D-Link 2005 Annual Report Download

Download and view the complete annual report

Please find the complete 2005 D-Link annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 67

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67

“I am proud to report that we are now a $1 billion
dollar company. Our record-breaking year in 2005
is the cumulative result of our steady growth in
worldwide revenue, shareholder equity and sales in
every product category and region. “
— Ken Kao
Chairman and CEO
Annual Report 2005

Table of contents

  • Page 1
    "I am proud to report that we are now a $1 billion dollar company. Our record-breaking year in 2005 is the cumulative result of our steady growth in worldwide revenue, shareholder equity and sales in every product category and region. " - Ken Kao Chairman and CEO Annual Report 2005

  • Page 2
    ... the lives of individuals around the world. Our past successes have positioned D-Link for continued growth and innovation. We will continue to be a global leader in networking and connectivity, delivering affordable, standards-based D-Link 2005 Annual Report products to consumers and business.

  • Page 3
    ... annual exchange rate for 2001 (U.S. Dollars in Thousands) Cash & Cash Equivalents Total Assets Working Capital Long Term Loans Shareholder's Equity Shares Outstanding ** 2005 (US$) $67,922 $734,822 $256,011 336 $368,623 $597,162 2004 $120,515 $814,977 $231,611 $685 $367,315 $535,521 % Change...

  • Page 4
    ... markets like Eastern Europe, Latin America and South East Asia via strong local partnerships, further enhancement of our already strong brand equity and our unyielding pursuit of innovation in our products and services. This dynamic, global-oriented approach to growth and solid customer service...

  • Page 5
    ... India's lucrative, highgrowth networking and structured cabling sectors. In Japan, a large but oÄžen very competitive market, D-Link, through its manufacturing subsidiary, held strong as one of the top three broadband equipment suppliers. North America Revenues from North America in 2005 accounted...

  • Page 6
    ..., a product category that D-Link helped pioneer, continues to lead sales in all regions. Sales By Region Asia Pacific and Others 38.78% Europe, Middle East, Africa 30.12% North America 31.10% FX rate: 1 US Dollar = 32.951 Taiwan In 2005, D-Link continued to develop business in emerging markets...

  • Page 7
    ... People," providing a variety of wireless and Ethernet networking solutions for both home and business. D-Link 2005 Annual Report 5 Our worldwide network serves over 90 countries from 100 offices staffed by more than 1800 professional sales, marketing, engineering, technical and customer support...

  • Page 8
    ... network and Internet connectivity to run their day to day business operations. According to our Q2 2005 reports, D-Link has once again shown leadership in this extremely competitive market segment. - Norm Bogen, Director of Networking, In-Stat Research D-Link North America includes business units...

  • Page 9
    D-Link 2005 Annual Report 7 D-Link saw consistent enterprise networking growth in North America - transitioning from SOHO into SMB - and remained a major player in home networking and the emerging digital home market.

  • Page 10
    ... and hacking, the worldwide market for Network Security Appliance & SoĞware is expected to grow from US$377 million in 2005 to US$1.7 billion by 2009. Source: Infonetics Research 8 D-Link 2005 Annual Report D-Link business-class networking provides endto-end solutions, leveling the playing field...

  • Page 11
    D-Link 2005 Annual Report 9 D-Link EMEA aggressively worked to further cement our position as the dominant networking and connectivity equipment supplier in the region.

  • Page 12
    ...into leading companies and key government agencies that provide communications services in these developing areas. D-Link Selected as the 2005 Most Admired Brand in Wireless LAN from IT 168. Economic development in these countries is also bringing a widespread adoption of Broadband, making it more...

  • Page 13
    D-Link 2005 Annual Report 11 D-Link enjoys continued market leadership in Asia Pacific, our fastest growing region.

  • Page 14
    .... Home Network Storage D-Link plug-n-play solutions are ideal storage devices for consumers to protect their entire library of digital music, photos and data files for instant access. 12 D-Link 2005 Annual Report D-Link wireless networking allows consumers access to high-speed Internet anywhere...

