Tara Dhillon – Senior Director Investor Relations Daniel J. Warmenhoven – Chairman of the Board & Chief Executive Officer Thomas Georgens – President, Chief Operating Officer & Director Steven J. Gomo – Chief Financial Officer & Executive Vice President Finance Thomas F. Mendoza – Vice Chairman of the Management Board

Keith Bachman – BMO Capital Markets Min Park – Goldman Sachs Clay Sumner – Friedman, Billings, Ramsey & Co. Aaron Rakers – Wachovia Capital Markets, LLC Thomas Curlin – RBC Capital Markets Katy Huberty – Morgan Stanley Scott Craig – Banc of America Ben Reitzes – Lehman Brothers William Fearnley – FTN Midwest Securities Corp. Chris Whitmore – Deutsche Bank Securities Wamsi Mohan – Merrill Lynch Shelby Seyrafi – Caris & Company Brian Freed – Morgan, Keegan & Company, Inc. Jason Noland – Robert Baird Kaushik Roy – Pacific Growth Equities Glenn Hanus – Needham and Company

Welcome to the fourth quarter 2008 NetApp earnings conference call. (Operator Instructions) I would now like to turn the presentation over to your host for today’s call Tara Dhillon, Senior Director of Investor Relations.

Good afternoon everyone. Thank you for joining us today. Our call is being webcast live and will be available for replay on our website at www.NetApp.com along with the earnings release, the financial tables and the reconciliation between GAAP and non-GAAP numbers. In the course of today’s call we will make forward-looking statements and projections that involve risks and uncertainties including statements of our intent to continuing to grow our sales capacity, our projections regarding our first quarter and first half 2009 financial results, including our revenues, margins and earnings, our expectations regarding future revenues from the IBM channel, our expectations regarding Data ONTAP GPS and future releases of Data ONTAP, our expectations that we will continue to hire and our expectations that we will achieve our previously announced fiscal 2009 financial goals. Actual results may differ materially from our statements or projections. Factors that could cause actual results to differ from our projections include but are not limited to customer demand for products and services, increased competition and any decline in general economic conditions. Other equally important factors are detailed in our accompanying press release as well as our 10K and 10Q reports on file with the SEC and also available through our website. All of these factors are incorporated by reference in today’s discussion. With me on today’s call are Dan Warmenhoven, our CEO; our President and Chief Operating Officer Tom Georgens; our CFO Steve Gomo; and our Vice Chairman Tom Mendoza. Steve will review the fourth quarter FY08 financials and targets for FY09, Tom will discuss our operations, Dan will share his thoughts and then we will wrap up with Q&A. At this point I’ll turn the call over to Steve. Steven J. Gomo: Good afternoon everybody. NetApp has delivered solid results again this quarter with record levels of cash generated from operations. As I walk through the commentary on our financials, please note that all numbers are GAAP unless stated otherwise. To see the reconciling items between non-GAAP and GAAP refer to the table in our press release and on our website. Total revenue for the fourth quarter was $938 million up 6% sequentially and up 17% over the fourth quarter of last year. Foreign currency effects aided sequential growth by half a percentage point and improved the year-over-year growth rate by 3.8 percentage points. Revenue for the full 2008 fiscal year was $3.3 billion up 18% over FY07. Product revenue of $630 million was up 4% sequentially and up 7% year-over-year accounting for 67% of total revenue. Add on software which is a subset of product revenue was about 23% of total revenue, down slightly in the mix from last quarter. The combination of the increase in channel business and an increase in the mix of low end products drove this effect. Revenue from software entitlements and maintenance was $136 million or 15% of total revenue. Software E&M continues to grow nicely up 9% sequentially and 37% year-over-year. The combined total of add on software and software E&M was 38% compared to 40% in Q3 and 40% in Q4 of last year. Revenue from services which includes hardware support, professional services and educational services was 18% of the total revenue, up 14% sequentially and up 51% over Q4 of last year. Service maintenance contracts increased 11% sequentially and 52% year-over-year. Professional services increased 23% sequentially and 55% year-over-year. Non-GAAP gross margins were 62.2% of revenue this quarter, up two tenths of a percent from last quarter. Non-GAAP product growth margins were up six tenths of a point sequentially to 60.4%. Non-GAAP software E&M margins were up half a point to 98.5 while non-GAAP service margins declined by seven tenths of a percent ending the quarter just under 40%. In the first quarter we will be implementing a recording format change for the way we track warranty cost in the gross margin section of our income statement. Going forward our warranty cost will be moved from service cost of goods sold where we have historically recorded them to the product cost of goods sold area. The change will have zero net impact on total cost of goods sold and total gross margins but will simply shift dollars between product and service margins. Had this change been made this quarter non-GAAP product margins would have decreased by about one percentage point while service margins would have increased by about five percentage points. Again, this reporting change will not affect total gross margins and it will not impact any other aspect of our financial statements. Turning to non-GAAP expenses, our operating expenses totaled $437 million or 46.6% of revenue. These expenses increased 9% sequentially and 17% year-over-year. The largest sequential spending increase was in sales and marketing as a result of our increased sales capacity, our brand and awareness investment and services hiring. During the quarter, headcount increased 522 people on a net basis ending the quarter with 7,645 employees. Going forward our investment in operating expense will continue to emphasize sales coverage to enable us to grow faster. GAAP operating expense includes the effect of prior period merger related costs such as the amortization of intangibles from acquisitions and the effects of FAS 123R. Non-GAAP income from operations totaled $147 million or 15.6% of revenue in Q4. It’s worth noting that the non-GAAP operating margin for the second half of FY08 was 16.1% and within our target range. Other income which consists primarily of interest income was $12 million in the fourth quarter. Non-GAAP income before tax was $158 million or 16.9% of revenue. Our non-GAAP effective tax rates remains at 17.5%. Non-GAAP net income totaled $131 million or $0.38 per share. GAAP net income totaled $90 million or $0.26 per share. Now, I’d like to highlight our cash flow performance. The combination of strong profits, a large increase in deferred revenue and focused receivables management generated record results. Our cash from operations was a record $293 million, up 2% sequentially and up 39% over Q4 of last year. Capital expenditures were $63 million this quarter. We define free cash flow as cash from operations less capital expenditures so free cash flow totaled $230 million down 1% sequentially and up 46% over Q4 of last year. Expressed as a percent of revenue, Q4 free cash flow was 24.5%, above our average of 23% for the last two fiscal years. Turning to the balance sheet, our cash and investments totaled $1.6 billion, an increase of about $37 million over last quarter. This balance excludes approximately $243 million of restricted cash related to our secured revolving credit facility and about $8 million worth of restricted cash related to security and rent deposits. It also excludes about $73 million of auction rate securities which have been reclassified from short term to long term investments. During the quarter we paid off the final $29 million of debt related to our cash repatriation two years ago and removed the associated restriction on $63 million of cash. The debt associated with our credit facilities is $173 million and is classified entirely as a long term liability. We continued to buy back stock this quarter repurchasing a total of 2.9 million shares at an average price of $20.86 for a total outlay of $59.4 million. Over the course of this fiscal year NetApp has spent about $903 million to repurchase about 33 million shares. There’s approximately $497 million remaining in our stock repurchase authorization. Turning to DSOs, our accounts receivable DSOs, days sales outstanding were 56 days compared to 48 days last quarter and 62 days in Q4 of last year. Last year’s Q4’s DSOs were recalculated to include the reclassification of $43 million worth of sales tax from accounts receivable to other current assets. Inventory turns were 20.3 times this quarter down from a record 22.5 times achieved in Q3 but nonetheless a very solid number. The total deferred revenue balance increased $169 million this quarter to $1.51 billion, a 13% sequential increase and a 37% increase in the balance year-over-year. Before I turn the call over to Tom, I’ll discuss our target operating model for Q1. Our outlook is based on current business expectations and market conditions and reflects our non-GAAP presentation. We are making forward-looking statements and projections that involve risk and uncertainty. Actual results may differ materially from our statements or projections for the reasons cited previously. At our analyst day in March we said we expected Q1 revenue to decline from Q4 by between 5% and 10%. This equated to a range of $837 million to $883 million which was calculated from the midpoint of our Q4 revenue guidance of $930 million. We’ve narrowed that guidance range modestly revising our first quarter target range to $845 million to $875 million. You’ll notice that the midpoint of the Q1 range remains unchanged from what we said at analyst day and it is consistent with our full year FY09 forecast. Also consistent with our analyst day discussions we expect non-GAAP gross margins to be approximately 61% for the full fiscal year including the first quarter. We also indicated that we expect our non-GAAP operating margins to average 11% in the first half of FY09. This is still our plan but the timing of our investments and headcount overlay with our quarterly revenue profile, the first quarter will be below 11% and the second quarter is expected to be above 11%. Q1 operating margins are planned to be between 9% and 10%. As said, we’re anticipating that these front half investments will begin to generate revenue in the second half of the fiscal year. We therefore remain confident that we will execute on our analyst day target for average second half operating margins of 16%. For Q1 non-GAAP EPS is expected to be approximately $0.20 to $0.23 with GAAP EPS between $0.09 and $0.13. Our diluted share count is expected to increase by about three million shares in the first quarter, depending on stock price. For the full year 2009 our expectation for revenue remain between $3.79 billion and $3.95 billion and non-GAAP earnings per share estimates remain at approximately $1.40 to $1.46. GAAP earnings per share should finish between $0.92 and $0.98. With that, I’ll turn the call over to Tom for an update on our operations.

