This section and other parts of this Form 10-Q contain forward-looking
statements, within the meaning of the Private Securities Litigation Reform Act
of 1995, that involve risks and uncertainties. Forward-looking statements
provide current expectations of future events based on certain assumptions and
include any statement that does not directly relate to any historical or current
fact. Forward-looking statements also can be identified by words such as
"future," "anticipates," "believes," "estimates," "expects," "intends," "will,"
"would," "could," "can," "may," and similar terms. Forward-looking statements
are not guarantees of future performance and the actual results of NetApp, Inc.
("we," "us," or the "Company") may differ significantly from the results
discussed in the forward-looking statements. Factors that might cause such
differences include, but are not limited to, those discussed in Part II, Item 1A
of this Form 10-Q under the heading "Risk Factors," which are incorporated
herein by reference. The following discussion should be read in conjunction with
our consolidated financial statements as of and for the fiscal year ended April
30, 2021, and the notes thereto, contained in our Annual Report on Form 10-K,
and the condensed consolidated financial statements and notes thereto included
elsewhere in this Form 10-Q. We assume no obligation to revise or update any
forward-looking statements for any reason, except as required by law.







                                       28

--------------------------------------------------------------------------------









Overview

Our Company

NetApp is a global cloud-led, data-centric software company that gives
organizations the freedom to put data to work in the applications that elevate
their business. We help our customers get the most out of their data with
industry-leading cloud data services, storage systems, and software. Throughout
our history, we have kept our focus on one thing - the data, continuously
improving how data are managed, stored, analyzed, protected, and moved. Our
strategy has been shaped around helping our customers embrace the full potential
of new technologies - from the rise of the internet, to helping large enterprise
customers in vertical markets, to bringing new systems to market. Today, we are
focused on unlocking the best of cloud.

As our products and solutions portfolios evolve, market dynamics change, and
management continues to assess our largest opportunities, we periodically change
how we manage our business. As of the end of our first quarter of fiscal 2022,
our Chief Operating Decision Maker (CODM), who is our Chief Executive Officer,
realigned internal reporting and began using financial information for
components of our business, organized based on category of product/solution, to
evaluate performance and allocate resources. This resulted in the creation of
two reportable segments for financial reporting purposes: Public Cloud and
Hybrid Cloud. Our CODM measures the performance of each segment based on segment
revenue and segment gross profit.

Public Cloud offers a portfolio of products delivered primarily as-a-service,
including related support, and made available on the world's leading clouds.
This portfolio includes storage services, cloud automation and optimization
services, and cloud infrastructure monitoring services.

Hybrid Cloud offers a portfolio of storage and data management solutions that
help customers build and integrate on-premises and private cloud environments.
This portfolio is designed to operate with public clouds to unlock the potential
of hybrid, multi-cloud operations. Hybrid Cloud is composed of software,
hardware, and related support, as well as professional and other services.

COVID-19



The novel coronavirus, or COVID-19, pandemic and efforts to control its spread
have significantly curtailed the movement of people, goods and services
worldwide, including in most or all of the regions in which we sell our products
and services and conduct our business operations. We have taken precautionary
measures intended to minimize the risk of the virus to our employees, our
customers, and the communities in which we operate. Since March 2020, the vast
majority of our employees have been working remotely and we have limited
business travel.

During the first six months of fiscal 2022, due to the macroeconomic uncertainty
caused by COVID-19, we continue to observe certain customers delaying purchases
of our products and services, while other customers accelerate or place new
orders to address the demands of remote working and digital business. We also
experienced certain logistical challenges in delivering our products and
services to customers in certain regions, and minor supply chain constraints.
Given uncertainties that exist in the broader technology supply chain, we have
begun to invest in inventory and certain longer-term commitments to help
mitigate the risk of supply shortages. If supply chain challenges continue it
could result in an increase in our cost of revenues.

The magnitude and duration of the disruption to our business, and impact to our
operational and financial performance, caused by COVID-19 pandemic remain
uncertain. Refer to Part II, Item 1A. - Risk Factors for the significant risks
we have identified as a result of the COVID-19 pandemic.



Stock Repurchase and Dividend Activity



During the first six months of fiscal 2022, we repurchased 2.7 million shares of
our common stock at an average price of $84.88 per share, for an aggregate of
$225 million. We also declared aggregate cash dividends of $1.00 per share in
that period, for which we paid $224 million.

Restructuring Event



During the first six months of fiscal 2022, we executed a restructuring plan and
recognized expenses totaling $29 million, of which $7 million were recorded in
the second quarter of fiscal 2022, consisting primarily of lease termination
fees, office relocation costs, and employee severance-related costs.

                                       29

--------------------------------------------------------------------------------

Results of Operations



Our fiscal year is reported as a 52- or 53-week year that ends on the last
Friday in April. Fiscal year 2022, ending on April 29, 2022, is a 52-week year,
with 13 weeks in each of its quarters. Fiscal year 2021, which ended on April
30, 2021 was a 53-week year, with 14 weeks included in its first quarter and 13
weeks in each subsequent quarter. Unless otherwise stated, references to
particular years, quarters, months and periods refer to the Company's fiscal
years ended in April and the associated quarters, months and periods of those
fiscal years.

