Netgear 2008 Annual Report Download

Download and view the complete annual report

Please find the complete 2008 Netgear annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 132

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132

NETGEAR, INC
FORM 10-K
(Annual Report)
Filed 03/04/09 for the Period Ending 12/31/08
Address 350 EAST PLUMERIA DRIVE
SAN JOSE, CA 95134
Telephone 4089078000
CIK 0001122904
Symbol NTGR
SIC Code 3661 - Telephone and Telegraph Apparatus
Industry Communications Equipment
Sector Technology
Fiscal Year 12/31
http://www.edgar-online.com
© Copyright 2009, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    NETGEAR, INC FORM 10-K (Annual Report) Filed 03/04/09 for the Period Ending 12/31/08 Address Telephone CIK Symbol SIC Code Industry Sector Fiscal Year 350 EAST PLUMERIA DRIVE SAN JOSE, CA 95134 4089078000 0001122904 NTGR 3661 - Telephone and Telegraph Apparatus Communications Equipment Technology ...

  • Page 2
    ... (I.R.S. Employer Identification No.) 350 East Plumeria Drive, San Jose, California (Address of principal executive offices) Registrant's telephone number, including area code (408) 907-8000 Securities registered pursuant to Section 12(b) of the Act: Title of each class 95134 (Zip Code) Name...

  • Page 3

  • Page 4
    ... Factors Unresolved Staff Comments Properties Legal Proceedings Submission of Matters to a Vote of Security Holders PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Selected Consolidated Financial Data Management's Discussion and...

  • Page 5
    ... and communicate across local area networks, or LANs, and the World Wide Web and share Internet access, peripherals, files, digital multimedia content and applications among multiple networked devices and other Internet-enabled devices. We sell our products through multiple sales channels worldwide...

  • Page 6
    ... our Powershift Partner program. Our DMRs and VARs generally purchase our products through our wholesale distributors, primarily Ingram Micro and Tech Data. Broadband Service Providers. We also supply our products directly to broadband service providers in the United States and internationally, who...

  • Page 7
    ... and small-office networks. Products that enable Ethernet networking include switches, which are multiple port devices used to network PCs and peripherals; network interface cards, adapters and bridges, that enable PCs and other equipment to be connected to a network; Internet Security Appliances...

  • Page 8
    ... circular dome atop a sleek black or white plastic casing. Our connectivity offerings for use in the home are generally at a lower price than higher security and configurability wireless offerings for the small business market. Our products for facilitating broadband access in the home are available...

  • Page 9
    ... and reliability, price, ease-of-installation, maintenance and use, and customer service and support. To remain competitive, we believe we must invest significant resources in developing new products and enhancing our current products while continuing to expand our sales channels and maintaining...

  • Page 10
    ... serve the the United States and Europe, Middle-East and Africa, or EMEA, region. Sales and Marketing As of December 31, 2008, we had 266 employees engaged in sales and marketing. We work directly with our customers on market development activities, such as co-advertising, in-store promotions and...

  • Page 11
    ... products, including NETGEAR, the NETGEAR logo, the NETGEAR Digital Entertainer logo, the Gear Guy logo, Connect with Innovation, Everybody's connecting, IntelliFi, ProSafe, RangeMax, ReadyNAS, Smart Wizard and X-RAID in the United States and internationally. We have registered a number of Internet...

  • Page 12
    ... NETGEAR division in January 1996. From 1983 until 1995, Mr. Lo worked at Hewlett-Packard Company, a computer and test equipment company, where he served in various management positions in software sales, technical support, network product management, sales support and marketing in the United States...

  • Page 13
    ...-Packard's Unix server and personal computer product divisions. Mr. Olson received a B.S. degree in Electrical Engineering from the University of California, Davis and an M.B.A. from Santa Clara University. David Soares has served as our Senior Vice President of Worldwide Sales since August 2004...

  • Page 14
    ... a portion of our international sales are currently invoiced in United States dollars, we have implemented and continue to implement for certain countries both invoicing and payment in foreign currencies. Our primary exposure to movements in foreign currency exchange rates relates to non-U.S. dollar...

