Welcome to the NetApp, Inc. third quarter 2009 earnings conference call. (Operator Instructions) I would now like to turn the presentation over to your host for today’s call, Ms. Tara Dhillon, Senior Director of Investor Relations; please proceed.

Good afternoon everyone. Thank you for joining us today. Our call is being web cast live and will be available for replay on our website at www.netapp.com along with the earnings release, the financial tables and GAAP and non-GAAP reconciliations. Today we are also presenting slides concurrently with our audio remarks. They will be available for download on our Investor Relations site at the end of this call. In the course of today’s call we will make forward-looking statements and projections that involve risk and uncertainty including statements regarding our financial performance in future periods, including Q4 of FY09, our expectations regarding future growth, market share and customer demand, our expectations with respect to our inventory management, the expected costs of settling a dispute with the Federal Government, the expected financial benefits from our restructuring actions and our expectations regarding our effective tax rate. 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, our ability to maintain or increase backlog and increase revenue, increased competition and the material and adverse global economic market conditions that currently exist. Other equally important factors are detailed in our accompanying press release as well as our 10-K and 10-Q reports on file with the SEC and also available on our website, all of which are incorporated by reference in today’s discussion. Please note that all numbers are GAAP unless stated otherwise. To see the reconciliation items between non-GAAP and GAAP refer to the tables on our press release and on our website. We would also like to notify you that in accordance with SEC guidance published on August 22, 2008, NetApp will begin to disseminate material information about the company through our corporate website within the next several fiscal quarters. We intend to designate a separate portion of our website for purposes of these disclosures and will include a prominent link on our site to allow visitors to locate this information, which NetApp will routinely update. The website will supplement, rather than replace, NetApp’s current existing channels of information distribution. With me on today’s call are Dan Warmenhoven, Chairman and CEO; our President and COO, Tom Georgens and our CFO, Steve Gomo. Steve will review the third quarter financials and discuss our outlook, Tom will discuss our operations and our opportunities, Dan will share his perspective on the business and the market, and then we will wrap up with Q&A. At this point I’ll turn the call over to Steve.

Good afternoon everyone. The financial highlight of our quarter was strong expense management by the entire NetApp team. Given that the macro economic environment continues to be challenging and uncertain this discipline was crucial. While our results in November and December were close to plan, close rates became even more unpredictable than we had expected in January and January performance was lower than planned. Fortunately our expense reduction efforts were already well in motion and we were able to expand our non-GAAP operating margin in spite of the revenue decline. Despite our Q3 expense reductions, the worsening global macro conditions in January and the ensuing levels and uncertainty about IT spending in calendar 2009 influences can move forward with the restructuring plan which we implemented earlier this week for fiscal Q4. This restructuring will further streamline our expense stack for the lean economic times ahead. Our actions are designed to preserve our revenue generating potential, increase our focus on true growth opportunities and at the same time improve our operating margins in FY10. Before discussing the future I will walk through our third quarter results. On a non-GAAP basis company revenue for the third quarter was $874 million, down 4% sequentially and down 1% from Q3 last year. Foreign currency effect diminished our sequential results by about 1.7 percentage points and lowered the year-over-year growth by almost 2 percentage points. Including the impact of $128 million accrual to value of contingency related to a dispute with the Federal Government, on a GAAP basis total revenue was $746 million. As we have previously disclosed this dispute relates to a disagreement over our discount practices and compliance with the Price Reduction Clause Provisions of our GSA contract for the time period of 1995 to 2005. Since 2005 most of NetApp’s government business…