The following table sets forth certain condensed consolidated statements of income data as a percentage of net revenues for the periods indicated:





                                                  Three Months Ended                     Six Months Ended
                                            October 29,         October 30,       October 29,         October 30,
                                                2021                2020              2021                2020
Net revenues:
Product                                               52 %                53 %              51 %                51 %
Services                                              48                  47                49                  49
Net revenues                                         100                 100               100                 100
Cost of revenues:
Cost of product                                       24                  25                23                  25
Cost of services                                       9                   9                 9                   9
Gross profit                                          68                  66                68                  66
Operating expenses:
Sales and marketing                                   30                  31                30                  32
Research and development                              14                  15                14                  16
General and administrative                             5                   5                 5                   5
Restructuring charges                                  -                   3                 1                   2
Acquisition-related expense                            -                   -                 -                   -
Total operating expenses                              49                  53                50                  55
Income from operations                                19                  13                18                  12
Other expense, net                                    (1 )                 -                (1 )                (1 )
Income before income taxes                            18                  12                17                  10
Provision for income taxes                             4                   3                 3                   2
Net income                                            14 %                10 %              14 %                 8 %



Percentages may not add due to rounding

Discussion and Analysis of Results of Operations

Net Revenues (in millions, except percentages):





                                                 Three Months Ended                                   Six Months Ended
                                    October 29,       October 30,                       October 29,       October 30,
                                        2021              2020          % Change            2021              2020          % Change
Net revenues                       $       1,566     $       1,416             11 %    $       3,024     $       2,719             11 %


The increase in net revenues for the second quarter and first six months of
fiscal 2022 compared to the corresponding periods of fiscal 2021 was due to an
increase in both product revenues and services revenues. Product revenues as a
percentage of net revenues decreased by approximately one percentage point and
remained relatively flat in the second quarter and first six months of fiscal
2022, respectively, compared to the corresponding periods of fiscal 2021.



Product Revenues (in millions, except percentages):





                                                 Three Months Ended                                    Six Months Ended
                                    October 29,        October 30,                       October 29,       October 30,
                                        2021               2020          % Change            2021              2020          % Change
Product revenues                   $         814      $         749              9 %    $       1,544     $       1,376             12 %
Hardware (Non-GAAP)                          339                332              2 %              655               648              1 %
Software (Non-GAAP)                          475                417             14 %              889               728             22 %


Hybrid Cloud

                                       30

--------------------------------------------------------------------------------
Product revenues are derived through the sale of our Hybrid Cloud solutions and
consist of sales of configured all-flash array and hybrid systems, which are
bundled hardware and software products, as well as add-on flash, disk and/or
hybrid storage and related OS, NetApp HCI, StorageGrid, OEM products and add-on
optional software.

In order to provide visibility into the value created by our software innovation
and R&D investment, we disclose the software and hardware components of our
product revenues. Software product revenue includes the OS software and optional
add-on software solutions attached to our systems across our entire product set,
while hardware product revenues include the non-software component of our
systems across the entire set. Because our revenue recognition policy under GAAP
defines a configured storage system, inclusive of the operating system software
essential to its functionality, as a single performance obligation, the hardware
and software components of our product revenues are considered non-GAAP
measures. The hardware and software components of our product revenues are
derived from an estimated fair value allocation of the transaction price of our
contracts with customers, down to the level of the product hardware and software
components. This allocation is primarily based on the contractual prices at
which NetApp has historically billed customers for such respective components.

Total product revenues increased in the second quarter and first six months of
fiscal 2022 compared to the corresponding periods of the prior year, primarily
driven by an increase in sales of all-flash array systems.

Revenues from the hardware component of product revenues represented 42% of
product revenues in both the second quarter and first six months of fiscal 2022,
compared to 44% and 47% of product revenues in the corresponding periods of the
prior year. The software component of product revenues represented 58% of
product revenues in both the second quarter and first six months of fiscal 2022,
compared to 56% and 53% of product revenues in the corresponding periods of the
prior year. The increase in the software component percentage of product
revenues in the second quarter and first six months of fiscal 2022 is primarily
due to the mix of systems sold, including a higher mix of all-flash array
systems, which contain a higher proportion of software components than other
Hybrid Cloud products.

Services Revenues (in millions, except percentages):





                                                 Three Months Ended                                   Six Months Ended
                                    October 29,        October 30,                       October 29,       October 30,
                                        2021               2020          % Change            2021              2020         % Change
Services revenues                  $         752      $         667             13 %    $       1,480     $       1,343            10 %
Support                                      590                553              7 %            1,168             1,130             3 %
Professional and other services               75                 67             12 %              146               135             8 %
Public cloud                                  87                 47             85 %              166                78           113 %




Hybrid Cloud



Hybrid Cloud services revenues are derived from the sale of: (1) support, which
includes both hardware and software support contracts (the latter of which
entitle customers to receive unspecified product upgrades and enhancements, bug
fixes and patch releases), and (2) professional and other services, which
include customer education and training.