  • Page 15
    ...well as decreased demand for Internet access; changes in or consolidation of our sales channels and wholesale distributor relationships or failure to manage our sales channel inventory and warehousing requirements; delay or failure to fulfill orders for our products on a timely basis; disruptions or...

  • Page 16
    ..., more extensive distribution channels, stronger brand names, greater access to shelf space in retail locations, bigger promotional budgets and larger customer bases than we do. These companies could devote more capital resources to develop, manufacture and market competing products than we could...

  • Page 17
    ...rapid reduction in the average unit selling prices over their respective sales cycles. In order to sell products that have a falling average unit selling price and maintain margins at the same time, we need to continually reduce product and manufacturing costs. To manage manufacturing costs, we must...

  • Page 18
    ... of our end user customers may be interrupted. If that happens, affected end-users or others may file actions against us alleging product liability, tort, or breach of warranty claims. If we fail to continue to introduce new products that achieve broad market acceptance on a timely basis, we will...

  • Page 19
    ... our products through our sales channels, which consists of traditional retailers, online retailers, DMRs, VARs, and broadband service providers. Some of these entities purchase our products through our wholesale distributors. We generally have no minimum purchase commitments or long-term contracts...

  • Page 20
    .... We also obtain switching fabric semiconductors, which are used in our Ethernet switches and Internet gateway products, and wireless local area network chipsets, which are used in all of our wireless products, from a limited number of suppliers. Semiconductor suppliers have experienced and...

  • Page 21
    ... and report key components of our results of operations, financial position and cash flows. If the systems fail to operate appropriately or we experience any disruptions or delays in enhancing their functionality to meet current business requirements, our ability to fulfill customer orders, bill and...

  • Page 22
    ... assets acquired in connection with the Company's 2006 acquisition of Skipjam Corp. due to the departure of a key employee responsible for managing the asset group as well as recent economic conditions. In conducting our annual impairment test for goodwill during the fourth quarter of 2008, our...

  • Page 23
    ... below the expectations of public market analysts or investors. In that event, our stock price could decline significantly. We depend on a limited number of third party manufacturers for substantially all of our manufacturing needs. If these third party manufacturers experience any delay, disruption...

  • Page 24
    ... be significantly harmed. We also utilize third party software development companies to develop, customize, maintain and support software that is incorporated into our products. If these companies fail to timely deliver or continuously maintain and support the software that we require of them, we...

  • Page 25
    ... for our end-user promotional programs is higher than we estimate, then our net revenue and gross margin will be negatively affected. From time to time we offer promotional incentives, including cash rebates, to encourage end-users to purchase certain of our products. Purchasers must follow specific...

  • Page 26
    ... in the United States and the international Internet security market. We recently moved into a new corporate headquarters in the third quarter of 2008. If we cannot retain sub lessees for the remaining lease term of our old facilities, then we will be forced to take an additional charge related to...

  • Page 27
    ... periods and could reduce our stock price and our ability to effectively utilize equity compensation to attract and retain employees. We historically have used stock options as a significant component of our employee compensation program in order to align employees' interests with the interests of...

  • Page 28
    ... Chairman and Chief Executive Officer, who has led our company since its inception, are very important to our business. We do not maintain any key person life insurance policies. The loss of any of our senior management or other key research, development, sales or marketing personnel, particularly...

  • Page 29
    ... Contents Item 1B. Staff Comments Unresolved None. Item 2. Properties Our principal administrative, sales, marketing and research and development facilities currently occupy approximately 142,700 square feet in an office complex in San Jose, California, under a lease that expires in March 2018. Our...

  • Page 30
    Table of Contents PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock has been quoted under the symbol "NTGR" on the Nasdaq National Market from July 31, 2003 to July 1, 2006, and on the ...

  • Page 31
    ... Contents Company Performance Notwithstanding any statement to the contrary in any of our previous or future filings with the SEC, the following information relating to the price performance of our common stock shall not be deemed "filed" with the SEC or "soliciting material" under the Exchange Act...

  • Page 32
    ... of Equity Securities by the Company Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs Period January 1, 2008-January 31...