  • Page 15
    D-Link 2005 Annual Report 13 D-Link continues to pioneer digital home solutions. We design and manufacture products that provide seamless interoperability for connecting peripherals to a home network for easy access to data, music and entertainment throughout your home, anytime, anywhere.

  • Page 16
    ...camera surveillance systems provide remote video and audio monitoring, recording and pan/tilt/zoom over the Internet for business. KVM Switches D-Link Keyboard, Video, Mouse (KVM) switches allow for easy management of multiple PCs or servers for the IT manager and integrator. The worldwide Ethernet...

  • Page 17
    D-Link 2005 Annual Report 15 D-Link products cover the gamut of networking and connectivity with complete end-to-end solutions for small - to medium - sized businesses looking for a robust, standards-based infrastructure solution.

  • Page 18
    ... access to live video streams over the Internet to the home consumer. Switching D-Link business-class Ethernet switching products are robust solutions capable of providing worldwide service provider networks. 16 D-Link 2005 Annual Report D-Link drives Broadband development worldwide by providing...

  • Page 19
    D-Link 2005 Annual Report 17 With the help of high-quality, affordable Broadband access solutions and digital home/office connectivity devices, D-Link's Broadband team works to provide solutions that cater to the specific needs of DSL and cable Broadband networks.

  • Page 20
    ... make communications and connectivity faster, easier and more affordable. From enterprise-class switches that match up feature-for-feature with competing products that sometimes cost considerably more, to the creation of affordable, high-speed home networking, to media players that stream content...

  • Page 21
    D-Link 2005 Annual Report 19 D-Link's unique advantage of manufacturing our own products is complemented by complete and experienced channel networks, worldwide resources and experienced people in each area of our business.

  • Page 22
    ... China Trust Commercial Bank 6F., 83, Chung-Ching South Road Sec.1 Taipai Taiwan Tel: 886-2-2361-3033 Fax: 886-2-2311-6723 Investor Relations No. 289, Sinhu 3rd Rd., Neihu District, Taipei City 114, Taiwan Tel: 886-2-6600-0123 Fax: 886-2-8791-4796 URL: ir.dlink.com. 20 D-Link 2005 Annual Report

  • Page 23
    D-LINK CORPORATION AND SUBSIDIARIES Consolidated Financial Statements December 31, 2005 and 2004 (With Independent Auditors' Report Thereon)

  • Page 24
    ...sheets of D-Link Corporation and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the company's management. Our...

  • Page 25
    ... loss on market value decline of long-term equity investments Accumulated translation adjustment Treasury stock Total parent company stockholders' equity Minority interest Total stockholders' equity Commitments and contingencies (note 7) Total liabilities and stockholders' equity 2005 $ 921,647...

  • Page 26
    ...LINK CORPORATION AND SUBSIDIARIES Consolidated Statements of Income Years ended December 31, 2005 and 2004 (in thousands of New Taiwan dollars, except for net income per common share) 2005 Sales (note 5) Cost of goods...income Net income attributed to: Parent company stockholders Minority interest $ 36...

  • Page 27
    D-LINK CORPORATION AND SUBSIDIARIES Consolidated Statements of Changes in Stockholders' Equity Years ended December 31, 2005 and 2004 (in thousands of New Taiwan dollars) Retained Earnings Unrealized loss on market value decline of longterm investment (86,840) (86,840) 30,223 (56,617) Accumulated ...

  • Page 28
    ...LINK CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows Years ended December 31, 2005 and 2004 (in thousands of New Taiwan dollars) 2005 Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided...stock...rate changes...938 2004 2,600,935 215,...

  • Page 29
    ...original equipment manufacturing ("OEM") operations from its D-Link brand business and transferred related operating assets and liabilities to establish Alpha Networks Inc. ("Alpha"). D-Link has focused on self-branding business since January 1, 2004. As of December 31, 2005, D-Link and subsidiaries...