As our financial results highlights, NetApp posted a strong finish to the year. Feedback from customers reinforces that we provide them with the most comprehensive storage and data management solutions with the lowest cost of ownership. Our value proposition is the most compelling in our history and we are making good progress in selling our solutions to a broader set of customers. As we outlined at our analyst day in March, our highest priority item remains diversifying our revenue streams. To this end, significant effort is being focused on expanding our customer base, especially our presences within the storage 5,000 which is what we call the 5,000 largest buyers of storage in the world. We divide the storage 5,000 in to three categories: high penetrated accounts; under penetrated accounts; and new to NetApp accounts. I’m pleased to report that business from under penetrated accounts grew 35% sequentially in Q4. We finished the year with over 100 net new to NetApp storage 5,000 customers and a couple thousand new midsized enterprise customers. Geographically Europe continues to outpace the other regions growing 20% over Q4 last year contributing 35% of revenue again this quarter. Asia PAC pulled back to 10% of total revenue, up 16% year-over-year but down from its record Q3 performance. The Americas grew 12% sequentially to 55% of revenue despite our top enterprise accounts being down modestly in the quarter. Our diversification efforts are starting to have significant impact since excluding our top enterprise accounts, our US commercial accounts grew 16% sequentially. The [federal] group was also strong contributing 11% of total revenue. Another positive indicator of revenue diversification is our channel business. The advancement in programs we’ve implemented in the channel over the past two quarters again drove increased business to our partners. 64% of total revenue came through indirect sources. We’re pleased to see our in direct channel continue to outpace our overall growth as a means for getting valuable and sustainable leverage for our partners. Arrow and Avnet had another record quarter growing to 18% of total revenue. IBM was below 5% this quarter reflecting the seasonally lighter first fiscal quarter. For the full fiscal year IBM contributed over 4% of revenue and brought us in to more than 900 new to NetApp accounts. As we highlighted at our analyst day, we expect IBM to grow to 6% of total revenue in fiscal year 09. Units shipped remained robust with a 17% sequential increase and the third consecutive quarter of double digit sequential unit growth. While our high end and mid range unit counts both increased, and the mid range still represents over 50% of our systems revenue, the low end has been particularly strong. Entry level unit shipments increased 33% sequentially and 67% over Q4 of last year. This acceleration is due to a continuous stream of product introductions throughout the fiscal year as well as a concerted effort to enable our channel partners. We spoke at prior calls about the investments we were making in channel programs in this segment, the acceleration of our unit counts, new customer acquisition and proportion of channel business were all positive indicators of our progress. Despite these investments and a measurable shift in our product mix towards low end systems and lower initial software cash rate, we have maintained our solid gross margins. [Inaudible] continues to expand as bookings that included a fiber channel and or an iSCSI component rose to a record 47% of our storage business this quarter. With 34% including fiber channel and 17% including iSCSI. Our SAN business also got a big tailwind in the third quarter with the Storage Performance Council’s independent benchmark proving that NetApp’s FAS3000 SAND performance is significantly better than the comparable EMC Clariion product especially when the premium [inaudible] features are enabled. It should be noted that our rapid growth in SAN is not necessarily indicative of a major shift in product mix but rather it is evidence of broader customer adoption of unified storage. The ability to simultaneously support SAN and NAS protocols. NetApp is the only vendor to support unified storage across our entire spectrum of platforms. Despite the strength of SAN, NAS protocols were still present on 67% of our storage bookings. Total petabytes increased 15% sequentially and marked our first quarter shipping over 200 petabytes. The shift towards cheaper, higher capacity ATA driver continues as customers seek denser, greener and more cost effective solutions. While archiving and disc based backup are major drivers, technologies like our RAID-DP is able to use those data drives and primary source applications without sacrificing reliability. One of the most compelling areas of NetApp innovation over the past few years has been the storage efficiency features we brought to market. Technologies like thin provisioning, efficient replication, zero space cloning of data sets and de-duplication our customer take significant cost out of their environment while the same time taking advantage of our unique and comprehensive data management functionality. In terms of de-duplication with over 60,000 systems actively running de-duplication on over 100 petabytes of physical storage we believe we have the largest installed base in the industry. While backup and to some extent our [pivol] are significant drivers of this technology, NetApp is the only enterprise vendor that supports and widely deploys de-dup on primary storage and production environments. The question of storage efficiency has impact on the growth of the storage market is as old as the industry itself. You have heard the story of ATA drives, cloning and thin provisioning when we pioneered these technologies years ago. But growth remained robust in the subsequent periods. Arguably de-duplication is difference because of its unprecedented adoption and applicability to our existing installed base. However, the industry had repeatedly proven that demand is elastic and reducing the cost per bip storage generates increased long term demand. NetApp intends to continue to innovate and promote storage efficiency technologies as a vehicle to gain share, cultivate customer loyalty and expand our addressable market. Our platform for future innovation continues to progress well. While still small, sales of our GX platform grew 75% over fiscal year 07. Although GX is typically focused on performance and archiving environments we are also experiencing expansion in to more traditional verticals such as financial services. Q4 we did indeed announce our latest 7G version of Data ONTAP, there will be one more release of GX coming soon and all subsequent major releases of Data ONTAP will be based on the convert 7G and GX platforms, an integration that is already underway with specific emphasis on a yearly transparent upgrade path. We continue to see the datacenter transformation due to server virtualization as a significant growth driver for NetApp. The massive amount of re-architecting to deploy virtualized environments providing what it needs to think end-to-end about servers, networks and storage to realize its full benefit creating a cleaner sheet of paper as IT professionals have seen in a long time. This creates an enormous advantage to those vendors who can enable and accelerate the success of these projects while rendering vulnerable the legacy incumbent solutions that are not particularly well suited for virtualized environments. While industry data is hard to find, our internal data indicates that server virtualization projects are a primary entry point for us in to new accounts and within existing account our catch rate for servers running VMware is growing at a very high rate. Not only are our customers shifting their VM workloads to their NetApp storage, we’re also winning new deals for deployment of our systems in to newly virtualized environments. As you can see, our efforts to grow and diversify our business continue at a brisk rate. We are focused on growing our footprint in the storage 5000 and innovating to remain the visionary leader of the storage market. I believe we have a huge opportunity in front of us and we will continue to drive hard towards capitalizing on it. I look forward to updating you on our progress in August but before I wrap up I’ll turn the call over to Dan for his remarks. Daniel J. Warmenhoven: My thanks to all of you for joining us today. Despite the slowdown in the US economy and the sluggishness of the economy, the NetApp team finished the year very strongly. We expect to keep the momentum going in to the new year and our forecasted revenue level in Q1 of fiscal year 2009 reflects a 23% to 27% increase over Q1 of this past year. Both our revenue and operating margin forecasts of the upcoming quarter are consistent with the guidance we provided in March at our annual analyst meeting. Unfortunately, it appears we did not effectively communicate our operating margin outlook. The guidance we provided in March of 11% operating margin in the first half of fiscal year 2009 is not reflected in the current estimates published by the sales side analysts. Our expectations for fiscal year 2009 have not changed since our analyst meeting. And, we attempted to articulate at the March meeting was that we believe we have an opportunity to gain share and we intend to invest in sales capacity and coverage to seize that opportunity. Over time there are very few disruptions that cause IT professionals to completely rethink how they support their business. We saw one of those disruptions after the bubble burst in 2001 when suddenly customers are scrambling to gain efficiencies and dramatically reduce the cost of their infrastructure. Our value proposition was and is right in that sweet spot. In the aftermath of 2001 NetApp enjoyed several years of 30% plus growth as we capitalized on an economic downturn. At the same time we continued to invest in innovation and to rapidly bring to market the most compelling solutions with the best value. Our goal is to help customers do more with less and they resonated with that value proposition and choice NetApp. Today, I believe we have a similar economic situation and we have the right arsenal of solutions to capitalize on two broad trends that are racing through the IT world today. The first is server virtualization is being deployed with amazing speed around the world. NetApp offers the optimum solution for virtualized server environments and the best virtualized storage infrastructure in the industry. But, we cannot afford to wait, we must seize the opportunity now and we are hiring sales people now while the opportunity is all around us. The second major trend is backup redesign. With the explosion in the volume of data and shrinking backup windows, customers are facing huge challenges for protecting their data. In many cases that problem is acerbated by the virtualized server infrastructure they implemented to increase their efficiency. More and more customers are choosing to use this opportunity to upgrade their backup infrastructure and more away from tape. NetApp provides the most compelling backup and date protection solutions in the industry to solve these customer requirements. Above all, the macroeconomic sluggishness of the US causes customers to rethink their big expense solutions from traditional vendors and move to modular virtual storage that takes up far less physical space, requires less power to operate and less man power to manage. In that current situation, we intend to invest in increasing sales coverage for more quota bearing sales people, more direct sales people, more of those that will assist direct partners. And, we intend to invest in awareness so that more potential customers consider NetApp to solve their needs because our win rates are high when we get considered but we need to get considered more often. That said, I should also point out that much of that investment was made in the quarter we just completed. In the past quarter our total expense grew at almost 9% over the prior quarter. In the upcoming Q1 we expect expenses to grow around 3% sequentially. We will balance this investment with a commitment to return to the 16% average operating margin in the second half of fiscal year 09. With the momentum Tom described, NetApp is certainly on track to achieve the fiscal year 09 financial goals we set at our analyst day. But, with the investments we’re making I look forward to returning even higher growth rates in the future. Oh behalf of the entire NetApp team I thank you for your support and your interest in NetApp. At this point, I’ll open the floor for questions. As is our practice, please limit yourself to one question and then return to the queue so we may address everyone in the allotted time.

