In a world that has seen the cost of disk drives drop to nearly that of tape, selling storage solutions at a 60% gross margin is almost impossible. Yet that's precisely what Network Appliance has been able to accomplish - while maintaining its startling 30% annual growth rate.

NetApp CEO Dan Warmenhoven readily admits the company, which made its name in the early '90s for its network-attached storage (NAS) systems, isn't for storage managers who just want the lowest cost per gigabyte. "If you're looking for cheap storage, you're talking to the wrong guy," he says. "We get asked all the time, 'How do you expect to sell disk drives at 60% gross margin?' The answer is, 'It's not about the disk. It's not about the storage. It's about the data-management services.' "

Analysts and customers have given NetApp kudos for the innovative design of its operating system, Data OnTap. Peter Cole, an independent investment analyst, credits the price and performance benefits of this system - and a savvy board and management team - as key to NetApp's success at sustaining its high growth rate and reaching $1.6 billion in revenue in its 2005 fiscal year, which ended in April 2005.