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Network Appliance forecasts continued growth

CEO Dan Warmenhoven says the company intends to capitalize on the increasing demand for storage by the Internet and corporations.

Network Appliance aims to ride the wave of growth in the computer data-storage market.

In a presentation at the Chase H&Q Technology Conference, Network Appliance CEO Dan Warmenhoven said the company intends to capitalize on the increasing demand for storage by the Internet and corporations.

The Santa Clara, Calif.-based company makes equipment that plugs into large networks, devices that Warmenhoven compared to appliances that install easily and protect data without much maintenance. The company recently introduced a new low-end model.

Network Appliance posted $289.4 million in revenues last year and earnings of 11 cents per share. The company has managed to post 17 consecutive quarters that exceeded or equaled 70 percent revenue growth from the year-earlier quarter.

In the third quarter, the company's most recent, Network Appliance reported cash and investments of $290 million and operating income that comprised 18 percent to 19 percent of sales during the past five quarters.

The company's stock has climbed dramatically in the past year, though it was hammered in the Wall Street sell-off last month and has dropped to about half its 52-week high. Network Appliance's products typically cost tens or hundreds of thousands of dollars, and analysts agree that the company has a sizable lead over competitors such as Hewlett-Packard or Auspex.

The company will report earnings for its most recent quarter next week.

One risk, however, is Network Appliance's reliance on business from Internet companies that may not be able to pay if the dot-com economy contracts. In the company's most recent quarter, Internet companies generated 40 percent of sales.

Warmenhoven acknowledged the risk but added that traditional companies with online operations, which tend to be better funded, also will need data-storage products as they move onto the Internet.

Analysts surveyed by First Call forecast Network Appliance to post income of 20 cents a share on revenue of $550.3 million for fiscal year 2000.

In midday trading, the company's shares were up $1.81 to $65. The shares have traded as low as $9.84 and as high as $124.