Thanks Steve. Despite the dismal economic backdrop there are still several very encouraging items to highlight about our business this quarter. Our storage efficiency story is particularly timely in this environment and our 50% savings guarantee for virtualized environments is generating higher rates of new customer engagements. Our channel development and sales force expansion have yielded record new mid size enterprise and storage 5000 accounts. Our SAN bookings are up dramatically and we closed the largest deal in our history this quarter. As Steve outlined for you we are also taking appropriate steps to tune the company for the current environment. As we mentioned in the last call we took actions in Q3 to stop most hiring and discretionary spending with the goal of more rapidly returning to our more historic operating model. The team responded aggressively and operating expenses were reduced by $30 million in a single quarter allowing us to generate sequential operating leverage despite the revenue decline. However, the economic outlook has only become more challenging and we had to make further reductions. Despite the difficult decision to reduce headcount we have actually increased investment in a number of key areas by eliminating low-yield products and inefficient activities. Similarly, our investment in quote bearing reps leaves us with sufficient sales capacity to rapidly rebound with the worldwide economies eventually recover. A key factor this quarter is the reported January effect where most customer budgets were being formally re-leveled to reflect the reduced 2009 expectations. In many cases customers were still finalizing budgets in January and many still have not completed the process. With our quarter ending January 23, earlier than usual, this uncertainty clearly impacted our business after somewhat more predictable conditions in November and December. The portion of our business most impacted by the downturn has…

Thank you Tom. NetApp’s fiscal third quarter was characterized by strong execution in the areas of new account acquisition and expense management in the face of demand headwinds resulting from the economic contraction. The economic environment is impacting enterprises around the world along with the vendors who do business with them. Many companies are still trying to determine how severely their businesses will be impacted and therefore what their IT budget will be in 2009. As a result there is a high degree of uncertainty about what our business levels will be in the near term. In terms of expense management I would like to thank the NetApp team for their outstanding response when we asked them to do all they could to reduce expenses. We took $30 million out of our expense structure in one quarter. However our expectation is that a challenging business environment will exist for at least the next several quarters and we concluded we must reduce our expense structure even further than the reductions we achieved in Q3. Consequently we made a very difficult decision to reduce our employment by slightly more than 6%, approximately 540 positions. It was especially disappointing that we had to take this action within three weeks of being named the Best Place to Work in the U.S. by Fortune Magazine. The restructuring was not just about expense reductions. The primary focus of the restructuring was to implement changes intended to improve our efficiency while continuing to execute on our core strategy of delivering industry leading products and support and focusing on new account acquisition. These actions are designed to streamline our business and make sure we have the optimum resource allocation to maximize our ability to gain share during the downturn. I believe that our team has now set the…

(Operator Instructions) The first question comes from the line of Wamsi Mohan – Merrill Lynch. Wamsi Mohan – Merrill Lynch: You have alluded to the opportunity to gain share when market conditions are tough. Your results from the quarter suggest otherwise, at least from a product revenue standpoint as you lost some share. Can you comment on whether your expectations of share gain of 2-3 times market growth rate have changed and if yes do you expect to run the business with a different operating margin target?

Let me first challenge the assumption we lost share. Certainly we were very weak in January but I don’t think there is anybody else to compare us to for the November/December period. My guess is when you see the other storage vendors report on their first calendar quarter which includes January you may come to a different conclusion. That said, we were clearly down in, as Tom indicated, our top enterprise accounts. I think on a year-over-year basis they were down about 20% and that was the cause for the major shortfall. It was very concentrated in those accounts. About 16% of revenue came from new accounts so it almost balanced it out but nonetheless we couldn’t overcome the 20% shortfall. I don’t think we lost share in those accounts I should add. They just basically stopped spending. So if you put it all together I think we are still on track to continue to gain share. It may not be fully realized until the existing large accounts resume spending and the new accounts increase spending. I think we still have the opportunity to grow at rates that are multiple of the market growth rate in storage. We are not really changing our model for the operating income and leverage.

If I could add one comment to that I think if you look at the business on aggregate we clearly had some difficult times with our top enterprise accounts. However, on the other hand I would say that our SAN business was remarkably robust in this environment and there is no question that we gained share on the SAN side. In fact arguably we may have gained more share this quarter on the SAN side than we have in any quarter in recent memory.

The next question comes from Brian Marshal – American Technology Research. Brian Marshal – American Technology Research: A question with regard to pricing trends on your stand alone product file servers it looks as though the implied product gross margins there in April are going to be down about 1,000 basis points year-over-year. Do you expect this trend to continue going forward or flatten out at these levels? If you could provide any color it would be helpful.