Support revenues increased in the second quarter and first six months of fiscal
2022 compared to the corresponding periods of the prior year, despite an extra
week in the first quarter of fiscal 2021 that contributed approximately $40
million of revenues in that period. The increases are primarily due to an
increase in our installed base and a higher mix of all-flash systems (which
carry a higher support dollar content than our other products) in the current
year.

Professional and other services revenues increased in the second quarter and
first six months of fiscal 2022 compared to the corresponding periods of the
prior year primarily due to an increase in demand from increased product sales.

Public Cloud

Public Cloud revenues are derived from the sale of public cloud offerings primarily delivered as-a-service, which include storage services, cloud automation and optimization services, and cloud infrastructure monitoring services.



Public Cloud revenues increased in the second quarter and first six months of
fiscal 2022 compared to the corresponding periods of the prior year primarily
due to strong customer demand for NetApp's diversified cloud offerings, coupled
with overall growth in the cloud market. The first six months of fiscal 2022
also benefitted from the acquisition of Spot, Inc. late in the first quarter of
fiscal 2021.

Cost of Revenues

Our cost of revenues consists of:


                                       31

--------------------------------------------------------------------------------
(1) cost of product revenues, composed of (a) cost of Hybrid Cloud product
revenues, which includes the costs of manufacturing and shipping our products,
inventory write-downs, and warranty costs, and (b) unallocated cost of product
revenues, which includes stock-based compensation and amortization of
intangibles, and;

(2) cost of services revenues, composed of (a) cost of support revenues, which
includes the costs of providing support activities for hardware and software
support, global support partnership programs, and third party royalty costs, (b)
cost of professional and other services revenues, (c) cost of public cloud
revenues, constituting the cost of providing our Public Cloud offerings which
includes depreciation and amortization expense and third party datacenter fees,
and (d) unallocated cost of services revenues, which includes stock-based
compensation and amortization of intangibles.

Cost of Product Revenues (in millions, except percentages):





                                                Three Months Ended                                  Six Months Ended
                                    October 29,       October 30,                      October 29,       October 30,
                                        2021              2020         % Change            2021              2020         % Change
Cost of product revenues           $         372     $         360             3 %    $         701     $         676             4 %
Hybrid Cloud                                 369               352             5 %              695               657             6 %
Unallocated                                    3                 8           (63 )%               6                19           (68 )%




Hybrid Cloud

Cost of Hybrid Cloud product revenues represented 46% and 45% of product
revenues for the second quarter and first six months of fiscal 2022,
respectively, compared to 48% and 49% for the corresponding periods of fiscal
2021. Materials costs represented 92% and 91% of cost of Hybrid Cloud product
revenues for the second quarter and first six months of fiscal 2022,
respectively, compared to 89% and 88% in the corresponding periods of fiscal
2021.

Materials costs increased by approximately $22 million and $39 million in the
second quarter and first six months of fiscal 2022 compared to the corresponding
periods of the prior year, reflecting the increases in product revenues in the
current year periods and the mix of systems sold in the respective periods.

Hybrid Cloud product gross margins increased by approximately two percentage
points and three percentage points in the second quarter and first six months of
fiscal 2022, respectively, compared to the corresponding periods of the prior
year. The increases are primarily due to the mix of systems sold, including a
higher mix of all-flash array systems which have higher margins than hybrid
systems.

Unallocated



Unallocated cost of product revenues decreased in the second quarter and first
six months of fiscal 2022 compared to the corresponding periods of the prior
year due to certain intangible assets becoming fully amortized in the second
half of fiscal 2021.

Cost of Services Revenues (in millions, except percentages):





                                                 Three Months Ended                                    Six Months Ended
                                    October 29,        October 30,                       October 29,       October 30,
                                        2021               2020          % Change            2021              2020          % Change
Cost of services revenues          $         135      $         123             10 %    $         265     $         238             11 %
Support                                       48                 50             (4 )%              96               101             (5 )%
Professional and other services               54                 50              8 %              105                98              7 %
Public cloud                                  25                 16             56 %               48                29             66 %
Unallocated                                    8                  7             14 %               16                10             60 %




Hybrid Cloud



Cost of Hybrid Cloud services revenues, which are composed of the costs of
support and professional and other services, was relatively flat in the second
quarter and first six months of fiscal 2022 compared to the corresponding
periods of fiscal 2021. Cost of Hybrid Cloud services revenues represented 15%
of Hybrid Cloud services revenues in the second quarter and first six months of
fiscal 2022 and 16% of Hybrid Cloud services revenues in the corresponding
periods of the prior year.



Hybrid Cloud support gross margins increased by one percentage point each in the
second quarter and first six months of fiscal 2022 compared to the corresponding
periods of the prior year due to growth in support revenues achieved with a
consistent cost base. Hybrid Cloud professional services gross margins increased
by three percentage points and one percentage point in the second quarter and
first six months of fiscal 2022 compared to the corresponding periods of the
prior year.