  • Page 33
    ...and related notes thereto, and "Management's ...2008 Year Ended December 31, 2007 2006 2005 (In thousands, except per share data) 2004 Consolidated Statement of Operations Data: Net revenue Cost of revenue(2) Gross profit Operating expenses: Research and development(2) Sales and marketing(2) General...

  • Page 34
    ... sales channels worldwide, including traditional retailers, online retailers, wholesale distributors, DMRs, VARs, and broadband service providers. Our retail channel includes traditional retail locations domestically and internationally, such as Best Buy, Fry's Electronics, Radio Shack, Staples...

  • Page 35
    ...shipments in our wireless-G products to existing service provider customers as well as sales of our ReadyNAS products, which were acquired in connection with our May 16, 2007 acquisition of Infrant Technologies, Inc. ("Infrant"). We have also experienced growth in wireless-N router sales. The growth...

  • Page 36
    ... to our direct customers. At the time we record the reduction to revenue related to warranty returns, we include within cost of revenue a write-down to reduce the carrying value of such products to net realizable value. Our standard warranty obligation to end-users provides for replacement of...

  • Page 37
    ..., significant decline in our stock price and market capitalization; a significant adverse change in the business climate; the testing for recoverability of a significant asset group; and slower growth rates. In the fourth quarter of fiscal 2008, we completed the annual impairment test of goodwill...

  • Page 38
    ...2008, a key employee responsible for managing the asset group acquired in connection with our 2006 acquisition of Skipjam Corp. departed the Company. The departure of this employee, along with the recent economic environment, resulted in our decision to reduce efforts geared at marketing the related...

  • Page 39
    ...SFAS No. 109, "Accounting for Income Taxes." It provides that a company should use a more-likely-than-not recognition threshold based on the technical merits of the income tax position taken. Income tax positions that meet the more-likely-than-not recognition threshold should be measured in order to...

  • Page 40
    ... sales in several of our product categories. These include wireless-G products sold to existing service provider customers and the full year sales of our ReadyNAS products, which were acquired in connection with our acquisition of Infrant in May 2007, as well as growth in wireless-N router sales...

  • Page 41
    ...include DSL gateway and cable gateway products sold to new and existing service provider customers and stronger worldwide switch sales, the launch of our ReadyNAS products, which were acquired in connection with our acquisition of Infrant, and a full year of wireless-N router sales. Sales incentives...

  • Page 42
    ...% to 158 employees as of December 31, 2008 as compared to 115 employees as of December 31, 2007, primarily due to new employees obtained from the acquisition of certain assets of CP Secure International Holding Limited ("CP Secure") in December 2008. The increase in research and development expense...

  • Page 43
    ... facilities costs primarily related to our new corporate headquarters in San Jose, California. These increases were partially offset by lower advertising and promotion expenses. 2007 Sales and Marketing Expense Compared to 2006 Sales and Marketing Expense Sales and marketing expenses increased $26...

  • Page 44
    ... 53 incremental employees related to expansion in EMEA and Asia Pacific. Outside service fees related to customer service and technical support increased by $3.8 million, in support of higher call volumes. We also incurred a $1.9 million increase in advertising and promotion expenses related to our...

  • Page 45
    ...to the termination of employment of approximately 35 individuals on November 12, 2008. Additionally, we expensed $964,000 related to excess facilities we ceased to use in Santa Clara and Fremont, California due to our relocation to a new corporate headquarters in San Jose, California. For a detailed...

  • Page 46
    ...exchange...stock-based compensation, state taxes, other non-deductible expenses, and tax credits. In 2008, there was no rate effect from in-process R&D expensed in connection with the acquisition of CP Secure since such in-process R&D was deductible for tax purposes. In 2007, the acquisition of Infrant...

  • Page 47
    ... 2008, financing activities used $9.7 million, due to the repurchase and retirement of 1.2 million shares of our common stock for $12.2 million offset in part by the issuance of our common stock upon exercise of stock options and our employee stock purchase program, as well as the excess tax benefit...

  • Page 48
    ... shares of our common stock in the open market for cash of $12.2 million. As of December 31, 2008, we were authorized to purchase up to an additional 4.8 million shares under the share repurchase plan. See Note 9 of the Notes to Consolidated Financial Statements for a discussion of the accounting...

