Netgear 2007 Annual Report Download - page 34

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Table of Contents
The following table sets forth the consolidated statements of operations, expressed as a percentage of net
revenue, for the periods presented:
Net Revenue
Our net revenue consists of gross product shipments, less allowances for estimated returns for stock rotation and
warranty, price protection and sales incentives deemed to be a reduction of net revenue per EITF Issue No. 01-9 and
net changes in deferred revenue. Sales incentives include advertising, cooperative marketing programs, end-caps,
instant rebates and mail-in rebates.
2006 Net Revenue Compared to 2005 Net Revenue
Net revenue increased $124.0 million, or 27.6%, to $573.6 million for the year ended December 31, 2006, from
$449.6 million for the year ended December 31, 2005. We continued to experience our seasonal pattern of higher net
revenues in the second half of the year. The increase in revenue was especially attributable to higher sales of DSL
gateway and powerline products to new and existing service provider customers, especially in Europe. The majority
of these incremental sales specifically included our wireless gateway customized for major service provider British
Sky Broadcasting in the United Kingdom, with shipments of wireless gateways and powerline products to other
service providers further improving revenue.
Sales were further enhanced by the first full year of RangeMax wireless router sales to the home market. We
introduced our RangeMax family of products, which included performance-enhancing Multiple-In Multiple-Out
(MIMO) technology, during 2005, and the market has continued to embrace this key product line throughout the
year. We expect the RangeMax family to remain strong in the coming year, and anticipate continuing our recent
trend of increased sales of customized wireless gateways to service providers, both domestically and abroad. We
30
Year Ended
December 31,
2004
2005
2006
Net revenue
100
%
100
%
100
%
Cost of revenue
67.9
66.3
66.2
Gross margin
32.1
33.7
33.8
Operating expenses:
Research and development
2.7
2.8
3.2
Sales and marketing
16.3
15.9
16.0
General and administrative
3.9
3.2
3.7
In
-
process research and development
0.0
0.0
0.5
Litigation reserves
0.0
0.2
0.0
Total operating expenses
22.9
22.1
23.4
Income from operations
9.2
11.6
10.4
Interest income
0.4
0.9
1.2
Other income (expense), net
(0.1
)
(0.4
)
0.4
Income before income taxes
9.5
12.1
12.0
Provision for income taxes
3.4
4.6
4.8
Net income
6.1
%
7.5
%
7.2
%
Year Ended December 31,
Percentage
Percentage
2004
Change
2005
Change
2006
(In thousands, except percentage data)
Net revenue
$
383,139
17.3
%
$
449,610
27.6
%
$
573,570