(Operator Instructions) Your first question comes from the line of Keith Bachman – BMO Capital Markets. Keith Bachman – BMO Capital Markets: In the interest of keeping to the one question I wanted to focus on Asia Pac. Dan, I think you or Steve had said it slowed down a little bit. Interesting, HP last night had shown some slowdown in Asia Pac too. I was just wondering if you could add a little color in to what you’re seeing in that particular region. Daniel J. Warmenhoven: The region is not uniform. We see it as kind of broken up by country or by sub-region. I should point out that the 10% of revenue that came from Asia Pac in this quarter is exactly the same percentage we’ve had in each of the two prior fiscal years in Q4 so I’m not sure you can make any pattern recognition out of it here. For us in particular, both Japan and China have been kind of slow especially on a year-over-year basis and we’ve seen real strength in Australia, India and Asia so it’s not uniform, it’s quite mixed. Keith Bachman – BMO Capital Markets: Dan, if I could just push you a little bit, was there any kind of difference in linearity in Asia Pac and/or, how do you think about it for the upcoming quarter if I could? Daniel J. Warmenhoven: Asia looked like a traditional Q4 for us so it was consistent in terms of linearity patterns of the prior Q4s and with the rest of the world. They grew in the mix, they’ve had a pretty good run for Q1 through Q3, I think roughly 13% of the mix. I would expect them to bounce back. We seem to have seasonality in Asia Pac just like we do in Europe which is traditionally strong in our Q3, Asia Pac goes weak in Q4 and I think we’re going to see them bounce back in the upcoming quarter.

