NetApp Sheds Web Appliance Unit

Vowing to tighten its focus on storage systems, Network Appliance today agreed to sell its NetCache business to Blue Coat Systems for roughly $23.9 million in cash and stock.

NetCache, which made $66 million in 2006, representing only 3 percent of NetApp’s revenues, makes Web appliances that businesses run in anything from primary data centers to remote offices and branches worldwide. NetCache machines secure and accelerate information piped over the Internet.

Functions of these boxes include proxy, caching, access control, content filtering and antivirus. The machines also pare delays and bandwidth usage to improve delivery of applications such as ERP and CRM systems.

The machines also facilitate video broadcasts and video-on-demand services.

NetApp said in a statement it expects to close the deal in 90 days.

Upon closing, NetApp NetCache employees will either be offered positions at Blue Coat Systems or will be deployed on other development programs or in new roles within NetApp.

NetApp said in a statement it will provide current customers support for their NetCache appliances for the duration of their support contracts and will honor all existing NetCache customer contracts.

While he acknowledged that NetCache helped grow NetApp to a $2 billion dollar company, Jay Kidd, senior vice president and general manager of NetApp emerging products group, said the move “allows us to sharpen our focus on data management solutions and services for the enterprise data center.”

“Over the long term, our NetCache customers will be better served working with a supplier who has a broader offering in the content delivery market and a strategic commitment to the Internet access, security, and proxy market.”

Blue Coat is that supplier, making appliances and software applications to improve information delivery and security over the Internet.

Blue Coat CEO Brian NeSmith said in a statement the purchase will help further the company’s vision of using proxy technology as the foundation of application delivery infrastructure.

The company is making the deal with the help of a $42 million private equity investment by Francisco Partners and Sequoia Capital.

StorageIO analyst Greg Schulz said selling NetCache will help NetApp focus on building out recent acquisitions that are in more harmony with core storage, management and data protection.

Analysts with Baird U.S. Equity Research praised the deal Friday and said NetApp has maintained its “outperform” rating.

“We believe the divestiture will prove essentially immaterial to EPS, and a smart strategic action that allows management to concentrate more on core areas of the business,” analysts for the firm said in a research note.

“NTAP continues to benefit from solid growth drivers and expansion into new geographic markets, which we view as sustainable for several years.”

NetApp has taken steps of late to bolster its presence in the storage market, introducing new high-end storage arrays and a high-performance computing bundle, to better compete with EMC, Hitachi Data Systems, HP and others.