  • Page 49
    ... expect a significant tax payment related to these obligations to occur within the next 12 months. Off-Balance Sheet Arrangements As of December 31, 2008, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of SEC Regulation S-K. Recent Accounting Pronouncements See...

  • Page 50
    ... with foreign exchange rate fluctuations due to our international sales and operating activities. These exposures may change over time as business practices evolve and could negatively impact our operating results and financial condition. We began using derivatives in the fourth quarter of 2008 to...

  • Page 51
    ... accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or...

  • Page 52
    ..., except share and per share data) December 31, 2008 2007 ASSETS Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net Inventories Deferred income taxes Prepaid expenses and other current assets Total current assets Property and equipment, net Intangibles...

  • Page 53
    Table of Contents NETGEAR, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) 2008 Year Ended December 31, 2007 2006 Net revenue Cost of revenue Gross profit Operating expenses: Research and development Sales and marketing General and administrative Restructuring In-...

  • Page 54
    ...short-term investments, net of tax Net income Total comprehensive income Stock-based compensation expense Purchase and retirement of common stock Issuance of common stock under stock-based compensation plans Tax benefit from exercise of stock options Balance at December 31, 2008 32,964 $ 33 $204...

  • Page 55
    ... business acquisitions, net of cash acquired Net cash provided by (used in) investing activities Cash flows from financing activities: Purchase and retirement of common stock Proceeds from exercise of stock options Proceeds from issuance of common stock under employee stock purchase plan Excess tax...

  • Page 56
    ... these users. The Company's product offerings enable users to share Internet access, peripherals, files, digital multimedia content and applications among multiple networked devices and other Internet-enabled devices. The Company sells products primarily through a global sales channel network, which...

  • Page 57
    ... as well as retailers and broadband service providers who sell the products to a large group of end-users. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of the Company's customers to make required payments. The Company regularly performs...

  • Page 58
    ... Leasehold improvements 2 years 5 years 2-5 years 2-3 years Shorter of the lease term or 5 years The Company accounts for impairment of property and equipment in accordance with SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets." Recoverability of assets to be held and...

  • Page 59
    ... to the increased consideration a potential acquirer would be required to pay in order to gain sufficient ownership to set policies, direct operations and make decisions related to the Company. In conducting its impairment test in the fourth quarter of 2008, the Company determined its fair value...

  • Page 60
    ... to its direct customers. At the time the Company records the reduction to revenue related to warranty returns, the Company includes within cost of revenue a write-down to reduce the carrying value of such products to net realizable value. The Company's standard warranty obligation to its end-users...

  • Page 61
    ... customer. If the Company determines that collection of the fee is not reasonably assured, then the Company defers the fee and recognizes revenue upon receipt of payment. In addition to warranty-related returns, certain distributors and retailers generally have the right to return product for stock...

  • Page 62
    ... 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123 (revised 2004), "Share-Based Payment" ("SFAS 123R"), using the modified prospective transition method. Under this transition method, stock-based compensation expense for the years ended December 31, 2008, 2007 and...

  • Page 63
    ... and the recognition of inprocess research and development as an indefinite-lived intangible asset until the development is complete, after which time the related capitalized costs would be amortized over the expected useful life. If the in-process research and development is subsequently abandoned...

  • Page 64
    ... of SFAS 157 in a market that is not active and addresses application issues such as the use of internal assumptions when relevant observable data does not exist, the use of observable market information when the market is not active and the use of market quotes when assessing the relevance of...

  • Page 65
    ... and has been accounted for using the purchase method of accounting. The Company intends to incorporate CP Secure's integrated platform into the Company's products to provide organizations with enhanced protection for their network, web access and email traffic. The aggregate purchase price was $14...

  • Page 66
    ...useful life of five years. Infrant Technologies, Inc. On May 16, 2007, the Company completed the acquisition of 100% of the outstanding shares of Infrant Technologies, Inc. ("Infrant"), a developer of network attached storage products. The Company believes the acquisition will accelerate the Company...

