Netgear 2004 Annual Report Download - page 87

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Table of Contents
NETGEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS— (Continued)
The fair value of each option grant under the Company’s stock option plan is estimated on the date of grant using the fair value
method, using the following weighted average assumptions:
Year Ended December31,
2002
2003
2004
Risk free interest rate
3.14
%
2.68
%
2.81
%
Expected life (years)
4
4
4
Expected dividends
$
—
$
—
$
—
Volatility
71
%
71
%
52
%
The weighted average fair value of options granted during 2002, 2003 and 2004 was $4.45, $8.37 and $5.47, respectively.
Note7—
Employee Stock Purchase Plans:
In April 2003, the Company adopted the Employee Stock Purchase Plan (the “Purchase Plan”) under which 500,000shares have been
reserved for issuance. The Purchase Plan permits purchases of common stock via payroll deductions. The maximum payroll deduction
is 10% of the employee’s cash compensation. Purchases of the common stock occur on February1 and August1 of each year. The
price of each share purchased is 85% of the lower of:
The fair market value per share of common stock on the first trading day of each offering period (which lasts 6months);or
The fair market value per share of common stock on the first trading day on or subsequent to the last day of the offering period, if it
falls on a weekend or Government holiday.
The value of the shares purchased by any single employee in any calendar year may not exceed $25,000.
Through December31, 2004, 39,217shares had been purchased under the Purchase Plan and 460,783 remain available for issuance.
Note8—
Segment Information, Operations by Geographic Area and Customer Concentration:
Operating segments are components of an enterprise about which separate financial information is available and is regularly evaluated
by management, namely the chief operating decision maker of an organization, in order to make operating and resource allocation
decisions. By this definition, the Company primarily operates in one business segment, which comprises the development, marketing
and sale of networking products for the small business and home markets. NETGEAR’s primary headquarters and a significant portion
of its operations are located in the United States. The Company also conducts sales, marketing, customer service activities and certain
distribution center activities through several small sales offices in Europe, Middle-East and Africa (EMEA) and Asia as well as
outsourced distribution centers. Geographic revenue information is based on the location of the reseller or distributor.
Long-lived assets, primarily fixed assets, are reported below based on the location of the asset.
57
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