Your next question will come from the line of Min Park – Goldman Sachs. Min Park – Goldman Sachs: Similar to the investment strategy that you outlined in your analyst day, it seems that a number of your competitors are also bulking up on sales and marketing to go after the higher growth segments such as S&B and emerging markets. To what extent are you beginning to see heightened competition in the field? And, how do you think it will play out on the pricing side?

Well, competition is intense and it’s been intense and I’m sure it will remain intense. I don’t really see the dynamic as being any different. If you look at our gross margins, you look at our win rates, I think we feel very, very confident about where we are. I still believe that our issue is less so whether we win or not and the price that we win because I think those remain robust. We just need to get ourselves in to more deals so we can transfer our win rate in to more opportunities. So, overall I don’t think that anything is really any different. I don’t want to say it’s benign out there, it is competitive but I don’t think it’s any different today than it was a year ago.

Your next question will come from the line of Clay Sumner – Friedman, Billings, Ramsey & Co. Clay Sumner – Friedman, Billings, Ramsey & Co.: Dan, this time last year you opened the call or maybe it was Steve saying that you guys did not feel at that time the normal seasonal level of backlog and as a result the July quarter was going to be a bit below normal. I’m just curious if you saw any similar challenges in this year’s Q4 or are you better positioned this year with respect to more normal backlog? Steven J. Gomo: We’re in a more normal backlog position. We’re feeling pretty comfortable and that’s all reflected in the guidance.

Your next question comes from the line of Aaron Rakers – Wachovia Capital Markets, LLC. Aaron Rakers – Wachovia Capital Markets, LLC: I guess I want to dive in to some of the balance sheet and cash flow metrics a little bit. In particular, the inventory was up quite a bit sequentially, quite a bit and I would love to understand what’s going on and the drivers behind that. Then also, on the DSO, also kind of the highest level we’ve seen in a little while, can you talk about linearity in the quarter and how should we think about DSO trending as we look in to fiscal 09? Steven J. Gomo: Our fourth quarter had basically the normal seasonality for fourth quarter versus the same we saw a year ago and the year before that so it’s very back end loaded like all of our fourth quarters are. That helps explain the inventory a little bit because we make sure we have plenty of parts and sub assemblies sitting around to fill those orders at the end of the quarter and if we overshoot a little bit we don’t really care, we just want to make sure we can satisfy customer demand. As far as the accounts receivables are concerned, if you go back a year ago, our DSO was about 62 days so actually DSO performed extremely well. Our collections were basically off the charts this quarter and the currency of our accounts receivables is at an all time record high. Aaron Rakers – Wachovia Capital Markets, LLC: I understand that but if I look at the inventory over the last few years, I mean inventory has either been flat to down at the end of the April quarter relative to a 17% sequential increase. So, I guess I’m wondering was there a change in terms of the order patterns that supported what appears to be a little bit of sharper increase than what we’ve typically seen?

If you look at, by contrast though the 22.5 inventory turns we had last quarter was an all time record for us as a company so with the current inventory turns level above 20 it’s actually higher than the two prior quarters and last quarter. So, I still think that the inventory position is actually in pretty good shape so I wouldn’t indicate that is a sign of unsold product or anything like that. I think that a number over 20 is pretty darn good in this industry and we’ve only hit it two of the last four quarters.

Your next question will come from the line of Thomas Curlin – RBC Capital Markets. Thomas Curlin – RBC Capital Markets: Can you walk us through what’s happening with add on software and maybe to some degree the other software category in terms of new software? It seems that’s decelerating year-over-year, is that driven by mix of high end versus low end business or icing strategies? Just what’s happening with that stuff?

So, I didn’t quite get all of that question, you were a little soft but I think the question was about software and software attach rates. Thomas Curlin – RBC Capital Markets: I guess to get really specific, the add on software category is decelerating year-over-year the last couple of quarters and I believe it was down a little bit year-over-year this quarter?

Part of it is the way we bundle hardware and software at some of our low end pricing in terms of how we put our low end bundle together. I think there’s a number of factors that as a result of our product mix and the strength of the volume of our low end platforms that is having some impact in terms of how we report that data. But overall gross margins are really solid, unit growth is really solid and those are things that we really look to. How we price our add on software and how we bundle it and how we break it out could be impacted by the overall base change but as we look at our attach rates overall across all of our platforms, those are still quite good. Daniel J. Warmenhoven: Just to underscore what Tom just said, we find an interesting mediation I guess you’d say in how the systems evolve after they are deployed. At the very high end our systems are generally purchased for one specific application and they don’t evolve to add on others. As you move down towards the low end the customer may buy it for one specific application but then over time they add on more software and expand its configuration in place as they become more general purpose in their deployment over time. So as the mix moves to low end you expect over time that our add on software would increase but the amount configured in at the point of sale would actually decline.

Your next question will come from Katy Huberty – Morgan Stanley. Katy Huberty – Morgan Stanley: Steve, given the strength of the low end of the business and the shift to the channel can you help us better understand how gross margins were flat over the last couple of quarters? What were the positive influences? Steven J. Gomo: I think the spending and the manufacturing areas obviously have been well controlled, variances are running as planned, there’s no unusual things happening there and the pricing environment is pretty much what we anticipated and modeled. As Tom pointed out there is no surprise there, so those are some of the big elements that drive this. Daniel J. Warmenhoven: Unlike servers, I should point out, the server business has a characteristic that the smaller machine the lower the gross margin, the bigger the machine the higher the gross margin. It is not the case here because of the amount of disc storage which gets configured into the systems. Our gross margins across the low end, the end of the product line are remarkably similar. If anything, our largest configurations when they’re maximally configured at the 6,000 end can have lower gross margins than the low end.

If I could just pile on to that one as well, in prior calls we’ve talked about our efforts to expand our channels and expand our coverage at the low end of the market and we actually gave some indication that you start to see some impact on our gross margin as a result of both the channel programs and the mix and one of the reasons why we emphasized that in this call is that we’ve been particularly pleased that we’ve been able to drive very, very high volumes there and we haven’t really lost anything at all on the gross margin line. I think we’ve been pretty pleased with that. I think the MSE or mid-size enterprise or our commercial sector, whatever you want to call it, I think has been robust not only for ourselves but some of our competition and I think that and we’ve got the right products and the right programs. We’ve been able to go at that much more aggressively than we did in the past and we’ve done it without sacrificing our gross margins.

Your next question will come from Scott Craig – Banc of America. Scott Craig – Banc of America: Just a question around the headcount, sorry if I missed this, so from a clarification standpoint how many people are we looking at adding next quarter and then as a follow on to that, when I look at the productivity metrics, and I realize this is a pretty crude productivity metrics, but if I look at revenue per employee, it really hasn’t been growing probably over the past few year and to me that would seem to be an easy way to get some leverage through the model from an expense standpoint. Is there anything being done to address the productivity side of things and how do you guys actually view the productivity metrics from an internal basis? Because all we see is really high level numbers. Daniel J. Warmenhoven: I share those high level numbers with the employee population every quarter and we do it specifically as revenue per employee, take the revenue for the quarter, divide it by the ending regular headcount and I would beg to differ with you. My chart that I’m going to put on the wall tomorrow in front of all employees shows that this past quarter we achieved at least a four year, I haven’t gone back any further, but four year record. And the revenue for employee trends up every quarter during this fiscal year. I don’t accept the premise of the question. The other answer is that we expect to hire between 500 and 600 people in the upcoming quarter.

Your next question will come from Ben Reitzes – Lehman Brothers. Ben Reitzes – Lehman Brothers: Dan, I just wanted some more dynamics on two issues. First, you mentioned the sluggish economy in the US, if you could talk about what you’re seeing in the US especially as you go into the next quarter. Is there something that makes you incrementally concerned on the revenue side and terms of that growth rate and characterize that. Obviously HP last night saw a slowing in the US so it’s no surprise but just any more dynamics. And then on the HP front, they failed to grow in the mid-range storage 17% last night and in that range for several quarters, your product revenue, I know it’s not apples to apples, has decelerated depending on how you look at it on your P&L and it’s gone down each quarter on the product side on the income statement, but I was just wondering if anything changed competitively as well in addition to the US question? Daniel J. Warmenhoven: How many questions would you like me to answer or maybe I should rephrase, which question would you like me to answer? Ben Reitzes – Lehman Brothers: Dan, if you could do both it would be great. Daniel J. Warmenhoven: Okay, I’ll take the first one. In the US in particular, no we don’t see any change in the overall economic condition. Certainly the background noise that we had in March was probably more negative than the background noise you hear now. People are expecting that we’re already in a recession and I think subsequent GDP data shows that we’re not. So maybe there’s a slightly better attitude on the part of the customer community but not enough to be material. We had anticipated that the forecast of the international monetary fund is published in February, late February, probably the one that would the scenario that would probably prevail which is that the US would go into a very slow growth mode or very minor recession mode, like 1% or 2% contraction in the first half of the year and then come out stronger in the second half and that appears to be now what the overall scenario looks like. That was the backdrop for our [inaudible] forecast and I think we’re feeling like that’s still tracking to plan.