  • Page 67
    ... expenses and other current assets Property and equipment Intangibles Goodwill Accounts payable Accrued employee compensation Other accrued liabilities Deferred income tax liability Total purchase price allocation The goodwill of $38.2 million recorded on the acquisition of Infrant is not deductible...

  • Page 68
    ... of networkable media devices for home entertainment and control. The Company believes the acquisition enhances its strategically important digital home entertainment and control business by strengthening the Company's ability to expand its multimedia product portfolio. The aggregate purchase price...

  • Page 69
    ... useful life. None of the goodwill recorded as part of the SkipJam acquisition will be deductible for income tax purposes. As part of the acquisition, the Company has also agreed to pay up to $1.4 million in cash contingent on the continued employment of certain SkipJam employees with the Company...

  • Page 70
    ... 31, 2007. Accounts receivable and related allowances consist of the following: December 31, 2008 2007 (In thousands) Gross accounts receivable Less: Allowance for doubtful accounts Allowance for sales returns Allowance for price protection Total allowances Accounts receivable, net Inventories...

  • Page 71
    ... the Company's 2006 acquisition of Skipjam Corp. Recoverability was assessed in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," based on undiscounted estimated future net cash flows, and the impairment charge was based on fair value using discounted...

  • Page 72
    ... Statements of Operations. On July 25, 2008, the Company ceased using buildings leased in Santa Clara and Fremont, California, and consolidated all personnel and operations from those locations to a new corporate headquarters in San Jose, California. The Company expects to sublease the majority of...

  • Page 73
    ... contract gains (losses), net Total Note 7-Income Taxes: Income before income taxes consists of the following (in thousands): ($ 7,219) (1,165) ($ 8,384) $3,298 - $3,298 $2,495 - $2,495 2008 Year Ended December 31, 2007 2006 United States International Total 71 $54,222 (8,879) $45,343...

  • Page 74
    Table of Contents The provision for income taxes consists of the following (in thousands): 2008 Year Ended December 31, 2007 2006 Current: U.S. Federal State Foreign Deferred: U.S. Federal State Foreign Total Net deferred tax assets consist of the following (in thousands): $21,451 2,959 5,541 29,...

  • Page 75
    ... million of acquired federal and state net operating losses from its acquisitions of SkipJam and Infrant, respectively, as of December 31, 2008. Use of these losses are subject to annual limitation under Internal Revenue Code Section 382. Additionally, the Company has state tax credit carryforwards...

  • Page 76
    ...in the San Jose division of the United States District Court, Northern District of California. The complaint alleges that the claims of CSIRO's U.S. Patent No. 5,487,069 are invalid and not infringed by any of the Company's products. CSIRO had asserted that the Company's wireless networking products...

  • Page 77
    .... Several defendants, including the Company, jointly filed a request for inter partes reexamination of the OptimumPath patent with the United States Patent and Trademark Office (the "USPTO") on October 13, 2008. On January 12, 2009, a reexamination was ordered with respect to claims 1-3 and 8-10 of...

  • Page 78
    ... failed to resolve the litigation. This action is in the discovery phase. Ruckus Wireless v. NETGEAR In May 2008, a lawsuit was filed against the Company by Ruckus Wireless ("Ruckus"), a developer of Wi-Fi technology, in the U.S. District Court for the Northern District of California. Ruckus alleges...

  • Page 79
    ...were not infringed by Charter. Hybrid filed similar lawsuits in the same jurisdiction against Comcast Corporation, Comcast of Dallas, LP, Time Warner Cable, Inc. and Cox Communications, Inc., all of whom are also customers of the Company. In May 2008, the Company, together with several co-defendants...

  • Page 80
    ... of any unvested portion of his or her stock options. Leases The Company leases office space, cars and equipment under non-cancelable operating leases with various expiration dates through December 2026. Rent expense in the years ended, December 31, 2008, 2007 and 2006 was $6.3 million, $3.4 million...

  • Page 81
    ... resulting from stock options, restricted stock awards, and the Employee Stock Purchase Plan included in the Company's Consolidated Statements of Operations (in thousands): Year Ended December 31, 2008 2007 2006 Cost of revenue Research and development Sales and marketing General and administrative...

