Netgear 2004 Annual Report Download - page 22

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pressures. In order to maintain our margins, it is necessary to offset average sales price erosion by negotiating continuously with
component suppliers and contract manufacturers to reduce unit costs of incoming inventory. We also expect to continue to introduce
new products and broaden our geographic and channel reach. These efforts require significant up front investment in advance of
incremental revenue, which could impact our margins. In addition, our international expansion may expose us to additional risks related
to foreign currency fluctuations.
Cost of revenue consists primarily of the following: the cost of finished products from our third-party contract manufacturers;
overhead costs including purchasing, product planning, inventory control, warehous-
14
2005. EDGAR Online, Inc.