Everybody here is confused about this comment about 1,000 basis points.

If you are talking about product I think you are referring to the consolidated company gross margin where we guided to something around 60% compared to 60.7% this quarter. Is that correct? Brian Marshal – American Technology Research: Actually no, when I look at April 2008 the product gross margins were about 60% that quarter and implied guidance for April 2009 based upon my model kind of assumes 50-51% for product gross margins.

I don’t have your model in front of me but that is not what my model shows. Remember also that in the fourth quarter of last year we treated our warranty costs differently than we treat them in FY09. So it is about 1.5 to 1.7 percentage points additional charge to the product cost of goods sold reducing the margin by a like amount and services goes just the opposite direction. So it is not like-for-like. It is true the product margins are down but it is nothing on the order of what you described. A substantial portion, i.e. 1/3, is due to the effect of the reporting change.

The next question comes from Min Park – Goldman Sachs. Min Park – Goldman Sachs: Just given the weakness in the month of January can you give us any color on your backlog heading into your fiscal Q4?

It is not materially different than you would expect for any other Q4. It is in line with what it was in this past quarter, Q3, and is very consistent with prior levels.

The next question comes from Brian Freed – Morgan, Keegan & Company. Brian Freed – Morgan, Keegan & Company: Last conference call you gave us a little color in terms of booking trends. I think you told us what bookings were in the October timeframe. Could you give us a little more color as to what you are seeing in January or year-to-date?

We were tracking pretty good through November and December. I think the focus was on the first three weeks in January. That is where things kind of really stalled out. Remember the quarter ended the Friday of the week that Obama was inaugurated on the 23rd. It was a really early end mostly because of a phenomenon of having our fiscal quarter’s walk, if you will, through the calendar of the year. The first three weeks were particularly weak in terms of bookings performance. Round numbers if you had looked at this as a normal pattern you would have seen about $50 million more booked in those three weeks than we experienced. That is a gross number. I’m not going to try to defend that number. You can come at it from three or four different directions. That is kind of the sense of how the slow down occurred. It would have been probably $30-35 million more in revenue if we had seen a normal bookings pattern those last three weeks. Brian Freed – Morgan, Keegan & Company: Have you seen any improvement in the last two weeks?

I’m not going to comment on that.

The next question comes from Keith Bachman – BMO Capital Markets. Keith Bachman – BMO Capital Markets: Steve, on the free cash flow generation you mentioned it was about 20-21% of revenues and that was fairly consistent with the October quarter. Last year you were about 24-26% depending on the quarter. Does that free cash flow yield so to speak continue up in this environment and in particular your DSO performance was pretty good. Is that sustainable within the context of free cash flow?

That is a difficult question to answer since we are not forecasting the fourth quarter revenue levels or next year’s revenue levels. Let’s put it this way, if business stays in this range free cash flow is going to be within a relevant range plus or minus $15-20 million of where it is now. I think our DSO is probably going to be better than our historical performance primarily just because of the weighting of the deferred element in our revenue base. Remember those items have already been invoiced in a prior period. We don’t have to collect those, etc. so the DSO is a little bit of an artifact of a shift in revenue mix towards more deferred elements. That said I think this company’s ability to generate cash is pretty substantial and I would think that we should be able to keep the free cash flow in a range of 18-24% depending on the quarter.

The next question comes from Mark Moskowitz – JP Morgan. Mark Moskowitz – JP Morgan: Regarding the velocity or weakness within hardware I want to get a sense if you can give us some context about how we should think about the roll out effect if you will in terms of software and services from this weakness in hardware over the next couple of quarters. How does that impact both the revenue velocity as well as margins?

I guess I don’t really expect anything to change in our mix if that is what you are getting at. I don’t see any fundamental changes going on in the market so I would expect the relative bookings profile as far as hardware and software services will be roughly the same. Clearly if revenue deteriorates further certainly that is not our hope or our forecast the impact of the deferred component will be a greater percentage of our overall revenue and that would be a factor. I think for now I don’t expect the dynamic to change very much. Probably the only one detail in that are customers that are not necessarily buying as much new equipment are certainly keeping their existing equipment on maintenance so we are starting to see maintenance renewal activity on equipment that has been out there for some time and that will continue.