The next question will come from Bill Fearnley – FTN Midwest. William Fearnley – FTN Midwest Securities Corp.: Could you guys provide some more color on the competitive win rates? Is there any difference here between the larger and the smaller competitors? And as importantly are you seeing anything change here with the decision cycles? What did you see in the last quarter and how does that color your view towards the upcoming quarter? The decision cycle, is there any lengthening there? Daniel J. Warmenhoven: We don’t see any particular in the overall competition. Certainly some of the ones in the newer categories like the virtual tape category, for instance, have gotten more players. So that’s a new emerging category and there’s lots of players trying to gain share, you just saw some other moves by one of our largest competitors literally today. With the exception of what I would consider to be fairly new segments, the core markets have stayed reasonably constant over time and I don’t think the win rates have changed significant either. That’s independent of which category you’re looking at by price span for instance. The share positions in this arena move very, very slowly. I think we gained a little share around the lower end price points of the 2000 family here recently but nothing very material in terms of the overall change. We’re talking about share changes per year of 1% or so among the various vendors. Steven J. Gomo: The only market that we saw the slowdown that we commented on on Analyst Day was financial services and everyone has seen that. I think decision making there is about what we expected though. I actually think they’re starting to get a handle on where they’re at and starting to move forward a little better than they were before. I think they froze for a little bit because they weren’t sure what they were seeing but our activity levels have remained exactly what we expected and I also think the partnerships that we have with various solution vendors like SAP, Oracle, Microsoft and VMware are helping us because around those solutions, as long as it’s solving a problem people are still moving forward. It’s just basic infrastructure stuff especially in the financial sector I think was slowed down. But we saw that and anticipated it and forecasted it.

Your next question will come from Chris Whitmore – Deutsche Bank. Chris Whitmore – Deutsche Bank Securities: I wanted to come back to the software question, this time looking at the deferred that slowed somewhat materially over the past couple of quarters. Is that a lagging indicator or a leading indicator of your business and what are your expectations for deferred going forward? Should those improve as some of the units you put out there start to buy more software? Steven J. Gomo: As I mentioned I think several times deferred is going to grow at a rate relative to the overall growth rate of the company and as the company's growth rate has slowed from the mid-30s to roughly the 20% level so too has defers slowed. And that’s why the growth rate in deferred this quarter we reported 39% growth instead of something in the 50s or something in the high 40s. So I think that as the growth rate of the company and our business level were to come back and we were to grow say in the mid-20s or 30s, you’d see those deferreds go right back there and start poking through the 40s and perhaps as high as the 50s levels again.

One other data point that I want to put out there too is that when you talk about software growth and hardware growth there’s a combination of factors. There’s new units sold and there’s also upgrade activity and in the past two quarters we’ve seen a very, very robust growth in the amount of new units sold. When I think about the underlying health of the business the amount of new units that we’re putting out there is a proxy for a bunch of things. It’s a proxy for new customer acquisition and it’s also a target for future sales of professional services, software upgrades, extended service contracts, etc., etc. For us the underlying metric that we’re looking at in terms of the underlying health of the business is actually new units sold and we had a very, very strong quarter with 17% sequential growth and we’ve also had three quarters in a row where we actually grew units double digits over the prior quarter. Daniel J. Warmenhoven: One of the earlier questions talked about competitors also investing to increase their sales capacity, the fact is those competitors are much larger and have much more sales capacity than we do to start with. There’s the metric Tom just brought up is the reason we have confidence. We talked to you about a year ago about general expansion, that’s worked out, how we’ve added some headcount sales, new accounts, sales activity is going very well. So we feel like we have the formula, if we add the right amount of headcount we’ll be able to see the results.

Your next question will come from Wamsi Mohan – Merrill Lynch. Wamsi Mohan – Merrill Lynch: We’ve done some work with you guys historically the way to share a gain in network storage for NetApp has been about 50, 60 basis points per year on the hardware front as probably DC data, do you see anything fundamental in your products or in the competitive environment that would suggest that your rate of share gain would be different, either better or worse, over the next two years? Daniel J. Warmenhoven: I think there’s an opportunity for us to accelerate that rate of share gain. We’ve seen it happen actually in several small markets. I’ll use one as an example, Australia which is a very small market, 24.5 million people, probably 3% of the world’s total market price heat we got to about roughly 18% or 19% share position we think last year and this year our business in Australia was up about 75%. It gets to a point where you move into the category of the preferred vendor, if you will, in certain areas and it can actually cause the market share gain to accelerate. Now I should say this has historically been a market which is as I describe to people the smallest moving market relative to change and adoption of new technology of any I can think of in the entire IT world, even worse than networking technologies. People move very, very judiciously here because if it doesn’t work for them they have lost their data or put their business at risk and they are very cautious and adopt new vendors very, very carefully and make them work through essentially a progression of proving their capabilities before they’ll move to the next or severe and more demanding environment. What that means is that changes we introduced in our particular time may not get widely adopted for a couple of years. FlexVOL for instance which had enormous savings and increase in utilization for our customer community, it really took about two years from the time we introduced it to the time it was over 50% of the install base. So that’s when you see these kinds of lull, slow rates of change. However, I do think there’s the opportunity for us with enough market coverage given our current position, with the references we have, the partners we have, etc. for us to actually get that dynamic to change quickly. And economic stress is one of the things that causes that to happen. Certain other phenomenal like server virtualization, etc. are adjacent opportunities that also provide us opportunity to get it to happen. I think if we focus on the right places at the right time, like virtualization and back up we can in fact move the needle a little fast than historically we’ve been able to. Steven J. Gomo: One thing I would add to that is when you think about the 500 basis point increase in market share gain, you also have to factor in the fact that IBM is now 4% of our revenue and it grew to that in the last two years. So when you think about 4% of our revenues, that’s another $100 million of market share at four price and obviously more than at three price. In terms of the market share gain in NetApp technology is a little bit more than the net our branded number would indicate.

Your next question will come from Shelby Seyrafi – Caris. Shelby Seyrafi – Caris & Company: I tend to get more concerned when your receivables grow more than 20% sequentially, especially in fiscal Q4. Looking at history it happened in fiscal 05 and fiscal 07 before some misses in fiscal Q1. How back end loaded was fiscal Q4 this year and what’s the risk that you decline perhaps double digits sequentially in fiscal Q1? Steven J. Gomo: The fourth quarter has roughly the same seasonality or the same profile of order distribution and revenue distribution that we saw a year ago in the fourth quarter and the year before that. There’s really not a significant difference, say it’s a half a percentage point type of thing. I think that the key question here is do we feel confident about our guidance and are we satisfied with our backlog levels and our ability to achieve the guidance? And we have to tell you, yes we are.

