Netgear 2004 Annual Report Download - page 47

Table of Contents
consuming to obtain alternative sources for these components, or to change product designs to make use of alternative components.
In addition, difficulties in transitioning from an existing supplier to a new supplier could create delays in component availability that
would have a significant impact on our ability to fulfill orders for our products. If we are unable to obtain a sufficient supply of
components, or if we experience any interruption in the supply of components, our product shipments could be reduced or delayed.
This would affect our ability to meet scheduled product deliveries, damage our brand and reputation in the market, and cause us to
lose market share.
We rely upon third parties for technology that is critical to our products, and if we are unable to continue to use this technology and
future technology, our ability to sell technologically advanced products would be limited.
We rely on third parties to obtain non-exclusive patented hardware and software license rights in technologies that are incorporated
into and necessary for the operation and functionality of our products. Because the intellectual property we license is available from
third parties, barriers to entry may be lower than if we owned exclusive rights to the technology we license and use. On the other hand,
if a competitor or potential competitor enters into an exclusive arrangement with any of our key third-party technology providers, our
ability to develop and sell products containing that technology would be severely limited. Our licenses often require royalty payments
or other consideration to third parties. Our success will depend in part on our continued ability to have access to these technologies,
and we do not know whether these third-party technologies will continue to be licensed to us on commercially acceptable terms or at
all. If we are unable to license the necessary technology, we may be forced to acquire or develop alternative technology of lower
quality or performance standards. This would limit and delay our ability to offer competitive products and increase our costs of
production. As a result, our margins, market share, and operating results could be significantly harmed.
If we are unable to secure and protect our intellectual property rights, our ability to compete could be harmed.
We rely upon third parties for a substantial portion of the intellectual property we use in our products. At the same time, we rely on a
combination of copyright, trademark, patent and trade secret laws, nondisclosure agreements with employees, consultants and
suppliers and other contractual provisions to establish, maintain and protect our intellectual property rights. Despite efforts to protect
our intellectual property, unauthorized third parties may attempt to design around, copy aspects of our product design or obtain and
use technology or other intellectual property associated with our products. For example, one of our primary intellectual property assets
is the NETGEAR name, trademark and logo. We may be unable to stop third parties from adopting similar names, trademarks and logos,
especially in those international markets where our intellectual property rights may be less protected. Furthermore, our competitors
may independently develop similar technology or design around our intellectual property. Our inability to secure and protect our
intellectual property rights could significantly harm our brand and business, operating results and financial condition.
Our sales and operations in international markets expose us to operational, financial and regulatory risks.
International sales comprise a significant amount of our overall net revenue. International sales were 46% of overall net revenue in
fiscal 2004. We anticipate that international sales may grow as a percentage of net revenue. We have committed resources to
expanding our international operations and sales channels and these efforts may not be successful. International operations are
subject to a number of other risks, including:
•
political and economic instability, international terrorism and anti-American sentiment, particularly in emerging markets;
•
preference for locally branded products, and laws and business practices favoring local competition;
•
exchange rate fluctuations;
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2005. EDGAR Online, Inc.