This is consistent with what we saw in 2001. We would also expect to see add-on storage increase in the mix going forward as customers try to forestall upgrading systems and just kind of expand them in place as a temporary stop gap measure. We did not see that this quarter which I was a little surprised about. I still expect to see it going forward.

The next question comes from Bill Choi – Jeffries.

I’d like to get some more color on the January precedent in a slightly different way. Are you able to provide some kind of a year-over-year comparison on a monthly basis that would give us a sense of how rapidly things dropped in January and whether given the push into the fiscal year end that is the kind of level you would expect heading into Q4?

No I can’t. Here is the problem. Our calendar year and fiscal year don’t line up very well. You find end of year effects in the calendar year, such as IBM for instance which had a really big finish in the calendar year, don’t line up week by week in our fiscal calendar.

But compared to the same time period for you a year ago are you able to give a year-over-year comparison of how November/December and then January looked?

The best I can do is what I have done. I will tell you I think our bookings on a normal progression would have been about $50 million higher in that last three weeks than what we actually experienced.

I’d like to follow-up on that one too if I could. The one thing that I want to be clear about is that with our quarter ending on the 23 what typically happens is it isn’t only about January activity levels it is also about customer behavior. Usually the first couple of weeks in January customers are coming back from the holiday, resetting their budgets and usually those are difficult weeks to get business closed. In our particular case we typically have 2-3 weeks after that to actually close the quarter. In this particular case we only had one such week so our commentary about the January effect is just as much about corporate calendar as it is about business levels and I think at this point it is hard to speculate what the relative impact of those two were.

The next question comes from William Fearnley – FTN Midwest Securities. William Fearnley – FTN Midwest Securities: I wanted to ask if I could how are you looking at near-term and long-term changes in the sales support staff deployments? Certainly you saw weakness in your biggest accounts but strength in the channels and how do you look at deployments going forward and how do the upcoming staff cut backs affect some of that as well?

First of all the staff cut backs process is virtually complete. That process began this week and your point is a fair one. The staff cut back was not just about a financial exercise of beating a cost target. We actually used this exercise to restructure in a number of ways and I think every aspect of the company have taken substantial steps to not only find a way to reduce cost but also find a way to invest in our key investment areas and our key priorities going forward. So we did not cut all aspects of the company equally. We clearly kept a focus on those things that were going to keep generating business in the near-term as well as generate business for us in the long run with product development and the like. Clearly we have restructured our activities around moving support personnel closer to the customer in some cases, redeploying our people away from some of our slow moving, low growth accounts towards new account activity. All of those things are on the way. That was a big part of our process. The whole activity was not only about meeting new cost targets. The re-engineering component as I said had equal emphasis and was equally dramatic. William Fearnley – FTN Midwest Securities: Is there any overhang with any negotiations you have to do with work councils or whatever in Europe? I know you have taken the actions but is there any delay in terms of when the people actually leave the company?

The answer to that is yes. Obviously we have a lot of complexity associated with it. That is why I said the process is substantially complete. There is certainly going to be some overhang in Europe and some other geos and there will also be some people in transitionary roles for awhile as we make some of these re-engineering changes.

The next question comes from Chris Whitmore – Deutsche Bank. Chris Whitmore – Deutsche Bank: Can you quantify the impact of exiting product lines on annual revenue? How large are those products and what is the impact going forward?

I suspect you are referring to two in particular. One would be Store Vault and I think at peak I don’t think that one reached $5 million per quarter of revenue. The other would be the SnapManager for systems and that one really struggled. I’m not sure we ever reached $1 million.

I think in summary a big part of our thinking here is that in a cost constrained or investment constrained environment we can make sure that we are spending our money on the things that are going to have the greatest return. Clearly those products didn’t measure up against that particular metric and as a result we basically skewed those resources to other, more productive activities. I think that is visible but that is symptomatic of a lot of the changes we made internally in terms of making these hard decisions around activities that are not yielding what we want them to and essentially the message is that the opportunity to invest in new initiatives is going to have to come from reducing investment in those things that are not nearly as lucrative. Chris Whitmore – Deutsche Bank: If I could ask a question around expectations and Opex and sales people and making their year-end targets, presumably you have made some assumption there. Can you share with us in terms of what is in that Opex guidance for sales force going into this?

