The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst
: I guess, George, in relation to your Public Cloud, sort of the air pocket that you're seeing, it does look like you're implying that most of the headwinds
have stemmed from a go-to-market sort of execution. Just wanted to sort of maybe ask for a bit more color there of what gives you confidence.
Is it just a go-to-market approach? You have to have the decision to stop acquisitions. What gives you the clarity at this point that it's not a sort of
additional services that you need to add to round out the portfolio? Sort of what's the guarantee it's good go-to-market execution at this point?
And I have a quick follow-up, Mike.
Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst
: Got it. And Mike, just a quick follow-up on gross margin sort of trajectory through the year. Is the improvement that you're implying, sort of as you
get into the back half, is that just more a function of the Public Cloud margins improving as you scale those revenues? Or are you expecting a similar
improvement in Hybrid Cloud? And how much of that has to do with sort of pricing actions coming more materially through the P&L?
Question: Nikolay Todorov - Longbow Research LLC - Analyst
: And congrats on strong results, particularly given supply chain headwinds.
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JUNE 01, 2022 / 9:30PM, NTAP.OQ - Q4 2022 NetApp Inc Earnings Call
George, a question may be, how have -- I'm just curious, how have the conversations been over the last, especially a couple of weeks, when you
talk with customers regarding their IT budgets in this environment?
I think clearly, there's a lot of headwinds, like you talked, in macro and supply chain and inflation. But there's been some recent third-party surveys
showing that budgets for IT are actually picking up, not down, and even if inflation pressure kind of persists. So just curious what is the feedback
that you're getting from CIOs and CFOs on those discussions around IT budgets.
Question: Nikolay Todorov - Longbow Research LLC - Analyst
: Okay. Great. And if I can follow up, Mike, on the price increases, I just want to understand, do you envision incremental price increases, especially
if you see further cost pressures through the year? Or you think that you've kind of front-loaded the price increases and you just need to realize
those as the year progresses?
Question: David Vogt - UBS Investment Bank, Research Division - Analyst
: Just a quick question on the acquisition strategy. So before you decided to hit pause, can you kind of discuss how the pipeline was shaping up,
and how sort of the opportunities might have looked for that particular strategy given the repricing that we've seen in both the public and the
private markets?
And when you think about the opportunity cost of pursuing -- not pursuing transactions, how do we think that affects the ramp of the longer-term
target in that sector -- or in that segment, I should say? And then I have a quick follow-up.
Question: David Vogt - UBS Investment Bank, Research Division - Analyst
: Great. And then, Mike, maybe a follow-up for you on Public Cloud gross margin. What scale -- maybe can you give us a sense of scale that you need
to get to, to get to your longer-term targets? Because even if I look before this quarter, sort of the incremental gross margins have been running
in the low 70s as you invest in the business. And obviously, there's some cost absorption issues.
Or maybe it's helpful if you can give us sort of an order of magnitude of what that delta might look like from a margin perspective, so we could see
the road map to that 75-plus percent Public Cloud gross margin that you sort of targeted out there.
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JUNE 01, 2022 / 9:30PM, NTAP.OQ - Q4 2022 NetApp Inc Earnings Call
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