NetApp is hoping to continue some of the momentum it’s picked up after a rough 2016.
Like many data center hardware companies including Hewlett Packard Enterprise (HPE) and Cisco (CSCO), NetApp’s (NTAP) core business of selling storage hardware has weakened. Increasingly, customers are renting computing power from cloud computing businesses like Amazon Web Services (AMZN) and Microsoft (MSFT) instead of buying their own equipment.
Under CEO George Kurian, NetApp has shifted to selling software subscriptions to offset declines in hardware sales. In NetApp’s case, it sells data management software that it says lets companies coordinate data across multiple clouds and internal data centers.
So far, Wall Street has been kind to NetApp’s refocusing. Its stock closed at $42 on Monday, nearly double from the company’s recent nadir in December 2015.
On Wednesday, NetApp will report its fiscal 2018 first quarter earnings. The following interview Kurian was edited for length and clarity.
Fortune: What are your thoughts about the rise of big cloud computing companies like Amazon?
Kurian: There will be multiple innovations, multiple cloud providers, and what we see based on all of the cloud customer sectors that we work with is that they are typically using multiple clouds. Some people have work going on, for example, with Oracle. Others have work going on with Microsoft. Amazon, clearly, is the leading player.
It seems like a new battleground between big enterprise companies involve becoming the biggest middleman provider between all the different cloud computing services. Where does NetApp stand in this battle?
We’re focused on the data layer. We’re not trying to be a general purpose cloud broker. We are really focused on making data a strategic asset to transform digital businesses.
You can have your content in Amazon, you can immediately move it to a Chinese cloud if you want, or an [Microsoft] Azure cloud, or a Google cloud because it looks exactly the same using our software.
Unlike HP or Dell, we’re not in the computing business. For us, connecting our software to any of the world’s big computing landscapes is a good thing.
It’s tough transforming a company, and NetApp experienced several rounds of layoffs, right?
Right. For the business as a whole we’ve right sized it quite substantially. We were about 12,500 employees when I took over, and we’re about 10,000, so we feel good about where we are. It was important to take the pain quickly.
We had very tough set of years before the last year of success. We had to go through a long and difficult transformation process.
What are your thoughts in the aftermath of Dell’s big acquisition of EMC?
Those transactions are incredibly complex to integrate. The success rates of massive scale technology mergers are extraordinarily low because of the complexity of the integration, the culture matching of completely different institutions, the leadership challenges of trying to bring together different leadership teams. You see all of that going on with Dell and EMC. They have still not clarified their technology roadmaps. We’ve taken advantage of that, there’s no question.
Explain your position on President Donald Trump’s immigration policies.
We serve customers in about 140 countries of the world, either directly or through partners, and we have benefited from having people from so many different parts of the world be part of NetApp. We think this idea of closing off the United States, precluding people from other countries to travel here is misguided.
I think the tone of the discourse has been more problematic than the physical policy. I don’t think anybody would disagree about having a good background and safety check, but I think the tone of the discourse has what’s been disappointing.
What’s a misconception the U.S. may have about Indian workers?
The one misconception has been that people have approached India as a low-cost development location or a location where you can set up a low-cost workforce. I think the fact that India is such a dynamic country, and similarly China, you’ve got to make sure that the employees there feel that they are working on the most important things that the company has. They are co-equal because otherwise you will never attract the best and brightest. If you go at it with a, “Hey, I’m treating you as a low-cost development center that has less than the best work,” they’re going to go to an Indian company because the Indian companies have aspirations to be global technology leaders as well.
What’s your view on how Silicon Valley culture of has changed over the past few years given the drama surrounding Uber?
It’s very hard to build up a reputation as an institution that does business the right way, treats it customers and employees with respect. In our case, we were blessed by a lot of people who stuck by us through the moments when, frankly, we had lost our way a few years ago. They continued to buy from us as customers, they continued to work for us as employees because they were willing to give us a second chance because of all the goodwill that we had put into the market.
That’s an interesting way of looking at the power of culture on influencing business.
One of the things that you realize is that the hubris during years of success can be fatally damaging when the business just goes even slightly sideways. I think that you’ve got to earn the respect. You have to earn goodwill because if you put it into the marketplace, people will stand by you when you’ve got challenges. I think people in Silicon Valley seem to have lost that concept.
To be honest, I think Silicon Valley goes through these cycles, and it seems to me that we don’t learn from prior experiences. I think there are many similarities to the dot-com era of hubris that’s going on in the marketplace today.
I don’t think that’s an excuse for sort of egregious behavior that we see. I think that it’s embarrassing almost that Silicon Valley, which prides itself on the place that is inventing the future, that we’re certainly not the role model of how the future ought to be culturally.