We have a normal seasonality, a normal commission structure that occurs in the fourth quarter when a lot of the accelerators are in place as people are beating their numbers and indeed many of our sales reps are beating their numbers this year so I don’t know it is going to be a whole lot different than it has been in past years. The aggregate level will probably be down in aggregate on an average per person basis but not that much. Chris Whitmore – Deutsche Bank: But yet you are getting less than normal seasonality on the top line? I’m just trying to understand that.

It is not a one-for-one relationship because the question is a certain account in an accelerated situation? Are the people that serve that account being paid on an accelerated basis? You can have an account that is 200% of their goal and the rest of them are 80% and if you do the math the way the multipliers work you can get a year that looks normal even though on average the company is down a little bit.

The next question comes from Benjamin Reitzes – Barclays Capital. Benjamin Reitzes – Barclays Capital : With regard to just another way to kind of think about going forward your indirect sales grew 8%, that is down I believe from 24% the previous quarter but your direct sales down 17%. Just common sense and I was wondering if you could refute this, wouldn’t indirect sales go next? We just heard from Arrow and obviously things are pretty weak but wouldn’t indirect go next and go pretty negative here and that is something you have to factor into your views for the upcoming quarter and make revenue go down sequentially? You would think indirect keeps this trend on the big accounts, you said the top 50 accounts, so I’m just thinking isn’t this indirect figure on the lag and we get that hit next quarter and how do you not know that?

I wouldn’t quite make that assumption. I’m not sure logically that follows. The fact that we are gaining so many new customers and we are actually acquiring customers at record rates tells me that the dynamics we are seeing are account specific and not fundamental to the entire industry at large or our competitive position. If we were not adding new customers at the same rate then I would say this industry is mostly locked in and we would expect to see these slow downs across the board. But we see the new mid sized enterprise account growth and we see the new storage 5000 account growth I still think there is opportunity for those channels to still be successful. A lot of that business is coming through our indirect channel and if anything if I look at what my competition is winning or losing their propositions look a lot similar to ours and that is the high end is weak and there is lots of new customer activity in the mid size enterprise area. I think our challenge is actually reaching it, not running out of demand.

The next question comes from Keith Bachman – BMO Capital Markets. Keith Bachman – BMO Capital Markets: I just want it on record that I went back in the queue to ask my second question. I wanted to ask you about product plans. That is to say big ticket generally isn’t selling well no matter what company; IBM, Sun, I imagine we will hear from HP and you guys that 6000 didn’t do as well as the 2000 series. How does that make you think differently or not about the product road maps for the balance of the year particularly any color on the GX and how you think about the operating system unification plans going forward?

Engineering is a long lead time activity so I think responding from the road map to events that might be a quarter or two quarters in duration is difficult. We haven’t done anything to change our road map in terms of hardware platforms which are the longest lead time items in response to this in any way. As far as the high end is concerned there are basically one or two things that I think are interesting and that is with the advent of the convergence of our operating systems and bringing clustering to our mainstream customer base the trade off of how many big high end platforms we need to continue to develop in the future as opposed to basically building large complexes out of more cost effective building blocks using clustering, there is a fundamental architectural question. I don’t think anybody in this industry is ready to say we are not going to build another high end platform but the question is beyond that will there be another one and another one after that. I think time will tell. For us I think our road map is intact. We still have another high end platform on the road map. We fully intend to deliver that as we previously said we would but I think beyond that as we see clustering become more pervasive then I think it is more of an option for debate.

The next question comes from Jayson Noland – Robert W. Baird & Co. Jayson Noland – Robert W. Baird & Co. : I had a question on verticals. I think the government was down off of a tough F2Q comp. Was the difference made up on the financial services side?