                                       32

--------------------------------------------------------------------------------

Public Cloud





Cost of Public Cloud revenues increased in the second quarter and first six
months of fiscal 2022 compared to the corresponding periods of fiscal 2021
reflecting the increase in Public Cloud revenues. Public Cloud gross margins
increased by five percentage points and eight percentage points in the second
quarter and first six months of fiscal 2022, respectively, compared to the
corresponding periods of fiscal 2021, reflecting efficiencies from scaling our
Public Cloud segment.



Unallocated



Unallocated cost of services revenues was relatively flat in the second quarter
of fiscal 2022 compared to the second quarter of fiscal 2021, while it increased
in the first six months of fiscal 2022 compared to the corresponding period of
fiscal 2021 due to our acquisition of Spot, Inc. in the first quarter of fiscal
2021 which resulted in higher amortization expense for certain intangible
assets.





Operating Expenses

Sales and Marketing, Research and Development and General and Administrative Expenses



Sales and marketing, research and development, and general and administrative
expenses for the second quarter and first six months of fiscal 2022 totaled $757
million, or 48% of net revenues, and $1,484 million, or 49% of net revenues,
respectively, reflecting a decrease of two percentage points and four percentage
points, respectively, compared to the corresponding periods of fiscal 2021.

Compensation costs represent the largest component of operating expenses. Included in compensation costs are salaries, benefits, other compensation-related costs, stock-based compensation expense and employee incentive compensation plan costs.

Total compensation costs included in operating expenses increased by $38 million, or 9%, in the second quarter of fiscal 2022 compared to the corresponding period of the prior year, reflecting an increase of all components of compensation costs.



Total compensation costs included in operating expenses increased by $17
million, or 2%, in the first six months of fiscal 2022 compared to the
corresponding period of the prior year, primarily due to higher salaries and
stock-based compensation expenses. Total compensation costs for the first six
months of fiscal 2021 includes the impact of an additional week in the first
quarter of fiscal 2021.

Sales and Marketing (in millions, except percentages):





                                                 Three Months Ended                                   Six Months Ended
                                    October 29,         October 30,                      October 29,       October 30,
                                        2021                2020         % Change            2021              2020         % Change

Sales and marketing expenses $ 465 $ 432

      8 %    $         916     $         861             6 %


Sales and marketing expenses consist primarily of compensation costs,
commissions, outside services, facilities and information technology (IT) costs,
advertising and marketing promotional expense and travel and entertainment
expense. Changes in sales and marketing expense consisted of the following (in
percentage points of the total change):



                                                     Three Months
                                                         Ended           Six Months Ended
                                                    Fiscal 2022 to        Fiscal 2022 to
                                                      Fiscal 2021           Fiscal 2021
Compensation costs                                                 6                     3
Commissions                                                        2                     2
Advertising and marketing promotional expense                      -                     1
Total change                                                       8                     6


The increase in compensation costs for the second quarter and first six months
of fiscal 2022 compared to the corresponding periods of the prior year reflected
an increase in average headcount of approximately 4% and 5%, respectively. The
expansion of our sales and marketing teams are expected to support our ability
to execute on key market opportunities.

The increase in commissions expense for the second quarter and first six months of fiscal 2022 is primarily due to higher performance against sales goals.



Advertising and marketing promotional expense increased in the first six months
of fiscal 2022 compared to the corresponding period of the prior year, primarily
due to higher spending levels on certain projects executed during the first
quarter of fiscal 2022.

                                       33

--------------------------------------------------------------------------------

Research and Development (in millions, except percentages):





                                                  Three Months Ended                                    Six Months Ended
                                     October 29,         October 30,                      October 29,       October 30,
                                         2021                2020         % Change            2021              2020          % Change

Research and development expenses $ 216 $ 212

       2 %    $         426     $         445             (4 )%


Research and development expenses consist primarily of compensation costs,
facilities and IT costs, depreciation, equipment and software-related costs,
prototypes, non-recurring engineering charges and other outside services costs.
Changes in research and development expense consisted of the following (in
percentage points of the total change):



                          Three Months Ended                Six Months Ended
                      Fiscal 2022 to Fiscal 2021       Fiscal 2022 to Fiscal 2021
Compensation costs                              4                               (4 )
Other                                          (2 )                              -
Total change                                    2                               (4 )


The increase in compensation costs for the second quarter of fiscal 2022
compared to the corresponding period in the prior year was primarily
attributable to higher incentive compensation expense as a result of stronger
company achievement against financial targets. The decrease in compensation
costs for the six months of fiscal 2022 compared to the corresponding period in
the prior year was attributable to a decrease in average headcount of 5%,
primarily resulting from the restructuring plans we implemented in fiscal 2020
which were completed during the first half of fiscal 2021.