  • Page 30
    ... of the direct and indirect ownership by the Company at December 31 Name of Investor 2005 2004 the Company 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 6. D-Link Technology Venture Capital Investment the Company Inc. ("DTVCI) 7. D-Link China Inc. ("DC...

  • Page 31
    ... 26. D-Link Denmark A.S. ("DDAS") 27. D-Link France ("DF") 28. D-Link Scandinavia AB ("DSAB") 29. D-Link Iberia SL ("DI") 30. D-Link Mediterraneo SRL ("DMSRL") 31. D-Link Netherlands ("DN") Percentage of the direct and indirect ownership by the Company at December 31 Name of Investor 2005 2004 DEL...

  • Page 32
    ... to Consolidated Financial Statements Name of Investee 1. OOO D-Link Russia ("DR") 2. D-Link Hong Kong ("DHK") 3. Netpro International Trading (Shanghai) Co., Ltd. Percentage of the direct and indirect ownership by the Company at December 31 Name of Investor 2005 2004 DHCL DHCL DSCL 100.00 100.00...

  • Page 33
    ... net asset value of open-end mutual funds on the last day of the period, the average closing price of the last month of the period for domestic publicly listed securities, and the closing price on the last day of the period for foreign publicly listed securities. (g) Allowance for doubtful accounts...

  • Page 34
    ... values of finished goods and work in process are determined on the basis of net realizable value. (i) Long-term equity investments Long-term equity investments in publicly traded companies whereby D-Link, directly or indirectly, owns less than 20 percent of the investee's voting shares and is not...

  • Page 35
    7 D-LINK CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements The useful lives of property, plant and equipment are as follows: (a) Buildings and improvements: 5~55 years. (b) Machinery and equipment: 3~10 years. (c) Transportation, office equipment and others: 2~10 years. ...

  • Page 36
    ... contracts are not for trading purposes. For those contracts entered into to hedge the risk related to assets and liabilities,...years of service, and one month of salary for each year of service thereafter. The maximum retirement benefit is 45 months of salary. Effective July 1, 2005, D-Link, DTI and...

  • Page 37
    ...products and the risks and rewards of ownership are transferred to the customers, which occurs principally at the time of shipment. Allowances and related... the classification of the related asset or liability. If the deferred income tax asset or liability is not directly related to a specific asset ...

  • Page 38
    10 D-LINK CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (q) Treasury stock Pursuant to ROC SFAS No. 30, "Accounting for Treasury Stock", the outstanding shares of DLink purchased back by itself should be recorded as treasury stock at the purchasing cost before such shares ...

  • Page 39
    ... Time deposits Bonds with repurchase agreements $ 979,334 971,885 280,009 2,231,228 1,722,488 2,089,870 14,003 3,826,361 $ (b) Short-term Investments December31, 2005 2004 Publicly listed stocks Mutual funds Less: allowance for decline in market value Market value $ $ $ 393,600 393,600 393,600...

  • Page 40
    ...771,445 (128,362) 5,643,083 Investee Equity method: D-Link India Ltd.(DIL) $ Cameo Communication, Inc. (CCI) Bothhand Enterprise Inc. (BEI) Cellvision System Inc. (CSI) Quie Tek Corp. (QTC) Others Lower-of-cost-or-market method: Abocom Systems, Inc. (ACS) Dray Tek Corp.(DTC) Lanner Electronics Inc...

  • Page 41
    ... Technology Inc., Z-COM Inc., IC Plus Corporation, Max Edge Electronics Corporation, Wi Harper International Investment Limited, Best 3C, E2O, etc. An investment loss of $132,495 thousand was recognized to reflect such decline. In 2004, ACS was valued using the lower-of-cost-or-market method, and...

