of net app, joining us on 0:04:36.320 --> 0:04:39.560 Zoom from Menlo Park, California. So, Georgia, I love it. 0:04:39.760 --> 0:04:42.920 From your perspective, where is the biggest source of growth 0:04:42.960 --> 0:04:45.840 for your business here over the next five years? I'm 0:04:45.839 --> 0:04:47.400 gonna ask you to think a little bit far out, 0:04:47.400 --> 0:04:49.839 which I know your board asked you to do. Occasionally, 0:04:49.839 --> 0:04:52.279 but on a five year plan, you're in so many 0:04:52.279 --> 0:04:54.960 pieces of the pie that are you have some really 0:04:55.000 --> 0:04:57.560 strong growth dynamics. Where do you really think your focused 0:04:57.560 --> 0:05:02.800 should be? We really see the two big transformational trends 0:05:02.839 --> 0:05:08.520 are data driven business or digital business and cloud. You know, 0:05:08.640 --> 0:05:13.320 we on the data side, we help our clients store 0:05:13.680 --> 0:05:19.120 aggregate enormous amounts of data, whether it's for traditional applications 0:05:19.160 --> 0:05:22.120 like an E r P or you mentioned salesforce those 0:05:22.200 --> 0:05:27.080 kinds of applications, or for the really modern advanced analytics 0:05:27.120 --> 0:05:31.839 and artificial intelligence applications. We for example, work with companies 0:05:31.839 --> 0:05:36.520 like Siemens Health and Years which makes medical imaging systems, 0:05:36.960 --> 0:05:40.560 and we use AI technology together with huge amounts of 0:05:40.680 --> 0:05:43.120 data to be able to make the life of a 0:05:43.279 --> 0:05:47.719 radiologist much easier. We can predict help them predict which 0:05:47.760 --> 0:05:50.799 patients are more likely to have COVID, or find cost 0:05:50.880 --> 0:05:55.400 effective ways to deal with the breast cancer and so on. 0:05:55.480 --> 0:05:58.919 So that's one data and the other is cloud. You know. 0:05:59.000 --> 0:06:03.640 You see there's a vast migration of customers to using 0:06:04.120 --> 0:06:07.960 cloud based technologies, and we help all of the leading 0:06:08.520 --> 0:06:12.560 cloud providers as well as their end customers to make 0:06:12.640 --> 0:06:18.360 their cloud projects much more reliable performance secured, especially security 0:06:18.480 --> 0:06:22.839 of data from attacks like ransomware, is a growing trend 0:06:22.960 --> 0:06:26.720 that we have really good solutions for. Carol, I think 0:06:26.880 --> 0:06:29.680 I'm even in the cloud. I know I am. You 0:06:29.720 --> 0:06:32.120 know if I'm in the cloud, you know it's a thing. 0:06:32.200 --> 0:06:36.160 It's a market. So, George, I'm looking at our PGeo 0:06:36.320 --> 0:06:38.600 function on the Bloomberg terminal that allows me to look 0:06:38.600 --> 0:06:41.480 at breakdown of your businesses by lots of different measures 0:06:41.520 --> 0:06:44.320 and by geography. I see that. Yeah, but a little 0:06:44.320 --> 0:06:46.400 more than half of your businesses in the US and 0:06:46.600 --> 0:06:50.159 CANA in Latin America, maybe about a third, thirty in Europe, 0:06:50.200 --> 0:06:56.000 and about fourteen in Asia. Going forward, where regionally will 0:06:56.040 --> 0:06:58.080 you be allocating more of your capital? Where do you 0:06:58.080 --> 0:07:02.960 see more growth? On a gineral basis, we continue to 0:07:03.000 --> 0:07:06.320 focus on the biggest markets in each of those geographies. 0:07:06.880 --> 0:07:11.200 I think several years ago, about maybe five or six 0:07:11.280 --> 0:07:15.760 years ago, we decided to participate in the China market, 0:07:15.920 --> 0:07:19.000 which is the largest Asian market, through a joint venture 0:07:19.480 --> 0:07:24.400 with Lenovo that allows us to serve the vast expanse 0:07:24.480 --> 0:07:30.640 of Chinese customers with local partnerships and local knowledge of 0:07:30.680 --> 0:07:33.080 the local market. So the rest of the world. We 0:07:33.160 --> 0:07:36.480 served through our own uh you know kind of sales 0:07:36.720 --> 0:07:40.480 and go to market organization and through partners, and