  • Page 82
    ... adoption of the 2006 Plan, the Company reserved 2,500,000 shares of common stock for issuance under the 2006 Plan. In June 2008, the Company adopted amendments to the 2006 Plan which increased the number of shares of the Company's common stock that may be issued under the 2006 plan by an additional...

  • Page 83
    ... any federal, state, local, domestic or foreign taxes relating to an award, and may be payable in shares, cash, other securities or any other form of property as the plan administrator may determine. In the event of a change in control of the Company, all awards under the 2006 Plan vest in full and...

  • Page 84
    ... employees will purchase stock semi-annually at a price equal to 85% of the fair market value on the purchase date. Since the price of the shares is now determined at the purchase date and there is no longer a look-back period, the Company recognizes the expense based on the 15% discount at purchase...

  • Page 85
    ... values in the table above represent the total pre-tax intrinsic values (the difference between the Company's closing stock price on the last trading day of 2008, 2007, and 2006 and the exercise price, multiplied by the number of shares underlying the in-themoney options) that would have been...

  • Page 86
    ... and sale of networking products for the small business and home markets. The Company's primary headquarters and a significant portion of its operations are located in the United States. The Company also conducts sales, marketing and customer service activities through several small sales offices in...

  • Page 87
    ..., are reported based on the location of the asset. Long-lived assets by geographic location are as follows (in thousands): Year Ended December 31, 2008 2007 United States EMEA Asia Pacific and rest of the world $ 17,632 434 2,226 $ 20,292 $ 9,459 578 1,168 $ 11,205 Customer concentration (as...

  • Page 88
    ...-for-sale securities are recorded at fair value based on quoted market prices in active markets. All of the Company's foreign currency forward contracts are with counterparties that have long-term credit ratings of doubleA. The Company's foreign currency forward contracts are valued using pricing...

  • Page 89
    ... the policies or procedures may deteriorate. Our management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2008. In making this assessment, our management used the...

  • Page 90
    ... in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as...

  • Page 91
    ... the Registrant" included under Part I, Item 1 of this Form 10-K. We have adopted a Code of Ethics that applies to our Chief Executive Officer and senior financial officers, as required by the SEC. The current version of our Code of Ethics can be found on our Internet site at http:// www.netgear.com...

  • Page 92
    ... Financial Data (unaudited) Management's Report on Internal Control Over Financial Reporting (2) Financial Statement Schedule. The following financial statement schedule of NETGEAR, Inc. for the fiscal years ended December 31, 2008, 2007 and 2006 is filed as part of this Form 10-K and should be...

  • Page 93
    ...caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Jose, State of California, on the 4th day of March 2009. NETGEAR, INC. Registrant /s/ P ATRICK C.S. L O Patrick C.S. Lo Chairman of the Board and Chief Executive Officer (Principal...

  • Page 94
    Table of Contents Signature Title Date /s/ G REGORY J. R OSSMANN Gregory J. Rossmann Director Director 92 March 4, 2009 March 4, 2009 /s/ J ULIE A. S HIMER Julie A. Shimer

  • Page 95
    ... Agreement for directors and officers(2) 2000 Stock Option Plan and forms of agreements thereunder(2) 2003 Stock Plan and forms of agreements thereunder(2) 2003 Employee Stock Purchase Plan(2) Offer Letter, dated December 3, 1999, between the registrant and Patrick C.S. Lo(2) Employment Agreement...

  • Page 96
    ... Corporation, Infrant Technologies, Inc., certain Infrant shareholders thereof, and Paul Tien as the Holders Representative(16) NETGEAR, Inc. 2007 Bonus Plan(17) Separation Agreement and Release, dated as of August 29, 2007, by and between the registrant and Deborah A. Williams(18) Office Lease...

  • Page 97
    ... bearing the same number filed with the Registrant's Current Report on Form 8-K filed on September 23, 2008 with the Securities and Exchange Commission. Incorporated by reference to an exhibit filed with the Registrant's Registration Statement on Form S-1 (Registration Statement 333104419), which...

  • Page 98
    ... Registrant's Quarterly Report on Form 10-Q filed on May 9, 2008 with the Securities and Exchange Commission. (21) Incorporated by reference to the copy included in the Registrant's Proxy Statement for the 2008 Annual Meeting of Stockholders filed on April 28, 2008 with the Securities and Exchange...

