D-Link 2007 Annual Report Download - page 6

The operational strength becomes clearer when we look at the
breakdown of annual revenue by region, where the Emerging and
Asia Pacific markets generated 48% of total revenue, followed by
Europe with 29%, then North America at 23%. Emerging and Asia
Pacific markets also displayed strong sales growth with 23%,
followed by a 15% increase in Europe, while North America declined
11% from FY2006.
Worldwide, we experienced increased revenue growth with WLAN
leading the product categories at 39%, followed by switch at 26%,
broadband at 20%, and digital home devices at 11% of global annual
revenue. All had great performance, with growth rates of 14%, 14%,
9 % and 5%, respectively. Switch and wireless product revenue also
increased compared to the previous year, a reflection of D-Link’s
success in the SMB and 11n product categories.
Localized Global Presence
Our continued market penetration worldwide was due, in large part,
to our strengthening of localized business units on every major
continent. This is in direct correlation to our increased revenue and
profit, especially in Emerging and Asia Pacific markets where 22
operating business units were added in FY2007, bringing our total
global presence to 127 offices worldwide.
The strong growth momentum established in FY2006 continued into
FY2007, fueled by local long-term infrastructure and economic
expansion.
Emerging and Asia Pacific Markets
Switch products, especially those with Green Ethernet technology,
accounted for a majority of sales in Russia for FY2007, while
broadband products and IP surveillance cameras were the main
cause of Latin America’s growth. We successfully penetrated Japan’s
market in FY2007 with initial success attributed to the demand for
core-to-edge managed gigabit switches, while Southeast Asia
focused on wireless switch solutions. One of the reasons for our
success was our ability to partner with the region’s governments,
universities, hospitals and other growing businesses and
organizations, as well as further cultivation of new and existing
channel partnerships.
Europe
The same partnership strategy was evident in all European regions.
Growth in areas such as Western and Nordic Europe was stimulated
by our Wi-Fi networking and IP storage product sales, while Eastern
Europe saw sales steadily increase from a variety of broadband
projects. We have realized the financial benefits of our efforts during
the past two years from consolidating sales, marketing, and product
strategies across all countries in the region, and unifying our brand
presence despite the challenges of intensified competition in a
mature European market.
North America
North America market revenue declined to 23% of total sales for the
Company. However, we remain confident in our strategy to deal with
increased price competition, high retail overheads and other
challenges that face the saturated consumer market. We have
increased the focus on our 802.11n solutions with aggressive pricing
and product segmentation strategies to meet the growing demands
for this important market segment. In-Stat reports that the North
American home network storage market will continue to present the
greatest opportunities worldwide in terms of volume. Media serving
features that offer a simple-to-use interface is what the market wants,
which D-Link provides. For the SMB and enterprise side, we are even
more optimistic. Our business products are becoming increasingly
attractive to organizations through our affordability, functionality
and cost-effectiveness versus that of our largest competitors,
especially in a downward-trending market.
The Future Remains Bright
For FY2008’s industry outlook, the demand from Telcos/ISPs for
networking infrastructure remains healthy. As for the enterprise
sector, corporate spending seems to have softened while consumer
expenditures remains stagnant, especially in developed countries.
Although we see 11n Wi-Fi technology will gradually replace 11g, the
future of WiMAX remains to be seen. Overall, the networking
industry is projected to grow at a stable pace for FY2008.
Although D-Link saw a decline in sales among both North American
and European markets, the Company believes that this is a result of
the enduring economic challenges of these regions rather than a
decline in global presence. Overall, profits have steadily increased,
which can be accounted for by the large success in sales from both
Emerging and Asia Pacific markets. D-Link continues to foresee a
profitable outcome for the Company, with the North American and
European regions enhancing the SMB channel coverage.
The key drivers to D-Link’s growth will be the launch of new models
on SMB products, such as managed Green Ethernet and Metro
Ethernet switches; consumer products, such as 11n-enabled IP
cameras and NAS storage, and D-Link 2.0 (D-Life) products, including
IP telephony and camera devices.
Our continued growth and track record for success give us a solid
foundation on which to build for the future. More importantly, it is
you – our devoted employees, our loyal customers, our dedicated
partners and our trusting shareholders – who we thank the most.
We are proud to have you on our winning team.
D-Link 2007 Annual Report 3
Sincerely,
John Lee
Chairman
D-Link Group