General and Administrative (in millions, except percentages):





                                                     Three Months Ended                                    Six Months Ended
                                       October 29,         October 30,                       October 29,       October 30,
                                           2021                2020          % Change            2021              2020          % Change

General and administrative expenses $ 76 $ 67

         13 %    $         142     $         128             11 %


General and administrative expenses consist primarily of compensation costs,
professional and corporate legal fees, outside services and facilities and IT
support costs. Changes in general and administrative expense consisted of the
following (in percentage points of the total change):



                                                    Three Months Ended         Six Months Ended
                                                   Fiscal 2022 to Fiscal        Fiscal 2022 to
                                                           2021                  Fiscal 2021
Compensation costs                                                    10                        4
Professional and legal fees and outside services                       8                        7
Litigation settlement                                                 (7 )                     (4 )
Facilities and IT support costs                                        1                        1
Other                                                                  1                        3
Total change                                                          13                       11


The increase in compensation costs in the second quarter and first six months of
fiscal 2022 compared to the corresponding periods of the prior year was
primarily attributable to higher stock-based compensation expense. The increase
in professional and legal fees and outside services expense in the second
quarter and first six months of fiscal 2022 was primarily due to higher spending
on business transformation projects and an increase in legal fees. During the
second quarter of fiscal 2021, we incurred a litigation settlement charge of
approximately $5 million.

Restructuring Charges (in millions, except percentages):





                                                 Three Months Ended                               Six Months Ended
                                     October 29,        October 30,                  October 29,       October 30,
                                         2021               2020         % Change        2021              2020         % Change
Restructuring charges              $             7     $          37           NM   $          29     $          42           NM




NM - Not Meaningful




In the second quarter and first six months of fiscal 2022, we recognized $7 million and $29 million, respectively, in restructuring costs, consisting primarily of lease termination fees, office relocation costs, and employee severance-related costs.


                                       34

--------------------------------------------------------------------------------

Acquisition-related Expense (in millions, except percentages):



                                               Three Months Ended                              Six Months Ended
                                   October 29,       October 30,                  October 29,       October 30,
                                       2021              2020         % Change        2021              2020         % Change
Acquisition-related expense       $           1     $           3           NM   $           2     $          11           NM




NM - Not Meaningful


In the first six months of fiscal 2022, we incurred $2 million of acquisition-related costs, primarily legal and consulting fees.

Other Expense, Net (in millions, except percentages)

The components of other expense, net were as follows:





                                               Three Months Ended                                   Six Months Ended
                                   October 29,       October 30,                      October 29,       October 30,
                                       2021              2020         % Change            2021              2020          % Change
Interest income                   $           1     $           2           (50 )%   $           3     $           5            (40 )%
Interest expense                            (18 )             (18 )           - %              (36 )             (36 )            - %
Other income (expense), net                   3                 9           (67 )%               7                (8 )         (188 )%
Total                             $         (14 )   $          (7 )         100 %    $         (26 )   $         (39 )          (33 )%


Interest income decreased in the second quarter and first six months of fiscal
2022 compared to the corresponding periods of the prior year due to both a
reduction in the size of our investment portfolio and lower yields earned on the
investments. Interest expense remained flat in the second quarter and first six
months of fiscal 2022 compared to the corresponding periods of fiscal 2021.

The differences in other income (expense), net for the second quarter and first
six months of fiscal 2022 as compared to the corresponding periods of the prior
year are partially due to foreign exchange gains and losses year-over-year. In
the first six months of fiscal 2021, other income (expense), net includes a $14
million loss recognized from the extinguishment of our Senior Notes due June
2021.

Provision for Income Taxes (in millions, except percentages):





                                                  Three Months Ended                                   Six Months Ended
                                    October 29,         October 30,                      October 29,        October 30,
                                        2021                2020          % Change           2021               2020          % Change
Provision for income taxes         $          56       $          38             47 %   $          91      $          65             40 %


Our effective tax rate for the second quarter of fiscal 2022 was 20.0% compared
to 21.7% for the second quarter of fiscal 2021. Our effective tax rate for the
first six months of fiscal 2022 was 17.6% compared to 23.3% for the first six
months of fiscal 2021. Our effective tax rates reflect the impact of a
significant amount of our earnings being taxed in foreign jurisdictions at rates
below the U.S. statutory tax rate. Our effective tax rate for the second quarter
and first six months of fiscal 2022 decreased compared to the corresponding
periods of the prior year due to discrete tax benefits for lapses of statute of
limitations as well as increased benefits related to stock-based compensation.
Additionally, the corresponding periods of the prior year included tax charges
for the integration of acquired companies.

As of October 29, 2021, we had $214 million of gross unrecognized tax benefits.
Inclusive of penalties, interest and certain income tax benefits, $110 million
would affect our provision for income taxes if recognized. Net unrecognized tax
benefits of $111 million have been recorded in other long-term liabilities.

