D-Link 2006 Annual Report Download - page 6

In terms of sales by product category, WLAN products realized a YoY
10% rise in 2006, and represented our leading product group,
accounting for 32% of total revenue. Broadband products represented
27% of sales and climbed 10% YoY, while Switches, which represented
26% of sales, grew 28% YoY, and Digital Home products, which
represented 10% of sales, rose 19% YoY.
Furthermore, according to In-Stat Research 2006 reports, D-Link
maintained its position as global networking and connectivity leader
in the important consumer and SMB market segments. As a positive
indicator for future profit growth, we continued to gain switch market
share from our competitors, especially in the lucrative emerging
markets. We are particularly pleased that we have progressively evolved
into a value player and volume winner, as indicated by our consistent
bottom line growth in 2006.
The Stage is Set for Future Success
From an industry perspective, demand from the SMB sector remains
healthy and is expected to drive worldwide sales growth throughout
2007 and beyond. Indicators also reveal that on the consumer front,
earlier market stagnation will be replaced by a recovery in sales for
products such as wireless networking based on the emerging 802.11n
standard, VoIP, IP cameras, network storage and others.
We strongly believe that D-Link’s revenue growth drivers in 2007 will
be a series of new products, including gigabit, intelligent and wireless
switches along with storage (SAN) solutions for the SMB market, and
for consumers, a lineup of new innovations in digital home devices.
The following regional results for 2006 provide insight into D-Link’s
plans to meet our revenue and profitability goals through the next
year. We are confident in our long-term relationships with our
international partners, channel experts and vendors, and the
professionalism of our more than 1,800 employees worldwide to help
us continue to grow through 2007 and beyond.
Emerging Markets & Asia Pacific
Emerging Markets & Asia-Pacific displayed strong market growth and
resulted in 50 percent (US$640 million) of D-Link Group’s
consolidated revenue in 2006, a significant 34% increase over 2005. We
continue to grow our market share in switching with a notable increase
in sales to business across the region. We are focused on extending our
leading position in the broadband market through key partnerships with
influential telecommunication companies in the region.
Our strategy to focus on emerging markets and to lay strong
foundations proved to be the correct approach, with healthy revenues
achieved from budding markets in 2006. Emerging markets such as
India, Latin America, Russia, the Middle East and Southeast Asia were
particularly successful. D-Link is the number one provider of
networking solutions in these promising markets, where we are excited
about future growth. Notable successes included the strengthening of
our position as a dominant player in the Latin American
telecommunications market, extending our market share in India’s
rewarding network and structured cabling sectors, and generating
double-digit growth in Russia over the past several years. We have no
doubt that the energy we are seeing now in these markets is but a
glimpse of the larger potential still to come.
North America
Revenues from North America in 2006 accounted for approximately
26 percent (US$333 million) of worldwide sales. We are optimistic in
our strategy to deal with the increased price competition, high retail
overheads and other challenges facing this saturated consumer market.
We have sharpened our focus on business networking solution sales.
Although 2006’s revenue in North America was flat, these efforts will
lead to future growth in revenue from managed switching and
business-class wireless connectivity. Moving into 2007, greater product
availability resulting from strategic distribution partnerships, increased
reseller education and introduction of next-generation digital home
products will continue to drive D-Link North America’s business and
extend brand preference in this competitive market landscape.
Europe
Europe continues to deliver consistent performance for D-Link
products. In 2006, revenues from this region reached US$307 million,
a 6% increase from 2005. This growth was driven by increased
demand for our wireless networking among consumers and switching
products for business. In the face of maturing markets and increased
competition, we will continue to realize success through successful
consolidation of sales, marketing and product strategies across all
countries in the region. This unification effort has provided a stronger
brand presence for D-Link throughout Europe, increasing the leverage
of each individual country to penetrate markets and win new business.
In Summary
Our 20th anniversary year was a success in many ways and leaves us
with documented reasons for optimism in 2007. Our product
development cycle is experiencing record efficiency and productivity.
Our ability to swiftly meet the changing and growing demand for
quality product solutions affordable in the business category is gaining
attention worldwide – from competitors, customers and our sales and
distribution partners. Our switching products are continuing to
generate high interest and resultant sales in many areas, especially in
the emerging markets of Russia, Eastern Europe and Southeast Asia.
In North America and Europe, consumer product maturation is being
balanced by an eagerly-awaited new wireless standard and our realizing
the opportunities in the business, government and education markets
by responding to the increasing demands for product alternatives that
meet their needs for quality within a budget. Combine these
accomplishments with channel and partner expansion, constant
innovation and management efficiency gains by various process re-
engineering in operations at different levels and you have a formula
for success for years to come.
Thanks to All
I would like to extend my deepest gratitude to you – our loyal
customers, our devoted employees, our dedicated partners and our
trusting shareholders – for helping us celebrate a momentous 20-year
milestone. Your contributions are appreciated and welcomed, and we
are proud to have you on our winning team.
Ken Kao
Chairman and Chief Executive Officer,
D-Link Group
D-Link 2006 Annual Report 3