I’m trying to look at the year-over-year comparisons. First of all it is hard to believe that financial services would make up for anything. Quite frankly our government business is up 11% year-over-year. It was probably our most successful growth geo in terms of our major geos. I don’t feel like our government business has seen any weathering at all. In the aggregate our breakdown is tech still 16%, financial services and government were 11% and then the other verticals were all single digits.

Just with regard to the Federal Government, remember that they have really two strong quarters which are our fiscal two and four. Fiscal Q2 which ends in October and contains the end of the U.S. government fiscal year which is the end of September. So they surge. So on a sequential basis you would expect to see it fall quite dramatically which it didn’t.

The next question comes from Alex Kurtz - Merriman Curhan Ford.

On the competitive front as you cost trade more on the mid sized enterprise are you seeing more CTO’s and CIO’s bring additional vendors for the RFP process? Are you seeing more people in the deal or is it still the same group across the board?

The competitive mix didn’t change that much. We looked at frequency of engagement versus various competitors, win/loss rates both on deals and dollar value of the deals and it was remarkably consistent from Q2 to Q3. It is really the same players. We don’t really see much difference. I think you might see a difference when you get to the next layer down, what we call the small enterprise, they have a tendency to buy more from a server vendor with storage bundled in but the medium size enterprises are still pretty good size and they are not small businesses in general.

If you were to look at the 700 accounts you talked about you added this quarter was there a specific geo or vertical that really stood out from those customer acquisitions?

No. Actually not. I’d say what is more interesting is the technologies that set out. Server virtualization and the underlying technology of SAN. Probably just for a point is that the new customer account information actually does not include IBM which is a whole other trench of new accounts both for storage 5000 and the mid size enterprise. However, if I am going to make one observation about the industry and vendors this is particularly around the SAN industry, we are certainly seeing some of the newer companies showing momentum. Our SAN business is particularly robust in this climate and I actually think that there actually is a shift in SAN share underway. In fact if you look at the 5-year charts of SAN share NetApp has clearly gained the most share of the major players but the only other category gaining share is “other.” I tried to highlight this a little bit in my comments but I believe what you are starting to see is some new innovative technologies enter the SAN market that are not being offered by the traditional vendors. As a result I think particularly in this environment that most of those new technologies whether it be thin provisioning or de-duplication and the like are particularly relevant in an investment constrained environment. As a result I think some of the new innovation is getting a look it didn’t get two years ago. I think that what you are starting to see is some of the traditional SAN vendors, particularly in the mid range particularly vulnerable to it, and you are starting to see companies like ourselves and other companies offering new innovation gaining share.

The next question comes from Kaushik Roy – Pacific Growth Equities. Kaushik Roy – Pacific Growth Equities: On operating margins I understand the long-term target is still 16%. Can you comment on your expectations on operating margins for the next couple of quarters? I guess at what revenue run rate are you inclined to reduce headcount more?

You were breaking up a little bit and I’m not sure I heard the question. We are not giving revenue guidance. I can’t really give you operating margin guidance.

Reverse engineering. I think his question is, he did break up, but I think the question is at what level do we achieve the 16%.

You know when we get to a steady state let’s say in FY10 we should be able to hit 16% at $920 million and even at $900 million we are very close, within one percentage point of that, so by restructuring we positioned ourselves to be able to achieve our objective of 16% at very low levels of $900+ in revenue and even if we dipped into the $800’s which we are not projecting but if that were to happen we are still within reach of our goal. Kaushik Roy – Pacific Growth Equities: So you don’t have to cut more heads if it falls slightly below $900?

My answer today would be no.

The next question comes from Bill Schultz – Credit Suisse. Bill Schultz – Credit Suisse: Dan I wanted to ask a question on the competitive landscape as well. There was some chatter that some of your competitors might have been offering some pretty aggressive bundle deals in December to pull business into the quarter. Did you see any impact from these types of actions and is there a risk that the environment could get incrementally aggressive as it progresses through the next several quarters potentially impacting your margins?