We continue to monitor the progress of ongoing discussions with tax authorities
and the impact, if any, of the expected expiration of the statute of limitations
in various taxing jurisdictions. We engage in continuous discussion and
negotiation with taxing authorities regarding tax matters in multiple
jurisdictions. We believe that within the next 12 months, it is reasonably
possible that either certain audits will conclude, certain statutes of
limitations will lapse, or both. As a result of uncertainties regarding tax
audits and their possible outcomes, an estimate of the range of possible impacts
to unrecognized tax benefits in the next twelve months cannot be made at this
time.









                                       35

--------------------------------------------------------------------------------

Liquidity, Capital Resources and Cash Requirements

October 29,       April 30,
(In millions, except percentages)                        2021             

2021

Cash, cash equivalents and short-term investments $ 4,548 $ 4,596 Principal amount of debt

$       2,650     $     2,650

The following is a summary of our cash flow activities:





                                                                 Six Months Ended
                                                          October 29,        October 30,
(In millions)                                                 2021               2020
Net cash provided by operating activities                $         540      $         401
Net cash used in investing activities                              (85 )             (321 )
Net cash (used in) provided by financing activities               (461 )    

746


Effect of exchange rate changes on cash, cash
equivalents and restricted cash                                    (13 )               44
Net change in cash, cash equivalents and restricted
cash                                                     $         (19 )    $         870


Cash Flows

As of October 29, 2021, our cash, cash equivalents and short-term investments
were $4.5 billion, which represents a decrease of $48 million for the first six
months of fiscal 2022. During the first six months of fiscal 2022, we generated
$540 million of cash from operating activities, offset by $224 million used for
the payment of dividends, $225 million used to repurchase shares of our common
stock, $97 million in purchases of property and equipment, and $14 million, net
of cash acquired, used for the acquisition of a privately-held company. Net
working capital was $2.5 billion as of October 29, 2021, approximately flat when
compared to April 30, 2021.

Cash Flows from Operating Activities



During the first six months of fiscal 2022, we generated cash from operating
activities of $540 million, reflecting net income of $426 million, adjusted by
non-cash depreciation and amortization of $92 million and non-cash stock-based
compensation expense of $115 million, compared to $401 million of cash generated
from operating activities during the first six months of fiscal 2021.

Significant changes in assets and liabilities in the first six months of fiscal 2022 included the following:



?
Accounts receivable decreased $292 million, reflecting more favorable shipping
linearity and seasonally lower billings for the first six months of fiscal 2022
compared to the last six months of fiscal 2021.
?
Accrued expenses decreased by $206 million, primarily due to employee
compensation payouts related to fiscal year 2021 commissions and incentive
compensation plans.
?
Deferred revenue and financed unearned services revenue decreased by $97
million, primarily due to a decrease in deferred software and hardware
maintenance contract revenues reflecting the seasonality of maintenance contract
renewal activities.
?
Long-term taxes payables decreased by $65 million, primarily due to
reclassification of transition taxes associated with U.S. tax reform from
long-term taxes payable to current taxes payable.

We expect that cash provided by operating activities may materially fluctuate in
future periods due to various factors, including fluctuations in our operating
results, shipment linearity, accounts receivable collections performance,
inventory and supply chain management, vendor payment initiatives, tax benefits
or charges from stock-based compensation, and the timing and amount of
compensation and other payments.

Cash Flows from Investing Activities



During the first six months of fiscal 2022, we generated $26 million from
maturities of investments, net of purchases, and paid $97 million for capital
expenditures, while during the same period of fiscal 2021, we generated $107
million from maturities and sales of investments, net of purchases, and paid $92
million for capital expenditures. Additionally, during the first six months of
fiscal 2022, we paid $14 million, net of cash acquired for a privately-held
company, as compared to $350 million, net of cash acquired that we paid for two
privately-held companies in the first six months of fiscal 2021.

                                       36

--------------------------------------------------------------------------------

Cash Flows from Financing Activities



During the first six months of fiscal 2022, cash flows used in financing
activities totaled $461 million and include $225 million for the repurchase of
approximately three million shares of common stock and $224 million for the
payment of dividends. During the first six months of fiscal 2021, cash flows
provided by financing activities totaled $746 million, and were primarily due to
net cash proceeds of $2.0 billion from the issuance of Senior Notes, partially
offset by the use of $513 million for the extinguishment of Senior Notes due
June 2021 and $420 million for the net repayment of commercial paper notes with
original maturities of three months or less, $214 million for the payment of
dividends, and $176 million for the repayment of commercial paper notes with
original maturities of greater than three months.