  • Page 42
    ...,223 thousand was recognized. As of December 31, 2005, the balance of unrealized loss on market value decline of long-term investment under stockholders' equity was $56,617 thousand. (f) Assets Held for Lease and Idle Assets D-Link purchased a plant located in the Neihu District of Taipei from Globe...

  • Page 43
    ...2005. As of December 31, 2005, the components of accumulated impairment loss were as below: Amount Items Assets held for lease - building Idle assets - land Idle assets - building..., 2005 2004 Amount Rate % Amount Rate % Usance letters of credit Unsecured borrowings under lines of credit Secured loans...

  • Page 44
    ... value: $1.5 billion. Ë™ Issue date: September 28, 1999. Ë™ Issue price: at par value. Ë™ Duration: seven-years, maturing on September 27, 2006. Ë™ Coupon rate: 0% Ë™ Conversion objective: D-Link's common stock. Ë™ Conversion price: The conversion price was 64.2 New Taiwan dollars per share when the...

  • Page 45
    ... into common stock or GDRs. Ë™ Conversion price: The conversion price was 50 New Taiwan dollars per share when the bonds were issued. On July 19, 2004, the conversion price was adjusted to 27.76 New Taiwan dollars per share based on the prescribed formula. Ë™ Redemption right: The bondholders...

  • Page 46
    ...Purpose December 31, 2005 2004 $ 200,000 Period and Redemption $600 million for Due by March 26, 2005; the the ...accordance with the agreement, D-Link Systems issued some notes payable to the leasing company. The par value of the unpaid notes as of December 31, 2005, is summarized below: Year ...

  • Page 47
    ...D-Link's, DTI's and Alpha's net periodic pension cost for 2005 and 2004 are summarized as follows: 2005 Service cost...2005 2004 Discount rate Rate of increase in future compensation levels Expected long-term rate of return on plan assets 3.50% 3.00% 3.50% 3.50% 3.00% 3.50% The pension costs of D-Link...

  • Page 48
    ...the issuance of the employee stock options). As of December 31, 2005 and 2004, the issued capital amounted to $6,091,618 thousand and $5,475,211 thousand, respectively. The par value of D-Link's common stock is ten New Taiwan dollars per share. On February 28, 2005, because the convertible bonds had...

  • Page 49
    ... to ROC SFB regulations, an ROC publicly listed company should retain a special reserve equal to any deductions made to stockholders' equity related to items such as foreign currency translation adjustments before distribution of earnings which were generated after 1999. If the aforementioned...

  • Page 50
    ... information would be available on the Market Observation Post System of the Taiwan Stock Exchange after the related meetings. (5) Treasury stock Pursuant to the board of directors' resolution on October 28, 2003, D-Link bought back 12,000 thousand common shares for $466,671 thousand to fulfill...

  • Page 51
    ... per common share (New Taiwan dollars) Weighted-average common shares outstanding (thousand shares)-retroactive Basic net income per common share (New Taiwan dollars)-retroactive (m) Income Taxes (1) Income taxes of D-Link and its subsidiaries are declared on an individual company basis. D-Link is...

  • Page 52
    ... January 1, 2001 ~ December 31, 2004 January 1, 2002 ~ December 31, 2005 In accordance with the "Business Mergers and Acquisitions Act", D-Link separated its ODM/OEM operations from its D-Link brand business and transferred related operations' assets and liabilities to establish Alpha on August 16...

  • Page 53
    ... 31, 2005 2004 Deferred tax assets - current: Investment tax credits Unrealized inter-company profits Unrealized foreign exchange loss (gain), net Allowance for decline in value of inventories Provision for doubtful accounts over statutory limitation Allowance for maintenance service cost Unrealized...

  • Page 54
    ... on research and development and training of professional personnel entitle Dlink and its subsidiaries in the ROC to investment tax credits. The capital investments in high-tech companies, significant emerging strategic industries, and venture capital also entitle D-link and its subsidiaries in the...