  • Page 99
    ...409A of the Internal Revenue Code and the final regulations and other official guidance thereunder (" Section 409A ") so as to avoid the imposition of any additional tax under Section 409A, as set forth below. NOW, THEREFORE , for good and valuable consideration, Executive and the Company agree that...

  • Page 100
    ... 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which Executive's employment is terminated. (e) The foregoing...

  • Page 101
    ... benefit of, and be binding upon, their respective successors, assigns, and legal representatives. 7. Governing Law . This Amendment will be governed by the laws of the State of California (with the exception of its conflict of laws provisions). oOo

  • Page 102
    IN WITNESS WHEREOF , each of the Parties has executed this Amendment, in the case of the Company by its duly authorized officer, as of the day and year set forth above. COMPANY NETGEAR, INC. By: /s/ Patrick C.S. Lo Title: CEO Date: 12/23/08 EXECUTIVE By: /s/ Michael F. Falcon Title: Sr. VP of ...

  • Page 103
    ...409A of the Internal Revenue Code and the final regulations and other official guidance thereunder (" Section 409A ") so as to avoid the imposition of any additional tax under Section 409A, as set forth below. NOW, THEREFORE , for good and valuable consideration, Executive and the Company agree that...

  • Page 104
    ... 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which Executive's employment is terminated. (e) The foregoing...

  • Page 105
    ... benefit of, and be binding upon, their respective successors, assigns, and legal representatives. 7. Governing Law . This Amendment will be governed by the laws of the State of California (with the exception of its conflict of laws provisions). o0o

  • Page 106
    ... the Parties has executed this Amendment, in the case of the Company by its duly authorized officer, as of the day and year set forth above. COMPANY NETGEAR, INC. By: /s/ Patrick C.S. Lo Title: CEO Date: 12/23/08 EXECUTIVE By: /s/ Christine M. Gorjanc Title: Chief Financial Officer Date: 12/31/08

  • Page 107
    ...409A of the Internal Revenue Code and the final regulations and other official guidance thereunder (" Section 409A ") so as to avoid the imposition of any additional tax under Section 409A, as set forth below. NOW, THEREFORE , for good and valuable consideration, Executive and the Company agree that...

  • Page 108
    ...service" within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the "Code") and the final regulations and official...specified employee" within the meaning of Section 409A at the time of your separation from service (other than due to death), and the severance payments and...

  • Page 109
    ... Section 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which your employment is terminated. (e) The foregoing...

  • Page 110
    ... of the Parties has executed this Amendment, in the case of the Company by its duly authorized officer, as of the day and year set forth above. COMPANY NETGEAR, INC. By: /s/ Andrew W. Kim Title: VP, Legal and Corporate Development Date: 12/23/08 EXECUTIVE By: /s/ Patrick C.S. Lo Title: CEO Date...

  • Page 111
    ...409A of the Internal Revenue Code and the final regulations and other official guidance thereunder (" Section 409A ") so as to avoid the imposition of any additional tax under Section 409A, as set forth below. NOW, THEREFORE , for good and valuable consideration, Executive and the Company agree that...

  • Page 112
    ...service" within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the "Code") and the final regulations and official...specified employee" within the meaning of Section 409A at the time of your separation from service (other than due to death), and the severance payments and...

  • Page 113
    ... Section 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which your employment is terminated. (e) The foregoing...

  • Page 114
    ... of the Parties has executed this Amendment, in the case of the Company by its duly authorized officer, as of the day and year set forth above. COMPANY NETGEAR, INC. By: /s/ Patrick C.S. Lo Title: CEO Date: 12/23/08 EXECUTIVE By: /s/ Mark Merrill Title: Chief Technical Officer Date: 12/28/08

  • Page 115
    ...409A of the Internal Revenue Code and the final regulations and other official guidance thereunder (" Section 409A ") so as to avoid the imposition of any additional tax under Section 409A, as set forth below. NOW, THEREFORE , for good and valuable consideration, Executive and the Company agree that...

  • Page 116
    ... 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which Executive's employment is terminated. (e) The foregoing...