Key factors that could affect our cash flows include changes in our revenue mix
and profitability, our ability to effectively manage our working capital, in
particular, accounts receivable, accounts payable and inventories, the timing
and amount of stock repurchases and payment of cash dividends, the impact of
foreign exchange rate changes, our ability to effectively integrate acquired
products, businesses and technologies and the timing of repayments of our debt.
Based on past performance and our current business outlook, we believe that our
sources of liquidity, including cash generated from operations, and our ability
to access capital markets and committed credit lines will satisfy our working
capital needs, capital expenditures, investment requirements, stock repurchases,
cash dividends, contractual obligations, commitments, principal and interest
payments on our debt and other liquidity requirements associated with operations
and meet our cash requirements for at least the next 12 months. However, in the
event our liquidity is insufficient, we may be required to curtail spending and
implement additional cost saving measures and restructuring actions or enter
into new financing arrangements. We cannot be certain that we will continue to
generate cash flows at or above current levels or that we will be able to obtain
additional financing, if necessary, on satisfactory terms, if at all. For
further discussion of factors that could affect our cash flows and liquidity
requirements, including the impact of the COVID-19 pandemic, see Part II, Item
1A. Risk Factors.

Liquidity

Our principal sources of liquidity as of October 29, 2021 consisted of cash and cash equivalents, short-term investments, cash we expect to generate from operations, and our commercial paper program and related credit facility.



Cash, cash equivalents and short-term investments consisted of the following (in
millions):



                             October 29,       April 30,
                                 2021             2021
Cash and cash equivalents   $       4,509     $     4,529
Short-term investments                 39              67
Total                       $       4,548     $     4,596




As of October 29, 2021 and April 30, 2021, $1.7 billion and $2.5 billion,
respectively, of cash, cash equivalents and short-term investments were held by
various foreign subsidiaries and were generally based in U.S. dollar-denominated
holdings, while $2.8 billion and $2.1 billion, respectively, were available in
the U.S.

Our principal liquidity requirements are primarily to meet our working capital
needs, support ongoing business activities, fund research and development, meet
capital expenditure needs, invest in critical or complementary technologies
through asset purchases and/or business acquisitions, service interest and
principal payments on our debt, fund our stock repurchase program, and pay
dividends, as and if declared. In the ordinary course of business, we engage in
periodic reviews of opportunities to invest in or acquire companies or units in
companies to expand our total addressable market, leverage technological
synergies and establish new streams of revenue, particularly in our Public Cloud
segment.

The principal objectives of our investment policy are the preservation of
principal and maintenance of liquidity. We attempt to mitigate default risk by
investing in high-quality investment grade securities, limiting the time to
maturity and monitoring the counter-parties and underlying obligors closely. We
believe our cash equivalents and short-term investments are liquid and
accessible. We are not aware of any significant deterioration in the fair value
of our cash equivalents or investments from the values reported as of October
29, 2021.

Our investment portfolio has been and will continue to be exposed to market risk
due to trends in the credit and capital markets. We continue to closely monitor
current economic and market events to minimize the market risk of our investment
portfolio. We routinely monitor our financial exposure to both sovereign and
non-sovereign borrowers and counterparties. We utilize a variety of planning and
financing strategies in an effort to ensure our worldwide cash is available when
and where it is needed. We also have an automatic shelf registration statement
on file with the Securities and Exchange Commission (SEC). We may in the future
offer an additional unspecified amount of debt, equity and other securities.

                                       37

--------------------------------------------------------------------------------

Senior Notes

The following table summarizes the principal amount of our Senior Notes as of October 29, 2021 (in millions):





3.25% Senior Notes Due December 2022    $   250
3.30% Senior Notes Due September 2024       400
1.875% Senior Notes Due June 2025           750
2.375% Senior Notes Due June 2027           550
2.70% Senior Notes Due June 2030            700
Total                                   $ 2,650


Interest on the Senior Notes is payable semi-annually. For further information
on the underlying terms, see Note 7 - Financing Arrangements of the Notes to
Condensed Consolidated Financial Statements.

Commercial Paper Program and Credit Facility



We have a commercial paper program (the Program), under which we may issue
unsecured commercial paper notes. Amounts available under the Program may be
borrowed, repaid and re-borrowed, with the aggregate face or principal amount of
the notes outstanding under the Program at any time not to exceed $1.0 billion.
The maturities of the notes can vary but may not exceed 397 days from the date
of issue. The notes are sold under customary terms in the commercial paper
market and may be issued at a discount from par or, alternatively, may be sold
at par and bear interest at rates dictated by market conditions at the time of
their issuance. The proceeds from the issuance of the notes are used for general
corporate purposes. No commercial paper notes were outstanding as of October 29,
2021.

In connection with the Program, we have a senior unsecured credit agreement with
a syndicated group of lenders. The credit agreement, which was amended on
January 22, 2021, provides for a $1.0 billion revolving unsecured credit
facility, with a sublimit of $50 million available for the issuance of letters
of credit on our behalf. The credit facility matures on January 22, 2026, with
an option for us to extend the maturity date for two additional 1-year periods,
subject to certain conditions. The proceeds of the loans may be used by us for
general corporate purposes and as liquidity support for our existing commercial
paper program. As of October 29, 2021, we were compliant with all associated
covenants in the agreement. No amounts were drawn against this credit facility
during any of the periods presented.

