How Crucial Is Hardware Maintenance To NetApp’s Product Sales?
As evidenced from the table below, NetApp’s hardware maintenance and services revenues have risen from about 28% of total storage hardware product sales to about 48% in 2015. We expect the figure to rise to over 53% in the next three years.
Reasons for growth in hardware maintenance revenues as a percentage of storage hardware revenues:
- Integrated storage architecture requires higher maintenance compared to traditional storage boxes.
- A slowdown in global spending on IT hardware led to low product sales in 2014 and 2015.
- Correspondingly, customers spent more on maintenance due to low expenditures on buying new hardware.
- High renewal rate of maintenance contracts also due to large installed base of products among clients.
Have more questions about NetApp (NASDAQ:NTAP)? See the links below:
- What’s NetApp’s Fundamental Value Based On Expected 2016 Results?
- What’s NetApp’s Revenue and EBITDA Breakdown?
Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for NetApp
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