  • Page 55
    ... are reputable financial institutions. Therefore, management believes that the risk of default by the counter-parties is remote. (a) Non-trading-purpose derivative financial instruments (i) Foreign currency option contracts As of December 31, 2005 and 2004, D-Link and subsidiaries had the following...

  • Page 56
    ... option contracts that do not qualify as hedges are marked to market, with changes in value recognized in other unrealized expense. D-Link recognized such realized expense of about $4,561 thousand and $15,000 thousand in 2005 and 2004, respectively. The realized gain resulting from foreign currency...

  • Page 57
    ...-parties is considered remote. (ii) Market price risk Market price risk represents the accounting loss that would be recognized at the reporting date for derivative financial instruments due to the changes in market interest rates or foreign exchange rates. As D-Link and subsidiaries' derivative...

  • Page 58
    ... financial assets (pledged time deposits), shortterm borrowings, notes and accounts payable, and payables to related parties approximate their fair value due to the short-term nature of these items. (b) The fair value of short-term investments is based on publicly quoted market prices. (c) The fair...

  • Page 59
    ...-party Transactions (a) The name and relationship of the related parties with which D-Link and its subsidiaries had significant transactions are shown below: Name D-Link India Ltd. (DIL) Cameo Communications, Inc. (CCI) Cellvision System Inc. (CSI) Bothhand Enterprise Inc. (BEI) Quie Tek Corp. (QTC...

  • Page 60
    ...LINK CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (2) Purchases and others 2005 Percentage of net Amount purchases CCI CSI GSEI DIL BEI Z-Com... differences in purchasing terms between related parties and thirdparty suppliers. If D-Links' payable for purchases from GSEI...

  • Page 61
    ... D-Link purchased a plant located in the Neihu District of Taipei and leased it to GSEI. The duration of the land lease agreement is from July 2004 to May 2005. In 2005 and 2004, the rental income of $15,757 thousand and $16,303 thousand, respectively, had been received. GSEI provided a guarantee...

  • Page 62
    ... event will not have a significant effect on operations. (f) Network 1 Security Solution, Inc. ("Network 1") asserted that D-Link sold products that infringed certain Network 1 patents, and brought suit against D-Link and D-Link Systems, a DLink subsidiary. D-Link is pursuing the suit with the...

  • Page 63
    ... 5, 2006, Alpha issued the first domestic convertible bonds amounting to $1,200 million with 0% coupon rate to develop the market and upgrade its research ability. The maturity period of the bonds is five years, and the conversion price is 37 New Taiwan dollars per share. 10. Other Information...

  • Page 64
    ... industry segment: network communication products. (b) Geographic information The geographical breakdown of sales for the years ended December 31, 2005 and 2004, is summarized as follows: 2005 Adjustments and eliminations Americas Area revenue: Third-party customers Inter-company Area profit (loss...

  • Page 65
    ... AND SUBSIDIARIES Notes to Consolidated Financial Statements (c) Export sales The export sales of D-Link and its subsidiaries in the ROC for the years ended December 31, 2005 and 2004, are summarized below: 2005 Asia Americas Europe Others 9,276,400 11,328,281 9,228,174 2,458,257 $ 32,291,112...

  • Page 66
    ...517-7111 FAX: +352 (00)2-517-6500 URL: www.dlink.lu Mexico Colonia Juarez 06600 Mexico Distrito Federal Mexico TEL: +52 (00) 877-453-5465 URL: www.dlink.com.mx Middle East (Dubai) P.O.Box: 500376 Office No.:103, Building:3 Dubai Internet City Dubai, United Arab Emirates Tel: +971 (00) 4-3916480 Fax...

  • Page 67
    D-Link and the D-Link logo are trademarks of D-Link Corporation or its subsidiaries in the United States and other countries. All other company or product names mentioned herein are trademarks or registered trademarks of their respective companies. Copyright © 2006 D-Link Corporation/D-Link Systems...