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NetApp (NTAP) to Slash Workforce by 8% Amid Economic Downturn

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NetApp (NTAP - Free Report) has announced a plan to restructure and reduce its workforce by 8% worldwide as part of its efforts to prioritize investments in the face of global macroeconomic challenges.

The company expects to incur charges of $85-$95 million, mainly for employee severance and benefit costs, with most of the charges expected to be cash expenditures recognized in the third quarter of fiscal 2023. The layoff is anticipated to be substantially implemented by the end of fourth-quarter fiscal 2023.

Layoffs are rampant in the tech sector as companies grapple with a challenging macroeconomic environment. Tech giants such as Microsoft, Meta Platform and Amazon have also announced layoffs amid a weak macro outlook. Microsoft is reportedly cutting 5% of its workforce, Meta Platform is cutting 13% of its workforce and Amazon is letting go of more than 18,000 employees.

Recently, SAP SE (SAP - Free Report) also announced that it plans to conduct a targeted restructuring program in certain areas of the company alongside its fourth-quarter 2022 results. The restructuring will affect around 2.5% of SAP's employees, with restructuring costs of €250 million to €300 million expected to be recognized in the first quarter of 2023.

During the Covid-19 pandemic, digitalization of operations and e-commerce grew at an accelerated pace which caused tech companies to ramp up their hiring efforts. But now, the majority of tech companies are facing difficulties owing to rising interest rates by the U.S. Federal Reserve to tackle rising inflation and declining consumer demand.

NetApp provides enterprise storage, data management software and hardware products and services. The company is well-positioned to gain from data-driven digital and cloud transformations. Also, the rapid adoption of FAS hybrid flash arrays and all-flash arrays bodes well.

For the third quarter of fiscal 2023, the company anticipates non-GAAP earnings to be between $1.25 and $1.35 per share. Net revenues are anticipated in the range of $1.525-$1.675 billion, indicating a year-over-year decline of 1% at the mid-point.

NTAP currently carries a Zacks Rank #3 (Hold). Shares of the company have lost 23.8% compared with the sub-industry’s decline of 16.2% in the past year.

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Stocks to Consider

Some better-ranked stocks from the broader technology space are Jabil (JBL - Free Report) and Arista Networks (ANET - Free Report) . Jabil presently sports a Zacks Rank #1 (Strong Buy) whereas Arista Networks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks.

The Zacks Consensus Estimate for Jabil’s 2023 earnings is pegged at $8.37 per share, rising 2.3% in the past 60 days. The long-term earnings growth rate is anticipated to be 12%.

Jabil’s earnings beat the Zacks Consensus Estimate in all the last four quarters, the average being 8.8%. Shares of JBL have increased 26.4% in the past year.

The Zacks Consensus Estimate for Arista Networks 2022 earnings is pegged at $4.38 per share, rising 0.2 in the past 60 days. The long-term earnings growth rate is anticipated to be 17.5%.

Arista Networks’ earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 12.7%. Shares of ANET have increased 1.4% in the past year.


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