Nothing really unusual. I should point out that a lot of our competitors do have quarters which end at the end of the calendar year and in particular the market leader has one that ends that way so they tend to get more aggressive every December. But this was nothing unusual from that perspective. Again as you look at the competitive frequency of engagement, resolution of deal and win/loss, dollar value of the deal, the reason for win or loss, etc. it really was very, very consistent with prior periods. Both the year-ago and the quarter earlier period both. No, I really didn’t see the change. I think what you probably saw is normal behavior but everybody is kind of more tuned into it now because they are looking for it because the economic conditions are bad. But I have to tell you sales people have a tendency to try to drive the accelerators and so forth and are willing to try to provide some financial incentives to our customers to close business. That is a normal pattern of behavior.

The next question comes from Brent Bracelin – Pacific Crest Securities. Brent Bracelin – Pacific Crest Securities: I guess just a specific question for Tom. As you look at NetApp it clearly has a long history of increasing storage efficiency through software. Clearly you talked about strong adoption of de-duplication, reducing storage footprints by up to 70%. As you think about the product business how do you now a portion of the 13% decline here in product sales is not partially attributed to the success you are having on de-duplication? At least partially exacerbating the macro concerns you see out there.

I guess my first response is that so what if it is. If we have 90% market share then I would say let’s be careful with the technology because we don’t know what is going to happen. But it is a mixed bag. A fair number of our big customers using or accelerating their deployment of this technology in order to defer storage purchases because they are under enormous budget pressure? I have no doubt that is going on. In fact I do see it. On the other hand once they have done that I think it makes a pretty sticky NetApp customers when it comes to actually buy some things. On the other hand not all of our platforms, not all of our older platforms actually are capable of running this and in that case it is an opportunity to upgrade. The other thing is the connect rate of this technology is the new environment is extremely high so I am sure it is helping business. So in the aggregate I have no doubt that some of the storage efficiency stuff is slowing our momentum in some of our big, large installed bases. However if that drives customer loyalty in the long run I think that is a risk worth taking. In the end I think if you have got new innovation the best thing you can do is make it available to your customers. I think only good things happen to you in the long run. Under no circumstances I could imagine unless we had massive market share would we contemplate holding this technology back. So I think we are going to aggressively promote it and if it has a short-term impact on our demand from our existing customer base then so be it.

When you look at the 16% of revenue that came from new accounts in the quarter and you go through the detail as to reasons why we won it was predominately storage efficiency. So I think that more than offsets any decline we might have seen from our installed base customers. Brent Bracelin – Pacific Crest Securities: It sounds like de-duplication certainly could be a potential headwind here in the short run but as you start to anniversary the inflation of the technology you should go back to a normalized kind of share gain environment. Is that the right way to look at it?

I think so. I think it frees up the space. Like de-duplication. As soon as this falls they are going to have to expand so it may be a short-term effect but like Tom said many of those have to be upgraded from a systems standpoint to even turn on.

I also believe that in the long run certainly this business environment is extraordinary but in the long run storage tends not to be capacity limited or demand limited. It tends to be budget limited. I think as normal environments as people get the efficiency to de-duplication and the thin provisioning and all the other technologies typically what they do is find a way to put even more stuff on line or make more copies of data or do more things along those lines. In this environment I think that probably curtailed as a second part of that but in the long run I feel that business is demand limited and if you can compress it you can find other things to put on line and more than make up for it. I am a firm believer and I haven’t been proved wrong that in the long run anything that lowers cost per bit stimulates demand.

The next question comes from William Fearnley – FTN Midwest Securities. William Fearnley – FTN Midwest Securities: Steve I apologize but a housekeeping question here. How should we be thinking about the tax rate and any potential tax benefits from R&D tax credits? Also how should we be thinking about share count and buy backs here in the near term?

On a tax rate standpoint if you are looking on a go forward basis I would be using a 16% effective tax rate. That is what we are using here and that is what we expect. As far as the share count is concerned I think there is a number of puts and takes there. The bottom line is I would look for it to be very flat.

At this time we have no additional questions. I will turn the call back over to Tara Dhillon for closing remarks.

Thank you for joining us today everyone. We will look forward to talking to you again on May 21.