Netgear 2008 Annual Report Download - page 10

Table of Contents
Once prototypes are completed, we work with our partners to complete the debugging and systems integration and testing. We are responsible
for conducting all of the regulatory agency approval processes required for each product. After completion of the final tests, agency approvals
and product documentation, the product is released for production.
IN-HOUSE DEVELOPMENT. Under the in-
house development model, one or more subsystems of the product are designed and developed
utilizing the NETGEAR engineering team. Under this model some of the primary technology is developed in-house. We then work closely with
either an ODM or a contract manufacturer to complete the development of the entire design, perform the necessary testing, and obtain regulatory
approvals before 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. In some
cases, 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 and graphical user interface, or GUI, 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 developing and improving the usability, reliability, functionality, cost and
performance of our products. Our total research and development expenses were $33.8 million in 2008, $28.1 million in 2007 and $18.4 million
in 2006.
Manufacturing
Our primary manufacturers are Cameo Communications Inc., Delta Networks Incorporated, Hon Hai Precision Industry Co., Ltd. (more
commonly known as Foxconn Corporation), SerComm Corporation, Kepro, and Unihan Corporation (which was spun out of ASUSTek
Computer, Inc. in January 2008), all of which are headquartered in Taiwan. The actual manufacturing of our products occurs primarily in
mainland China, with pilot and low-volume manufacturing in Taiwan on a select basis. We distribute our manufacturing among these key
suppliers to avoid excessive concentration with a single supplier. 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 quality organization based in Hong Kong and mainland China. They are responsible for auditing and
inspecting process and product quality on the premises of our ODMs, CMs and OEMs.
We currently outsource warehousing and distribution logistics to four third-party providers who are responsible for warehousing,
distribution logistics and order fulfillment. In addition, these parties are also responsible for some configuration and re-
packaging of our products
including bundling components to form kits, inserting appropriate documentation, disk drive configuration, and adding power adapters. APL
Logistics Americas, Ltd. in City of Industry, California serves the Americas region, Kerry Logistics Ltd. in Hong Kong serves the Asia Pacific
region, and DSV Solutions B.V. and ModusLink BV in the Netherlands 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 demonstrations, instant rebate programs, event sponsorship and sales
associate training. We also participate in major industry trade shows and marketing events. Our marketing department is comprised of our
product marketing and corporate marketing groups.
Our product marketing group focuses on product strategy, product development roadmaps, the new product introduction process, product
lifecycle management, demand assessment and competitive analysis. The group
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