Netgear 2013 Annual Report Download - page 40

Table of Contents
You should read the following discussion of our financial condition and results of operations together with the audited consolidated financial
statements and notes to the financial statements included elsewhere in this Form 10-K. This discussion contains forward-
looking statements that involve
risks and uncertainties. The forward-
looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions
and projections about our industry, business and future financial results. Our actual results could differ materially from the results contemplated by
these forward-looking statements due to a number of factors, including those discussed under “Risk Factors” in Part I, Item 1A above.
Business and Executive Overview
We are a global networking company that delivers innovative products to consumers, businesses and service providers. Our products are built on a
variety of proven technologies such as wireless, Ethernet and powerline, with a focus on reliability and ease-of-
use. Our product line consists of wired
and wireless devices that enable networking, broadband access and network connectivity. These products are available in multiple configurations to
address the needs of our end-users in each geographic region in which our products are sold.
We operate in three specific business segments: retail, commercial, and service provider.
Each business unit is managed by a Senior Vice
President/General Manager. We believe this structure enables us to better focus our efforts on our core customer segments and allows us to be more
nimble and opportunistic as a company overall. The retail business unit is focused on individual consumers and consists of high performance,
dependable and easy-to-
use home networking, home video monitoring, storage and digital media products. The commercial business unit is focused on
small and medium size businesses and consists of business networking, storage and security solutions that bring enterprise class functionality at an
affordable price. The service provider business unit is focused on the service provider market and consists of made-to-
order and retail proven, whole
home networking hardware and software solutions, as well as 4G LTE hotspots sold to service providers for sale to their subscribers.
We conduct
business across three geographic regions: Americas, Europe, Middle-East and Africa (“EMEA”) and Asia Pacific (“APAC”).
Our service provider business has grown substantially over the years, particularly as a result of acquisitions, and it is difficult to ascertain a
seasonal pattern given that the business is less predictable than our other core businesses. The commercial business, consumer, and broadband service
provider markets are intensely competitive and subject to rapid technological change. We believe that the principal competitive factors in the retail,
commercial, and service provider markets for networking products include product breadth, size and scope of the sales channel, brand name, timeliness
of new product introductions, product availability, performance, features, functionality and reliability, ease-of-
installation, maintenance and use, and
customer service and support. To remain competitive, we believe we must continue to aggressively invest resources in developing new products and
enhancing our current products while continuing to expand our channels and maintaining customer satisfaction worldwide.
We sell our networking products through multiple sales channels worldwide, including traditional retailers, online retailers, wholesale distributors,
direct market resellers (“DMRs”), value-added resellers (“VARs”),
and broadband service providers. Our retail channel includes traditional retail
locations domestically and internationally, such as Best Buy, Costco, Fry’s Electronics, K-mart, Radio Shack, Sears, Staples, Target, Wal-
Mart, Argos
(U.K.), Dixons (U.K.), PC World (U.K.), MediaMarkt (Germany, Austria), Dick Smith (Australia), JB HiFi (Australia), Elkjop (Norway) and Lenovo
(China). Online retailers include Amazon.com, Dell, Newegg.com and Buy.com. Our DMRs include CDW Corporation, Insight Corporation and PC
Connection in domestic markets and Misco throughout Europe. In addition, we also sell our products through broadband service providers, such as
multiple system operators (“MSOs”),
DSL, and other broadband technology operators domestically and internationally. Some of these retailers and
broadband service providers purchase directly from us, while others are fulfilled through wholesale distributors around the world. A substantial portion
of our net revenue to date has been derived from a limited number of wholesale distributors and retailers, including Ingram Micro and Best Buy. We
expect that these wholesale distributors and retailers will continue to contribute a significant percentage of our net revenue for the foreseeable future.
In 2013
, we continued to grow the business. On April 2, 2013, we acquired the select assets and operations of the Sierra Wireless, Inc. AirCard
business ("AirCard"), including customer relationships, certain intellectual property, inventory and property and
equipment. We added 161 AirCard
employees as a result of the acquisition. We believe the AirCard acquisition will accelerate the mobile initiative of our service provider business unit to
become a global leader in providing the latest in LTE data networking access devices. The acquisition qualified as a business combination and was
accounted for using the acquisition method of accounting. On June 21, 2013, we acquired certain assets and operations of Arada Systems, Inc.
(“Arada”).
We believe the Arada acquisition will bolster our wireless product offerings in our commercial business unit and strengthen our market
position in the small to medium size campus wireless LAN market. The acquisition qualified as a business combination and was accounted for using the
acquisition method of accounting.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations