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Table of Contents
advantage of complex applications, advanced communication capabilities and rich multimedia content, users are
upgrading their Internet connections by deploying high-speed broadband access technologies. Users also seek the
convenience and flexibility of operating their PCs, laptops and related computing devices in a more mobile, or
wireless, manner. Finally, as the usage of networks, including the Internet, has increased, users have become much
more focused on the security of their connections and the protection of the data within their networks.
Small business and home users demand a complete set of wired and wireless networking and broadband
solutions that are tailored to their specific needs and budgets and also incorporate the latest networking technologies.
These users require the continual introduction of new and refined products. Small business and home users often lack
extensive IT resources and technical knowledge and therefore demand ‘plug-and-play’ or easy-to-install and use
solutions. These users seek reliable products that require little or no maintenance, and are supported by effective
technical support and customer service. We believe that these users also prefer the convenience of obtaining a
networking solution from a single company with whom they are familiar; as these users expand their networks, they
tend to be loyal purchasers of that brand. In addition, purchasing decisions of users in the small business and home
markets are also driven by the affordability of networking products. To provide reliable, easy-to-use products at an
attractive price, we believe a successful supplier must have a company-wide focus on the unique requirements of
these markets and the operational discipline and cost-efficient company infrastructure and processes that allow for
efficient product development, manufacturing and distribution.
Sales Channels
We sell our products through multiple sales channels worldwide, including traditional retailers, online retailers,
wholesale distributors, DMRs, VARs, and broadband service providers.
Retailers.
Our retail channel primarily supplies products that are sold into the home market. We sell directly to,
or enter into consignment arrangements with, a number of our traditional retailers. The remaining traditional retailers,
as well as our online retailers, are fulfilled through wholesale distributors, the largest of which are Ingram Micro, Inc.
and Tech Data Corporation. We work directly with our retail channels on market development activities, such as co-
advertising, in-store promotions and demonstrations, instant rebate programs, event sponsorship and sales associate
training, as well as establishing “store within a store” websites and banner advertising.
DMRs and VARs. We primarily sell into the small business market through an extensive network of DMRs and
VARs. Our DMRs include companies such as CDW and Insight. VARs include our network of registered Powershift
Partners, or resellers who achieve prescribed quarterly sales goals and as a result may receive sales incentives,
marketing support and other program benefits from us. Our products are also resold by a large number of smaller
VARs whose sales are not large enough to qualify them for our Powershift Partner program. Our DMRs and VARs
generally purchase our products through our wholesale distributors, primarily Ingram Micro, Inc. and Tech Data
Corporation.
Broadband Service Providers. We also supply our products directly to broadband service providers in the
United States and internationally, who distribute our products to their small business and home subscribers.
We derive the majority of our net revenue from international sales. International sales as a percentage of net
revenue grew from 56% in 2005 to 62% in 2006. Sales in Europe, Middle-East and Africa, or EMEA, grew from
$200.0 million in 2005 to $298.2 million in 2006, representing an increase of approximately 49% during that period.
We continue to penetrate new markets such as Brazil, Eastern Europe, India, and the Middle-East. The table below
sets forth our net revenue by major geographic region.
3
Year Ended December 31,
Percentage
Percentage
2004
Change
2005
Change
2006
(In thousands, except percentage data)
United States
$
186,836
7
%
$
199,208
11
%
$
220,440
EMEA
159,615
25
%
199,951
49
%
298,234
Asia Pacific and rest of world
36,688
38
%
50,451
9
%
54,896
Total
$
383,139
17
%
$
449,610
28
%
$
573,570