  • Page 117
    ... benefit of, and be binding upon, their respective successors, assigns, and legal representatives. 7. Governing Law . This Amendment will be governed by the laws of the State of California (with the exception of its conflict of laws provisions). oOo

  • Page 118
    ... , each of the Parties has executed this Amendment, in the case of the Company by its duly authorized officer, as of the day and year set forth above. COMPANY NETGEAR, INC. By: /s/ Patrick C.S. Lo Title: CEO Date: 12/23/08 EXECUTIVE By: /s/ Chuck Olson Title: Sr. VP of Engineering Date: 12/24/08

  • Page 119
    ...409A of the Internal Revenue Code and the final regulations and other official guidance thereunder (" Section 409A ") so as to avoid the imposition of any additional tax under Section 409A, as set forth below. NOW, THEREFORE , for good and valuable consideration, Executive and the Company agree that...

  • Page 120
    ... 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which Executive's employment is terminated. (e) The foregoing...

  • Page 121
    ... benefit of, and be binding upon, their respective successors, assigns, and legal representatives. 6. Governing Law . This Amendment will be governed by the laws of the State of California (with the exception of its conflict of laws provisions). oOo

  • Page 122
    ... , each of the Parties has executed this Amendment, in the case of the Company by its duly authorized officer, as of the day and year set forth above. COMPANY NETGEAR, INC. By: /s/ Patrick C.S. Lo Title: CEO Date: 12/23/08 EXECUTIVE By: /s/ Michael Werdann Title: VP Sales, Americas Date: 12/30/08

  • Page 123
    ...409A of the Internal Revenue Code and the final regulations and other official guidance thereunder (" Section 409A ") so as to avoid the imposition of any additional tax under Section 409A, as set forth below. NOW, THEREFORE , for good and valuable consideration, Executive and the Company agree that...

  • Page 124
    ... 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which Executive's employment is terminated. (e) The foregoing...

  • Page 125
    ... benefit of, and be binding upon, their respective successors, assigns, and legal representatives. 7. Governing Law . This Amendment will be governed by the laws of the State of California (with the exception of its conflict of laws provisions). oOo -3-

  • Page 126
    ... the Parties has executed this Amendment, in the case of the Company by its duly authorized officer, as of the day and year set forth above. COMPANY NETGEAR, INC. By: /s/ Patrick C.S. Lo Title: CEO Date: 12/23/08 EXECUTIVE By: /s/ Thomas Holt Title: Chief Information Officer Date: 12/29/08 -4-

  • Page 127
    ... AS (Norway) Netgear Switzerland GmbH (Switzerland) Netgear UK Limited (United Kingdom) Netgear New Zealand (New Zealand) Netgear Australia Pty Ltd. (Australia) Netgear Asia Pte Ltd. (Singapore) Netgear Hong Kong Limited (Hong Kong) Netgear (Beijing) Network Technology Co., Ltd. Netgear Austria GmbH...

  • Page 128
    ... and 333136895) of NETGEAR, Inc. of our report dated March 3, 2009 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K. /s/ PricewaterhouseCoopers LLP San Jose, California March 3, 2009

  • Page 129
    EXHIBIT 31.1 CHIEF EXECUTIVE OFFICER CERTIFICATION I, Patrick C.S. Lo, certify that: 1. 2. I have reviewed this annual report on Form 10-K of NETGEAR, Inc. (the "Registrant"); Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact...

  • Page 130
    EXHIBIT 31.2 CHIEF FINANCIAL OFFICER CERTIFICATION I, Christine M. Gorjanc, certify that: 1. 2. I have reviewed this annual report on Form 10-K of NETGEAR, Inc. (the "Registrant"); Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material...

  • Page 131
    ... connection with the Annual Report of NETGEAR, Inc. (the "Company") on Form 10-K for the year ended December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Patrick C.S. Lo, Chairman and Chief Executive Officer of the Company, certify, pursuant to...

  • Page 132
    ... In connection with the Annual Report of NETGEAR, Inc. (the "Company") on Form 10-K for the year ended December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Christine M. Gorjanc, Chief Financial Officer of the Company, certify, pursuant to 18...