Netgear 2012 Annual Report Download - page 16

Table of Contents
Economic conditions are likely to materially adversely affect our revenue and results of operations.
Our business has been and may continue to be affected by a number of factors that are beyond our control such as general geopolitical,
economic and business conditions, conditions in the financial markets, and changes in the overall demand for networking products. A severe and/or
prolonged economic downturn could adversely affect our customers' financial condition and the levels of business activity of our customers.
Continued weakness in, and uncertainty about, global economic conditions continue to cause businesses to postpone spending in response to tighter
credit, negative financial news and/or declines in income or asset values, which could have a material negative effect on the demand for networking
products.
The recent indications of continued economic recession throughout various regions worldwide, especially in Europe, have presented significant
challenges to our business. If conditions in the global economy, including Europe, Australia and the United States, or other key vertical or geographic
markets continue to remain weak and uncertain or weaken even further, such conditions could have a material adverse impact on our business,
operating results and financial condition. In addition, if we are unable to successfully anticipate changing economic and political conditions, we may
be unable to effectively plan for and respond to those changes, which could materially adversely affect our business and results of operations.
In addition, the recent economic problems affecting the financial markets and the recent uncertainty in global economic conditions have
resulted in a number of adverse effects including a low level of liquidity in many financial markets, extreme volatility in credit, equity, currency and
fixed income markets, instability in the stock market and high unemployment. For example, the recent challenges faced by the European Union to
stabilize some of its member economies, such as Greece, Portugal, Spain, Hungary and even Italy, has had international implications affecting the
stability of global financial markets and hindering economies worldwide. Many member nations in the European Union have been addressing the
issues with controversial austerity measures. Should the European Union monetary policy measures be insufficient to restore confidence and stability
to the financial markets, the recovery of the global economy, including the U.S. and European Union economies where we have a significant
presence, could be hindered or reversed, which could have a material adverse effect on us. For example, the aggregate number of resellers of our
products decreased during the third quarter of 2012; we believe this was caused by the difficult worldwide economic environment, and especially the
difficulties experienced in Europe. There could also be a number of other follow-
on effects from these economic developments and negative
economic trends on our business, including the inability of customers to obtain credit to finance purchases of our products; customer insolvencies;
decreased customer confidence to make purchasing decisions; decreased customer demand; and decreased customer ability to pay their trade
obligations.
Some of our competitors have substantially greater resources than we do, and to be competitive we may be required to lower our prices or
increase our sales and marketing expenses, which could result in reduced margins and loss of market share.
We compete in a rapidly evolving and fiercely competitive market, and we expect competition to continue to be intense, including price
competition. Our principal competitors in the commercial business market include Allied Telesys, Barracuda, Buffalo, Data Robotics, Dell, D-
Link,
Fortinet, Hewlett-
Packard, Huawei, Cisco Systems, the Linksys division of Cisco Systems, QNAP Systems, Seagate Technology, SonicWALL,
Synology, TRENDnet, WatchGuard and Western Digital. Our principal competitors in the home market for networking devices and television
connectivity products include Apple, AsusTEK, Belkin, D-Link, the Linksys division of Cisco Systems, Roku, TP-
Link and Western Digital. Our
principal competitors in the broadband service provider market include Actiontec, ARRIS, Compal Broadband, Comtrend, D-
Link, Hitron, Huawei,
Motorola, NetComm Wireless, Pace, Sagem, Scientific Atlanta-
a Cisco company, SMC Networks, TechniColor, Ubee, ZTE and ZyXEL. Other
competitors include numerous local vendors such as Devolo, LEA, AVM and the Hercules brand of Guillemot Corporation in Europe, Corega and
Melco in Japan and TP-
Link in China. In addition, these local vendors may target markets outside of their local regions and may increasingly
compete with us in other regions worldwide. Our potential competitors also include other consumer electronics vendors, including LG Electronics,
Microsoft, Panasonic, Samsung, Sony, Toshiba and Vizio, who could integrate networking and streaming capabilities into their line of products, such
as televisions, set top boxes and gaming consoles, and our channel customers who may decide to offer self-
branded networking products. We also
face competition from service providers who may bundle a free networking device with their broadband service offering, which would reduce our
sales if we are not the supplier of choice to those service providers. In the service provider space, we are also facing significant and increased
competition from original design manufacturers, or ODM's, and contract manufacturers who are selling and attempting to sell their products directly
to service providers around the world. In addition, as we expand our product portfolio to include home monitoring cameras and services, we also face
competition from incumbents and specialty providers in this space, including Axis Communications, Linksys, D-
Link, Logitech, Dropcam, and
Sercomm.
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changes in stock market analyst recommendations regarding our common stock, other comparable companies or our industry generally.