Netgear 2004 Annual Report Download - page 9

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Table of Contents
Research and Development
As of December31, 2004, we had 43 employees engaged in research and development. We believe that our success depends on our
ability to develop products that meet the changing user needs and to anticipate and proactively respond to evolving technology in a
timely and cost-effective manner. Accordingly, we have made investments in our research and development department in order to
effectively evaluate new technologies and develop new products. Our research and development employees work closely with our
manufacturing partners to bring our products to market in a timely, high quality and cost-efficient manner.
We identify and qualify new technologies, and we work closely with our various technology suppliers and manufacturing partners to
develop products using one of the two manufacturing methodologies described below.
ODM.
Under the original design manufacturer, or ODM, methodology, which we use for most of our product development activities,
we define the product concept and specification and perform the technology selection. We then coordinate with our technology
suppliers while they develop the chipsets, software drivers and detailed circuit designs. Once prototypes are completed, we work with
our ODMs to complete the debugging and systems integration and testing. Our ODMs conduct all of the agency approval processes
for electrical safety and electromagnetic interference. After completion of the final tests, agency approvals and product documentation,
the product is released for production.
OEM.
Under the original equipment manufacturer, or OEM, methodology, which we use for a limited number of products, we define
the product specification and then purchase the product from OEM suppliers that have existing products fitting our design
requirements. Once a technology supplier’s product is selected, we work with the OEM supplier to complete the cosmetic changes to
fit into our mechanical and packaging design, as well as our documentation standard. The OEM supplier completes regulatory
approvals on our behalf. When all design verification and regulatory testing is completed, the product is released for production.
Our internal research and development efforts focus on improving the industrial design of our products and enhancing their
ease-of-use. Our total research and development expenses were $9.9million in 2004, $8.2million in 2003 and $7.4million in 2002.
Manufacturing
Our primary manufacturing contractors are ASUSTek Computer, Inc., Cameo Communications Inc., Delta Networks Incorporated, Hon
Hai Precision Industry Co., Ltd., SerComm Corporation and Z-Com, Inc., all of which are headquartered in Taiwan. The actual
manufacturing of our products occurs both in Taiwan and mainland China. We distribute our manufacturing among these key
suppliers to avoid excessive concentration with a single supplier. Delta Networks Incorporated is associated with Delta International
Holding Ltd.. In addition to their responsibility for the manufacturing of our products, our manufacturers purchase all necessary parts
and materials to produce complete, finished goods. To maintain quality standards for our suppliers, we have established our own
product testing and quality organization based in Hong Kong, which is responsible for auditing and inspecting product quality on the
premises of our contractors.
We currently outsource warehousing and distribution logistics to three third party logistics providers who are responsible for
warehousing, distribution logistics and customer order fulfillment. In addition, these parties are also responsible for some final
packaging of our products including bundling components to form kits, and inserting appropriate documentation and power adapters.
APL Logistics Americas, Ltd. in Walnut, California serves the Americas region, Kerry Logistics Ltd. in Hong Kong serves the Asia
Pacific region, and Furness Logistics BV in the Netherlands serves the Europe, Middle East and Africa, or EMEA, region.
Sales and Marketing
As of December31, 2004, we had 123 employees engaged in sales and marketing. We work directly with our resellers on market
development activities, such as co-advertising, in-store promotions and demonstrations, event sponsorship and sales associate
training. We also participate in major industry trade shows and
5
2005. EDGAR Online, Inc.