D-Link 2006 Annual Report Download - page 5

As we enter our 21st year in business, now is the perfect opportunity
to look to the future with the strength and resolve gained from past
experience. We will improve our business by using the same
commitment to innovation — such as D-Link becoming the first
networking company to enter the Web 2.0 era this past year, our
global-oriented approach to growth and our keen focus on customer
service and product excellence.
Financial Highlights
In 2006, financial metrics were healthy. Most notably, revenues in
2006 topped US$1.280 billion, representing a 13.1% (or 14.5% in
Taiwan Dollar terms) increase over the previous year. Net income also
rose from US$50.8 million in 2005, to US$77.4 million in 2006. We
successfully grew gross profit by 20 percent, operating profit by 48
percent and earnings per share by 52 percent.
Our strategy to extend our global reach by laying strong foundations in
emerging markets is producing most of the positive operation results
and points to years of healthy growth ahead.
Localized Global Presence
While reveling in the success of our first 20 years, we celebrated
important market penetration around the globe through the
strengthening of localized business units on every major continent.
Our operating business units increased to 105 worldwide in 2006.
D-Link holds a strong market position in all key markets, with a leading
position in critical emerging markets such as India, Latin America,
Russia, the Middle East and Southeast Asia. Strength in these emerging
markets was an important cornerstone for the company in 2006 as we
realized strong growth momentum heading into 2007. This strength was
fueled by local infrastructure development and economic expansion.
For the first time in company history, D-Link foreign shareholding
went up significantly and exceeded 50% as of 12/31/06. The foreign
shareholders were largely world-class mutual funds, pension funds and
large financial investment institutions that historically hold for long
term. This reflected a long-term confidence in our business strategy,
management and operations with recognition to the value of our
brand equity.
Of significant note, mature markets such as North America and
Europe were flat in 2006 due mainly to lack of new technology break-
through. However, we are proactive in addressing the challenges to
continued expansion in these increasingly saturated consumer
networking markets. Introduction of home networking products based
on an emerging 802.11n networking standard, complimentary digital
home solutions such as home network storage, media players and
home VoIP and communication solutions are laying the foundation for
future growth. We also expect further growth in North America and
Europe in the small-to-medium business (SMB) and enterprise
networking sectors.
We remain optimistic that the local economic expansion in emerging
markets will translate into strong demand for our gigabit switching,
broadband access solutions, IP telephony and digital home products.
We continue to adjust and optimize our business strategy and expect to
see continued growth in these exciting economies going forward
despite the gradually intensifying competition in these marketplaces.
Another key milestone in 2006 was the result achieved from
improved re-engineering of our global operation processes, which has
streamlined procurement and enabled our global logistics to become
more cost-efficient. Better currency risk management also contributed
to our success.
We reached our 20-year milestone in June 2006. We are proud to report that this was another year of success — 20 years of double-digit revenue growth, year over year.
The strengthening of our business in mature markets and important expansion in emerging high-
growth markets were key elements to our growth in 2006. We continued to aggressively push
forward into lucrative budding markets, strengthening our leading market position in Russia, the
Middle East, Latin America and Southeast Asia with deeper localized business operations, strong
brand awareness and a product portfolio to match the growing needs of each region.
Ken Kao
Chairman and Chief Executive Officer
D-Link Group
Letter to Shareholders,
Customers, Partners and
Employees
2 D-Link 2006 Annual Report