Capital Expenditure Requirements



We expect to fund our capital expenditures, including our commitments related to
facilities, equipment, operating leases and internal-use software development
projects over the next few years through existing cash, cash equivalents,
investments and cash generated from operations. The timing and amount of our
capital requirements cannot be precisely determined and will depend on a number
of factors, including future demand for products, changes in the network storage
industry, hiring plans and our decisions related to the financing of our
facilities and equipment requirements. We anticipate capital expenditures for
the remainder of fiscal 2022 to be between $100 million and $150 million.

Dividends and Stock Repurchase Program

On November 22, 2021, we declared a cash dividend of $0.50 per share of common stock, payable on January 26, 2022 to holders of record as of the close of business on January 7, 2022.



As of October 29, 2021, our Board of Directors has authorized the repurchase of
up to $14.1 billion of our common stock under our stock repurchase program.
Under this program, we may purchase shares of our outstanding common stock
through solicited or unsolicited transactions in the open market, in privately
negotiated transactions, through accelerated share repurchase programs, pursuant
to a Rule 10b5-1 plan or in such other manner as deemed appropriate by our
management. The stock repurchase program may be suspended or discontinued at any
time. Since the May 13, 2003 inception of this program through October 29, 2021,
we repurchased a total of 343 million shares of our common stock at an average
price of $39.37 per share, for an aggregate purchase price of $13.5 billion. As
of October 29, 2021, the remaining authorized amount for stock repurchases under
this program was $0.6 billion.

Purchase Commitments



In the ordinary course of business, we make commitments to third-party contract
manufacturers and component suppliers to manage manufacturer lead times and meet
product forecasts, and to other parties, to purchase various key components used
in the manufacture of our products. In addition, we have open purchase orders
and contractual obligations associated with our ordinary course of business for
which we have not yet received goods or services. These off-balance sheet
purchase commitments totaled $1,053 million at October 29, 2021.

                                       38

--------------------------------------------------------------------------------

Financing Guarantees



While most of our arrangements for sales include short-term payment terms, from
time to time we provide long-term financing to creditworthy customers. We have
generally sold receivables financed through these arrangements on a non-recourse
basis to third party financing institutions within 10 days of the contracts'
dates of execution, and we classify the proceeds from these sales as cash flows
from operating activities in our condensed consolidated statements of cash
flows. We account for the sales of these receivables as "true sales" as defined
in the accounting standards on transfers of financial assets, as we are
considered to have surrendered control of these financing receivables. We sold
$38 million and $26 million of receivables during the first six months of fiscal
2022 and fiscal 2021, respectively.

In addition, we enter into arrangements with leasing companies for the sale of
our hardware systems products. These leasing companies, in turn, lease our
products to end-users. The leasing companies generally have no recourse to us in
the event of default by the end-user.

Some of the leasing arrangements described above have been financed on a
recourse basis through third-party financing institutions. Under the terms of
recourse leases, which are generally three years or less, we remain liable for
the aggregate unpaid remaining lease payments to the third-party leasing
companies in the event of end-user customer default. These arrangements are
generally collateralized by a security interest in the underlying assets. As of
October 29, 2021 and April 30, 2021, the aggregate amount by which such
contingencies exceeded the associated liabilities was not significant. To date,
we have not experienced significant losses under our lease financing programs or
other financing arrangements.

We have entered into service contracts with certain of our end-user customers
that are supported by third-party financing arrangements. If a service contract
is terminated as a result of our non-performance under the contract or our
failure to comply with the terms of the financing arrangement, we could, under
certain circumstances, be required to acquire certain assets related to the
service contract or to pay the aggregate unpaid payments under such
arrangements. As of October 29, 2021, we have not been required to make any
payments under these arrangements, and we believe the likelihood of having to
acquire a material amount of assets or make payments under these arrangements is
remote. The portion of the financial arrangement that represents unearned
services revenue is included in deferred revenue and financed unearned services
revenue in our condensed consolidated balance sheets.

Legal Contingencies



We are subject to various legal proceedings and claims which arise in the normal
course of business. See further details on such matters in Note 15 - Commitments
and Contingencies of the Notes to Condensed Consolidated Financial Statements.



Critical Accounting Policies and Estimates



Our condensed consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America,
which require management to make judgments, estimates and assumptions that
affect the reported amounts of assets, liabilities, net revenues and expenses,
and the disclosure of contingent assets and liabilities. Our estimates are based
on historical experience and various other assumptions that we believe to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities. We believe
that the accounting estimates employed and the resulting balances are
reasonable; however, actual results may differ from these estimates and such
differences may be material. Management's estimates include, as applicable, the
anticipated impacts of the COVID-19 pandemic.

The summary of our significant accounting policies is included under Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations of our fiscal 2021 Form 10-K. An accounting policy is deemed to be
critical if it requires an accounting estimate to be made based on assumptions
about matters that are highly uncertain at the time the estimate is made, if
different estimates reasonably could have been used, or if changes in the
estimate that are reasonably possible could materially impact the financial
statements. There have been no material changes to the critical accounting
policies and estimates as filed in such report.









                                       39

--------------------------------------------------------------------------------

© Edgar Online, source Glimpses