Your next question will come from Brian Freed – Morgan, Keegan. Brian Freed – Morgan, Keegan & Company, Inc.: Real quick just to revisit the product versus software growth rates, relative to your peers, your gain in the hardware side of things appears to be decelerating yet you continue to show a significant multiple market growth rate in software. Do you think it’s rational to decouple the two in a practical sense or are they practically so coupled that it’s better to look at them combined? Steven J. Gomo: I’d say that it probably makes sense to continue to look at them as we’re currently putting them together. But probably a more interesting dynamic is that as you spread it out over time is that we land the footprints today and we sell upgraded software later. That’s why our emphasis on the unit count is so darn important. If the unit count was not growing that would be a proxy for we’re not gaining new accounts and it would be a proxy for the fact that we’re not planting the seeds for future business. When the unit count is robust then I feel very good about the likelihood of continued software growth. Perhaps we’re in a little bit of a slowdown now, perhaps it’s a sign of our top enterprise accounts, at least in the US, not being as robust. It could be any number of factors, but the simple fact of the matter is as long as we’re selling units and I think we’re well positioned in the future to continue to sell software and continue to sell services. Daniel J. Warmenhoven: If I read into your question a little bit, the question may have been around unbundling? Is that what you’re referring to? Brian Freed – Morgan, Keegan & Company, Inc.: Well, if you just look at product revenue as a standalone segment, its growth has decelerated year-over-year and arguably some of your competitors would say that they’re now growing product revenue faster than you guys. I just wonder how you guys think of your product revenue growth versus you software revenue growth, particularly relative to market share? Daniel J. Warmenhoven: In that category, in that sense I think of them as totally combined. I think the analogous model here would be Cisco with their IOS. They sell a hardware platform and they sell a piece of software on top, but that software only runs in that hardware and that’s exactly the case we have here. Virtually all of our add on software is actually incorporated into the Data ONTAP system and we enable it through license keys which is totally independent from Data ONTAP, is actually a very small percentage and it’s not practical to think about unbundling of the software features on the hardware platform. Essentially the hardware platform represents sockets that you can plug the other software components into and architecturally that would be very difficult to unwind. So Tom’s comment about that’s why we track the platform so much is spot on. When I think about the markets I think about the combined hardware and software together as a single unit. I think any attempt to segment those two would probably cause you to come up with all kinds of meaningless answers. Steven J. Gomo: The one thing that I would add is I totally agree that the way you rephrased the question that the bundling of the hardware software is a fact and I think that’s just the way it is. I think the other dynamic in play is how much of it is new sales and how much of it is upgrade business and that’s proven to be more volatile and if I look at new sales that’s been quite good. In fact our forecast for next quarter is especially positive given our guidance. But our upgrade business has been probably slower than it has been in recent years and that could be a symptom of our installed base, our top enterprise accounts, or what have you. That’s why we’re trying to give you a little bit of insight into our unit growth because that really is a proxy for the growth engine of the business.

Your next question will come from Jason Noland – Robert Baird. Jason Noland – Robert Baird: Dan, Tom, any update on your brand campaign? I know these are always hard to measure but any early thoughts or anecdotal impact in the market? Daniel J. Warmenhoven: The early indications are really good based on, as you said we have very thin data to look at. One of the things you can look at though is the number of hits on www.NetAPP.com and those are up by quite a significant factor so traffic on the website has been really good, initial feedback through web traffic has been good, things of that nature. But yes, it’s too early to really conclude anything quantitatively. Steven J. Gomo: The awareness metric that we put out there Analyst Day, that’s something that’s only going to get measured on an annual basis and we need to let our activities settle for a little bit. So that’s probably some time away. But as Dan indicated the initial things about the web traffic and referrals to our sales force and things like that all look pretty positive. Daniel J. Warmenhoven: Have you seen an ad? Jason Noland – Robert Baird: I have. The blue beating heart all over the place.

Your next question will come from Kaushik Roy – Pacific Growth Equities. Kaushik Roy – Pacific Growth Equities: It seems like your operating margin in Q1 has to be close to 9.5% to get to the $0.22. Even last July when revenues were significantly lower than expected it was 11%. It seems like investors are not very happy about it, the stock is down 11% after hours. Why are you bringing down your op ex so much and then what are your hiring plans for the full year? It seems like for full fiscal 2008 you hired 1,000 people then in Q1 itself you’re going to hire 550 people. If you can comment on that, it’ll be helpful. Daniel J. Warmenhoven: We hired 500 people this past quarter. We’re going to hire another 500 in the upcoming quarter. More importantly though look at the quarter-to-quarter sequential numbers. Given the revenue number you are right. The 9.5% to 10% or something in that range is probably about the right zone, but the gross margins are roughly flat I assume in your model and according to Steve’s guidance anyway and the expense number is about 3% as I mentioned in mine. 9.5% to 10% depending on whatever revenue level you pick. That incidentally is not inconsistent with the guidance we gave in the Analyst meeting in March. We said the operating income, operating profit level for the first half would be 11% so you are talking about 1% or so differential. That could swing really easily based on whatever the ultimate revenue level is. Kaushik Roy – Pacific Growth Equities: It seems like the investors are not liking the operating margin. It seems like you guided pretty much in line with the top line but operating margin is slightly lower than what people. Daniel J. Warmenhoven: I can’t speak an investor, all I can tell you is that we just reiterated exactly the guidance we gave in March. If it wasn’t well understood, I’m sorry that we didn’t get the message through. But I can even show you the slides we put on the wall that says it’s 11% in the first half.

Your next question will come from Glenn Hanus – Needham. Glenn Hanus – Needham and Company: Maybe shift gears to product roadmap a little bit and maybe you could comment on the duplication on your VTL platform, when that might come out? If you view that as important, when we’re going to have product refresh cycles, when to think about that and maybe any comment on solid state tier zero storage?

First of all we’re not going to pre-announce any product or talk about any roadmaps or any of that. What I will say about VTL is actually we have gated our de-duplication technology with a number of customers. So that is continuing to progress. But beyond that I’m not going to add anything to that equation. Clearly our de-duplication in the VTL market is a key requirement. Our business has been quite successful without it, even this quarter, our VTL units are up 48% year-on-year. De-duplication isn’t the only feature that matters, but clearly it’s important and we need to get that into our portfolio. As far as the rest of the product line I thought we had a pretty robust year in terms of platforms over the last 12 months and I expect that to continue pretty much in all phases. Glenn Hanus – Needham and Company: What about solid state?