we're 0:07:40.520 --> 0:07:43.040 pleased with the strength of our you know, it's a 0:07:43.040 --> 0:07:46.800 balanced book of business. We've seen strong adoption of our 0:07:46.840 --> 0:07:49.840 portfolio across all the leading markets, and so I'm excited 0:07:49.840 --> 0:07:52.600 about what the future holds. Hey, George, I do wanted 0:07:52.640 --> 0:07:54.640 to and some of the major macro issues that are 0:07:54.680 --> 0:07:58.760 out there, whether it's near shoring, offshoring, on shoring, uh 0:07:58.800 --> 0:08:00.960 and then through on top of that g political tensions 0:08:00.960 --> 0:08:04.280 which is creating all of that changes. How is that 0:08:04.320 --> 0:08:07.640 impacting you guys in terms of where you produce, where 0:08:07.640 --> 0:08:11.480 you do business. Clearly, it's a great question, Carol, I 0:08:11.560 --> 0:08:15.000 think clearly, over the last few years, both because of 0:08:15.040 --> 0:08:20.360 geopolitical risk, but also just supply availability and risk management, 0:08:20.800 --> 0:08:25.040 we've built a diverse kind of geographic base for supply 0:08:25.120 --> 0:08:29.800 and manufacturing. We've moved our dependence from the far East 0:08:29.840 --> 0:08:33.640 too much more local markets, so we manufacture heavily in 0:08:33.760 --> 0:08:38.120 Mexico and in some parts of Europe. We've moved, you know, 0:08:38.160 --> 0:08:42.439 our supply base from a silicon perspective into a diverse 0:08:42.559 --> 0:08:46.720 mix of silicon providers, and we've moved the way our 0:08:46.800 --> 0:08:51.280 systems are built. Rather than from highly integrated systems that 0:08:51.400 --> 0:08:54.400 have risk from one component, we're moving it to more 0:08:54.400 --> 0:08:57.679 of a Lego style building block models, so that if 0:08:57.720 --> 0:09:00.280 one component isn't there, you can slot in another one. 0:09:00.679 --> 0:09:02.080 So we had to do a lot of work. We 0:09:02.120 --> 0:09:05.840 continue to believe that the world's uh, you know, we 0:09:05.920 --> 0:09:08.640 need to think about supply rather than in the old 0:09:08.720 --> 0:09:12.640 model of just in time management to actually be risking 0:09:12.720 --> 0:09:15.920 supply to meet demand. Yeah, that's we've heard definite. A 0:09:15.960 --> 0:09:18.480 lot of companies, a lot of different industries, real quick, 0:09:18.679 --> 0:09:22.160 George thirty seconds. Labor You have about twelve thousand employees 0:09:23.160 --> 0:09:24.880 health tough? Is they get labor health to us that 0:09:24.920 --> 0:09:28.840 they keep labor? I think it's been. It's a very 0:09:28.840 --> 0:09:33.880 competitive job market, especially for the type of talent software 0:09:33.880 --> 0:09:37.040 and cloud talent that we look for. We've got a 0:09:37.080 --> 0:09:40.520 really good value proposition for employees. They get to do 0:09:40.640 --> 0:09:44.960 great work in a you know, very supportive culture, and 0:09:45.000 --> 0:09:49.280 we are got a global population, so we can source 0:09:49.320 --> 0:09:51.559 talent wherever in the world. It is. Yeah, but is 0:09:51.600 --> 0:09:55.240 it getting more expensive? Just got about fifteen seconds. Yeah, 0:09:55.320 --> 0:09:58.040 I mean, clearly having the best talent in the world 0:09:58.080 --> 0:10:01.160 is a source of competitive advantage, and we've got good 0:10:01.200 --> 0:10:04.600 compensation programs to meet what what's needed. All right, listen, 0:10:04.640 --> 0:10:06.839 thank you so much, really appreciate all the time on 0:10:06.960 --> 0:10:09.120 what we know is a busy day for you folks. 0:10:09.120 --> 0:10:11.400 George Corey and he is a chief executive officer at 0:10:11.400 --> 0:10:15.319 net App via zoom from Menlo Park, California. This as 0:10:15.360 --> 0:10:19.520 we see net app excuse me, net App reporting after 0:10:19.600 --> 0:10:22.240 the close and its stock is up about five percently 0:10:22.280 --> 0:10:25.360 after our so investors reacting favorably to what the company 0:10:25.520 --> 0:10:26.319 had to say.