I guess I could say stay tuned. I think solid state technology and flash technology is going to be relevant and increasingly so as time comes on and we attempt to incorporate that into our products and leverage it as appropriate. But I’m not going to pre-announce anything at this point.

Your next question is a follow up from Aaron Rakers - Wachovia. Aaron Rakers - Wachovia: I guess one of the things myself and I think investors are going to try and get comfortable with is the expectations baked into your model to get you to that 11% op margin for the first half of the year. Are the assumptions calling for a typical seasonal type increase going into the October quarter which I would characterize as more of a mid-teens type sequential growth? And again update us on how long it typically has taken you to get new sales additions up and fully productive. Steven J. Gomo: The answer is yes. Your sequential growth rate there, mid-teens, is depending on where you’re, I don’t know where you’re at right now, but that’s not off the charts from what we’re looking at. I think you have to remember that we started making some of these investments in sales and marketing this past fourth quarter. Some of those are going to start to have some impact in the second quarter. We’ve already started to see our traction improve in the channel programs and at the low end we have our normal cadence of product introductions are coming up. So we’re confident that we can deliver the 11% in the first half. Keith Bachman – Bank of Montreal: If I could ask one other thing, one thing you disclosed was a pretty sharp increase in your block level SANS this quarter, it looks like it was really driven by the fiber channel side. Can you help us understand the underlying dynamics of what’s starting to drive that and why maybe we’re not seeing the iSCSI side of that growth as well?

I’ll give you two answers to that one. The first one is that especially on iSCSI I believe that we are not able to track it sufficiently. iSCSI is bundled in the system and it’s really hard to tell how it gets deployed. We have to wait until after it’s installed to see how it’s configured to actually tell if somebody is using it as an iSCSI server. It’s very difficult to report on it in the sense of revenue as it goes out the door. I think we’re definitely under-reporting the performance in iSCSI. I believe and this is my personal belief it’s very hard to back up any hard data that many of our systems are being used essentially as unified storage solutions based on [inaudible] were I suppose NAS and iSCSI has the active interfaces through one internet pipe. But yet it’s very difficult for us to capture those as they’re being shipped. On the SANS side, I think what you’re seeing is there was surge in terms of , especially at the low end, single systems which had both SAN and an Ethernet interfacer, SAN and MAS together. As we report those numbers back to you we try to make sure we don’t overstate the impact but on a superficial level let’s say NAS came down and SAN went up, but actually I think what happened is just because the SAN interface was configured into more systems the application methodology caused one to look higher and the other lower. We’re actually getting to the point now where I think the segmentations that the industry has followed are becoming less meaningful. Currently less than 40% of our systems going out the door carry at least two interfaces and I think that’s understated because we can’t track the iSCSI ones. It’s become much more difficult to figure out segment by segment what’s exactly going on. Steven J. Gomo: I would concur with that. I think what is unmistakable is that customers are using NetApp more in their standard environments. Are they buying dedicated SAN machines? In some cases, yes. But clearly the two trends that are out there is that in SAN environments where iSCSI where we believe we fully outgrew the market but SAN where we dramatically outgrew the market clearly we’re seeing more acceptance of our block base technology in the customer base. But we’re not seeing it necessarily in the form of dedicated iSCSI boxes or dedicated SAN boxes. We’re seeing it in the form of unified storage that’s running multiple protocols, both SAN and NAS at the same time. And that’s why we threw out the NFB NAS number, that 67% of our systems is fine on the SAN growth, 67% of our revenue had a NAS component to it as well.

Your next question is a follow up from Bill Fearnley – FTN Midwest. William Fearnley – FTN Midwest Securities Corp.: Steve, could you go over the gross margin, the difference in gross margin treatment again? And, is your expectation in what happened in fourth quarter the expectation for what you think is going to happen going forward here for the next couple of quarters as well? It went by pretty quickly, if you could repeat it that would be helpful. Steven J. Gomo: Let’s forget the change in format recording for just a moment, let’s just stay with our current format. In our analyst day we said that we expect to see about a 51% gross margin for all of next year and throughout the quarters and I would expect to see our first quarter be somewhere 61%, 61.5%, it’s a little hard to call at this point but I would plan in that range if I were you. And, if that’s the case, there won’t be a lot of change in the various components that make that up. Daniel J. Warmenhoven: But you’ll see a reclassification however in gross margins from the lowering of product gross margin and an improvement in the service gross margins. Steven J. Gomo: Now, let’s layer the change on top of that. Now, I’m going to come back and layer the warranty recording change on top of that. You can take about a point off the product gross margins and you can add about five points roughly to the service gross margins. But, your total gross margin will be unchanged.

Your next question is a follow up from the line of Wamsi Mohan – Merrill Lynch. Wamsi Mohan – Merrill Lynch: I wanted to really go back to like July of 2004 to see total software as a percent of revenue sort of at the 38%, so should we still expect fiscal 09 at 40% as stated at the analyst day given your efforts to increase your indirect business? Daniel J. Warmenhoven: I believe for some time you’re going to see us that we’ve hit the ceiling I guess, you’re going to see kind of the fiscal fluctuations are on a norm. I always thought 40% was very high but it kept coming in quarter after quarter at that level. I just think you’ll see it fluctuate two or three points on either side of about 37% maybe 38%. I thought that 40% was kind of ceiling for us in terms of mix. That says roughly, especially when you take out the service component that add on software is approaching the same dollar value in the mix as the underlying hardware and storage and I think that’s just kind of a natural barrier and it’s going to be very difficult to break through and you’ll see isolations around the midpoint. Ladies and gentlemen I think that concludes the call for today. I’d like to again thank you for joining us. I’d especially like to thank the employees of NetApp for a terrific finish for a very challenging year. I look forward to updating all of you on our Q1 results August 13th. I look forward to talking to you then. Have a great day.

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect.