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NETGEAR, INC
FORM 10-K
(Annual Report)
Filed 03/01/10 for the Period Ending 12/31/09
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 2010, 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 03/01/10 for the Period Ending 12/31/09 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
    ... 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 of each exchange on which registered Common Stock, par...

  • Page 3
    DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement for the Registrant's 2010 Annual Meeting of Stockholders are incorporated by reference in Part III of this Form 10-K.

  • Page 4
    ... Financial Statements and Supplementary Data Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information PART III Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial...

  • Page 5
    ... 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, which includes traditional retailers, online retailers, wholesale...

  • Page 6
    ... 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. Wholesale Distribution...

  • Page 7
    ...broadband modems; gateways, which are routers with integrated modems, for internet access; IP telephony products, used for transmitting voice communications over a network; and Media servers, which store files and multimedia content for access by PCs, laptops, smart phones and other internet enabled...

  • Page 8
    ...installation process with their broadband service provider, using a graphical user interface and simple point and click operations. Our connectivity product offerings for the home include powerline and MoCA data transmission modes which allow home users to take advantage of their existing electrical...

  • 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
    ... 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...

  • Page 11
    ..., RangeMax, ReadyNAS, Smart Wizard, ProSecure, the ProSecure logo, Push2TV, and X-RAID. We have registered a number of internet domain names that we use for electronic interaction with our customers including dissemination of product information, marketing programs, product registration, sales...

  • Page 12
    ... include those listed in the risk factors section of this report and others such as changes in the pricing policies of or the introduction of new products by us or our competitors; litigation involving patent infringement; changes in the terms of our contracts with customers or suppliers that cause...

  • Page 13
    ... tax rate; delays in the introduction of new products by us or market acceptance of these products; an increase in price protection claims, redemptions of marketing rebates, product warranty and stock rotation returns or allowance for doubtful accounts; epidemic or widespread failure in one or more...

  • Page 14
    ..., technical, sales, marketing and other resources. These competitors may, among other things, undertake more extensive marketing campaigns, adopt more aggressive pricing policies, obtain more favorable pricing from suppliers and manufacturers, and exert more influence on sales channels than we...

  • Page 15
    ... sales channels, we may incur increased and unexpected costs associated with this inventory. We generally allow wholesale distributors and traditional retailers to return a limited amount of our products in exchange for other products. Under our price protection policy, if we reduce the list price...

  • Page 16
    ... 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 collaborate...

  • Page 17
    ... operating results. Additionally, the IRS and other tax authorities have increasingly focused attention on intercompany transfer pricing with respect to sales of products and services and the use of intangible assets. Tax authorities could disagree with our intercompany charges, cross-jurisdictional...

  • Page 18
    ... effect on our stock price. We are subject to numerous governmental regulations concerning the manufacturing and use of our products. We must stay in compliance with all such regulations and any future regulations. Any failure to comply with such regulations, and the unanticipated costs of complying...

  • Page 19
    ... and cause the price of our stock to decline. In addition, third parties, some of whom are potential competitors, have initiated and may continue to initiate litigation against our manufacturers, suppliers, members of our sales channels or our service provider customers, alleging infringement of...

  • Page 20
    ... and expand our sales channels. We sell 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...

  • Page 21
    .... We compete with established companies that have longer operating histories and longstanding relationships with VARs that we would find highly desirable as sales channel partners. We also sell products to broadband service providers. Competition for selling to broadband service providers is intense...

  • Page 22
    ... service provider channel that differ from what we have traditionally faced with the other channels. These challenges include a longer sales cycle, more stringent product testing and validation requirements, a higher level of customization demands, requirements that suppliers take on a larger share...

  • Page 23
    ... enter into new sales territories. Acquisitions involve numerous risks and challenges, including but not limited to the following integrating the companies, assets, systems, products, sales channels and personnel that we acquire; growing or maintaining revenues to justify the purchase price and the...

  • Page 24
    ...pay our requested prices or reduce their level of purchases, our net revenue could decline. We sell a substantial portion of our products through retailers, including Best Buy Co., Inc., and wholesale distributors, including Ingram Micro, Inc. During the year ended December 31, 2009, sales to Ingram...

  • Page 25
    ... and support these products. If the redemption rate 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...

  • Page 26
    ... net revenue in fiscal 2009. We continue to be committed to growing our international sales. We have committed resources to expanding our international operations and sales channels and these efforts may not be successful. International operations are subject to a number of other risks, including...

  • Page 27
    ..., some foreign competitors are subject to less stringent controls on exporting their encryption technologies. As a result, they may be able to compete more effectively than we can in the United States and the international internet security market. We moved into a new corporate headquarters in the...

  • Page 28
    ... continued significant one-time purchases. As a result, lack of repeatable one-time purchases will adversely affect our revenue. Because our expenses are based on our revenue forecasts, a substantial reduction or delay in sales of our products to, or unexpected returns from, customers and resellers...

  • Page 29
    ... Unresolved Staff Comments 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 international headquarters occupy...

  • Page 30
    ... at Meridian Data, a storage company acquired by Quantum Corporation, where he served as Vice President of Operations. From February 1989 to April 1999, Mr. Falcon was at Silicon Valley Group, a semiconductor equipment manufacturer, where he served as Director of Operations, Strategic Planning and...

  • Page 31
    ... 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. Mr. Soares joined us in...

  • Page 32
    ... grants in May 2003), the 2003 Stock Plan, the 2006 Long Term Incentive Plan and the 2003 Employee Stock Purchase Plan. Number of Securities to be Issued Upon Exercise of Outstanding Options, Plan Category Warrants and Rights (a) Weighted-Average Exercise Price of Outstanding Options, Warrants and...

  • Page 33
    ... not include holders of shares in "street names" or persons, partnerships, associations, corporations or other entities identified in security position listings maintained by depository trust companies. Dividend Policy We have never declared or paid cash dividends on our capital stock. We currently...

  • Page 34
    ... of Equity Securities by the Company Total Number of Shares Total Number of Period Shares Purchased Average Price Paid per Share Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs January 1, 2009-January 31...

  • Page 35
    ... 0.99 Information regarding calculation of per share data is described in Note 6 of the Notes to Consolidated Financial Statements. Stock-based compensation expense was allocated as follows: Cost of revenue Research and development Sales and marketing General and administrative 33 $ 959 1,973 4,147...

  • Page 36
    ... sell our networking products through multiple 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...

  • Page 37
    ...home markets for networking products include product breadth, size and scope of the sales channel, brand name, timeliness of new product introductions, product performance, features, functionality and reliability, ease-of-installation, maintenance and use, and customer service and support. To remain...

  • Page 38
    ...we defer the revenue until receipt of payment. Allowances for Product Warranties, Returns due to Stock Rotation, Sales Incentives and Doubtful Accounts Our standard warranty obligation to our direct customers generally provides for a right of return of any product for a full refund in the event that...

  • Page 39
    ...comparison to our estimated forecast of product demand for the next nine months to determine what inventory, if any, are not saleable. Our analysis is based on the demand forecast but takes into account market conditions, product development plans, product life expectancy and other factors. Based on...

  • Page 40
    ...or fair value less costs to sell. The carrying value of the asset is reviewed on a regular basis for the existence of facts, both internal and external, that may suggest impairment. In the fourth quarter of 2008, a key employee responsible for managing the asset group acquired in connection with our...

  • Page 41
    ... December 31, Percentage 2009 Percentage 2007 2008 Change Change (In thousands, except percentage data) Net revenue Cost of revenue Gross profit Operating expenses: Research and development Sales and marketing General and administrative Restructuring In-process research and development Technology...

  • Page 42
    ... revenue consists of gross product shipments, less allowances for estimated returns for stock rotation and warranty, price protection, end-user customer rebates and other sales incentives deemed to be a reduction of net revenue and net changes in deferred revenue. 2009 Net Revenue Compared to 2008...

  • Page 43
    ...strategy allows us to better manage our product costs and gross margin. Our gross margin can be affected by a number of factors, including fluctuation in foreign exchange rates, sales returns, changes in net revenues due to changes in average selling prices, end-user customer rebates and other sales...

  • Page 44
    ..., as well as higher warranty costs associated with end-user warranty returns. Additionally, inventory reserves increased primarily due to selling price declines of certain products. These declines were primarily attributable to the strengthening of the U.S. dollar in locations where we bill in local...

  • Page 45
    ... marketing expenses consist primarily of advertising, trade shows, corporate communications and other marketing expenses, product marketing expenses, outbound freight costs, personnel expenses for sales and marketing staff and technical support expenses. 2009 Sales and Marketing Expense Compared to...

  • Page 46
    ... by a decrease in employee performance compensation. Restructuring In July 2008, we ceased using buildings leased in Santa Clara and Fremont, California, and consolidated all personnel and operations from those locations to our new corporate headquarters in San Jose, California. During the year...

  • Page 47
    ... established the technological feasibility of these products, and we do not believe the software has an alternative future use. In this situation, the authoritative guidance for software states that the cost of software purchased to be integrated with products that have not yet reached technological...

  • Page 48
    ...program in November 2008, and therefore the impact of fluctuations in currency decreased significantly during the year ended December 31, 2009, resulting in a decrease in net foreign exchange... stock-based compensation, state taxes, other non-deductible expenses, and tax credits. Additionally, in 2009...

  • Page 49
    ..., 2009 used $72.3 million, which includes the net purchases of short-term investments of $89.8 million, payments made in connection with our acquisition of CP Secure of $3.5 million, and purchases of property and equipment amounting to $3.9 million, offset primarily by net proceeds from the sale of...

  • Page 50
    ... shares of our common stock in the open market for cash of $12.2 million. As of December 31, 2009, we were authorized to purchase up to an additional 4.8 million shares under the share repurchase plan. See Note 10 of the Notes to Consolidated Financial Statements for a discussion of the accounting...

  • Page 51
    ... will be amortized over its estimated useful life of seven years. We lease office space, cars and equipment under non-cancelable operating leases with various expiration dates through December 2026. Rent expense was $6.2 million for the year ended December 31, 2009, $6.3 million for the year ended...

  • Page 52
    ... tax benefits will depend upon a number of factors. Accordingly, the timing of payment cannot be estimated. We do not expect a significant tax payment related to these obligations to occur within the next 12 months. Off-Balance Sheet Arrangements As of December 31, 2009, we did not have any off...

  • Page 53
    ... are marked-to-market on a monthly basis with gains and losses included in other income (expense), net in the Consolidated Statements of Operations, and in cumulative other comprehensive income on the Consolidated Balance Sheets. We do not use foreign currency contracts for speculative or trading...

  • Page 54
    ... schedule, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain...

  • Page 55
    ... (Note 9) Stockholders' equity: Preferred stock: $0.001 par value; 5,000,000 shares authorized in 2009 and 2008; none outstanding in 2009 or 2008 Common stock: $0.001 par value; 200,000,000 shares authorized in 2009 and 2008; shares issued and outstanding: 34,732,579 in 2009 and 34,280,539 in 2008...

  • Page 56
    Table of Contents NETGEAR, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) 2009 Year Ended December 31, 2008 2007 Net revenue Cost of revenue Gross profit Operating expenses: Research and development Sales and marketing General and administrative Restructuring In-...

  • Page 57
    ... gains and losses on availablefor-sale securities, 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...

  • Page 58
    ...Proceeds from sale of short-term investments Purchase of property and equipment Payments made in connection with 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...

  • Page 59
    ... 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 includes traditional retailers, online retailers, wholesale...

  • Page 60
    ... well as retailers and broadband service providers who sell or distribute 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...

  • Page 61
    ..., and geographic or country-specific risks and economic conditions that may affect a customer's ability to pay. The allowance for doubtful accounts is reviewed monthly and adjusted if necessary based on the Company's assessments of its customers' ability to pay. If the financial condition of the...

  • Page 62
    ... is reviewed on a regular basis for the existence of facts, both internal and external, that may suggest impairment. Charges related to the impairment of property and equipment were not material in the years ended December 31, 2009, 2008 and 2007. Goodwill The Company performs an annual goodwill...

  • Page 63
    ... could affect the Company's financial results. Product warranties The Company provides for estimated future warranty obligations at the time revenue is recognized. The Company's standard warranty obligation to its direct customers generally provides for a right of return of any product for a full...

  • Page 64
    ..., channel inventory levels, current economic trends and changes in customer demand for the Company's products when evaluating the adequacy of the allowance for sales returns, namely warranty and stock rotation returns. Revenue on shipments is also reduced for estimated price protection and sales...

  • Page 65
    ... established the technological feasibility of these products, and does not believe the software has an alternative future use. In this situation, the authoritative guidance for software states that the cost of software purchased to be integrated with products that have not yet reached technological...

  • Page 66
    ... after January 1, 2006. The Company recognizes these compensation costs on a straight-line basis over the requisite service period of the award, which is generally the option vesting term of four years. The Company will recognize an excess benefit from stock-based compensation in equity based on the...

  • Page 67
    ... the FASB issued additional authoritative guidance for earnings per share, which addresses whether unvested instruments granted in share-based payment transactions that contain non-forfeitable rights to dividends or dividend equivalents are participating securities subject to the two-class method of...

  • Page 68
    ...assets of CP Secure International Holding Limited ("CP Secure"), a privately-held provider of integrated network security solutions. The acquisition qualified as a business acquisition and has been accounted for using the purchase method of accounting. The Company incorporated CP Secure's integrated...

  • Page 69
    Table of Contents products to provide organizations with enhanced protection for their network, web access and email traffic. The aggregate purchase price was $14 million, paid in cash. Additionally, the acquisition agreement specified that CP Secure shareholders may receive a total additional ...

  • Page 70
    ...amortized over its estimated useful life of five years. During the year ended December 31, 2009, the Company made an additional $3.5 million payment in connection with the Company's 2008 acquisition of CP Secure in connection with the achievement of certain product acceptance criteria. This resulted...

  • Page 71
    ...alternative uses exist. The Company acquired three in-process research and development projects. Two projects involve development of new products in the ReadyNAS desktop product category, and one project involves development of a higher end version of a product currently selling in the ReadyNAS rack...

  • Page 72
    ...109 $ 10,170 Accounts receivable and related allowances consist of the following: December 31, 2009 2008 (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 73
    ... 31, 2009 2008 Computer equipment Furniture, fixtures and leasehold improvements Software Machinery Construction in progress Less: ...2009, the Company recorded $3.5 million of goodwill associated with a $3.5 million earn-out payment made in connection with the Company's 2008 acquisition of CP Secure...

  • Page 74
    ... of intangibles acquired during the Company's 2006 acquisition of Skipjam Corp. Recoverability was assessed based on undiscounted estimated future net cash flows, and the impairment charge was based on fair value using discounted cash flows. No such impairment charges were recorded in 2009 or in...

  • Page 75
    ...from those locations to its new corporate headquarters in San Jose, California. The Company initially expected to sublease the majority of this space through the end of the operating leases, the longest of which extends to December 2010. However, in the three months ended June 28, 2009, a sub-lessee...

  • Page 76
    ... certain existing assets and liabilities. The Company does not enter into derivatives transactions for trading or speculative purposes. Cash flow hedges To help manage the exposure of gross and operating margins to fluctuations in foreign currency exchange rates, the Company hedges a portion of its...

  • Page 77
    ...months in duration. The Company may choose not to hedge certain foreign exchange exposures for a variety of reasons, including, but not limited to, immateriality, accounting considerations, and the prohibitive economic cost...Sheet Location December 31, 2009 (In thousands) Balance Sheet Location Fair ...

  • Page 78
    ... the employee must pay for exercising stock options, the amount of stock-based compensation cost for future services that the Company has not yet recognized, and the amount of tax benefit that would be recorded in additional paid-in capital upon exercise are assumed to be used to repurchase shares...

  • Page 79
    ...share data): 2009 Year Ended December 31, 2008 2007 Net income Weighted average shares outstanding: Basic Options and awards Total diluted shares Basic net income per share Diluted net income per share...298 - $3,298 2009 Year Ended December 31, 2008 2007 United States International Total The ...

  • Page 80
    ...of December 31, 2009, the Company has $669,000 and $1.5 million of acquired federal and state net operating losses as well as $128,000 of California tax credits carryforwards from its acquisition of Infrant. Use of these losses and credits are subject to annual limitation under Internal Revenue Code...

  • Page 81
    ... 31, 2009 that resulted from limitations on use imposed by the State of California. The federal losses expire in different years beginning in fiscal 2021. The state loss begins to expire in fiscal 2014. The state tax credit carry-forward has no expiration. The Company files income tax returns in the...

  • Page 82
    ..."), in the San Jose division of the United States District Court, Northern District of California. The complaint alleged that the claims of CSIRO's U.S. Patent No. 5,487,069 are invalid and not infringed by any of Company's products. CSIRO had asserted that the Company's wireless networking products...

  • Page 83
    ... progress towards settlement. This action is now in the discovery phase. The District Court has set a February 17, 2011 claim construction hearing date, and a 10day jury trial is scheduled to begin on May 23, 2011. Network-1 Security Solutions, Inc. v. NETGEAR In February 2008, a lawsuit was filed...

  • Page 84
    ...antenna array technology in its WPN824 RangeMax wireless router. Ruckus also sued Rayspan Corporation alleging similar claims of patent infringement. The Company filed its answer to the lawsuit in the third quarter of 2008. The Company and Rayspan Corporation jointly filed a request for inter partes...

  • Page 85
    ... unnamed NETGEAR products that use encryption methods infringe upon PACid's patents. The Company filed its answer to the lawsuit in September 2009 and asserted that PACid's patents were both invalid and not infringed by the Company. The status conference has not yet been scheduled, and discovery has...

  • Page 86
    ...11 g Wireless ADSL Modem VPN Firewall Router, ProSafe Wireless-N VPN Firewall, and ProSafe 802 11 wireless VPN Firewall 8 with 8-port 10/100 Mbps Switch infringe upon U.S. patent 7,346,926. The Company has not yet answered the complaint. IP Indemnification Claims In addition, in its sales agreements...

  • Page 87
    ...countries issue their implementation guidance. The Company believes it meets the requirements of the Standby Regulation. Employment Agreements The Company has signed various employment agreements with key executives pursuant to which if their employment is terminated without cause, the employees are...

  • Page 88
    Table of Contents 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, 2009, 2008 and 2007 was $6.2 million, $6.3 million, and $3.4 million, respectively. ...

  • Page 89
    ... is generally the option vesting term of four years. Total stock-based compensation cost capitalized in inventory was less than $250,000 in each of the years ended December 31, 2009, 2008, and 2007. As of December 31, 2009, the Company has the following share-based compensation plans: 2000 Stock...

  • Page 90
    ... 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 2,500,000 shares. As of December 31, 2009, 1,058,274 shares were reserved for future...

  • Page 91
    ... for and granted a 300,000 share NSO in connection with the hiring of a key executive. As of December 31, 2009, no options remain outstanding under the 2006 Stand-Alone Stock Option Agreement. Employee Stock Purchase Plan The Company sponsors an Employee Stock Purchase Plan (the "ESPP"), pursuant to...

  • Page 92
    ... share-based compensation plans is estimated on the date of grant using the Black-Scholes-Merton option valuation model and the weighted average assumptions in the following table. The expected term of options granted is derived from historical data on employee exercise and post-vesting employment...

  • Page 93
    ... above represent the total pre-tax intrinsic values (the difference between the Company's closing stock price on the last trading day of 2009, 2008, and 2007 and the exercise price, multiplied by the number of shares underlying the in-themoney options) that would have been received by the option...

  • Page 94
    ... 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 95
    .... Best Buy Co., Inc. Tech Data Corporation All others individually less than 10% of revenue 11% 11% 8% 70% 100% 14% 8% 11% 67% 100% 17% 7% 14% 62% 100% Note 12-Employee Benefit Plan: In April 2000, the Company adopted the NETGEAR 401(k) Plan to which employees may contribute up to 100% of salary...

  • Page 96
    ..., 2008: As of December 31, 2009 Quoted market prices in active Total markets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Cash equivalents-money market funds Available-for-sale securities-Treasuries(1) Foreign currency forward contracts(2) Total...

  • Page 97
    ... in other accrued liabilities on the Company's consolidated balance sheet. The Company's investments in cash equivalents and available for sale securities are classified within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets. All of the...

  • Page 98
    ... liability. In accordance with the purchase method of accounting and as updated with the FASB's April 2009 additional authoritative guidance for business combinations, the Company will allocate the total purchase price to identifiable intangible assets in the three months ending March 28, 2010 based...

  • Page 99
    ...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 appropriate to allow...

  • Page 100
    ...effective as of December 31, 2009. The effectiveness of our internal control over financial reporting as of December 31, 2009 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included in this Annual Report on Form 10...

  • Page 101
    ... Officers of the Registrant" included under Part I 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...

  • Page 102
    ... December 31, 2008 Year ended December 31, 2007 Allowance for sales returns and product warranty: Year ended December 31, 2009 Year ended December 31, 2008 Year ended December 31, 2007 Allowance for price protection: Year ended December 31, 2009 Year ended December 31, 2008 Year ended December 31...

  • Page 103
    ...(d) of the Securities Exchange Act of 1934, the Registrant has duly 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 1st day of March 2010. NETGEAR, INC. Registrant /s/ P ATRICK C.S. L O Patrick...

  • Page 104
    Table of Contents Signature Title Date /S/ G REGORY J. R OSSMANN Gregory J. Rossmann Director Director 102 March 1, 2010 March 1, 2010 / S/ J ULIE A. S HIMER Julie A. Shimer

  • Page 105
    ...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) Offer Letter, dated December 9, 1999, between the registrant and Mark G. Merrill(2) Employment Agreement, dated...

  • Page 106
    ... 2009, between the registrant and Christine Gorjanc(14) List of subsidiaries and affiliates Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm Power of Attorney (included on signature page) Certification of Chief Executive Officer pursuant to Securities Exchange Act...

  • Page 107
    ... in the Registrant's Proxy Statement for the 2008 Annual Meeting of Stockholders filed on April 28, 2008 with the Securities and Exchange Commission. Incorporated by reference to the copy included in the Registrant's Annual Report on Form 10-K filed on March 4, 2009 with the Securities and Exchange...

  • Page 108
    ...Produtos Eletronicos Ltda (Brazil) Netgear Mexico S. de R.L. (Mexico) Netgear Japan K.K. (Japan) Netgear Netherlands B.V. (Netherlands) Netgear Technologies India Private Limited (India) Netgear Taiwan Co., Ltd. (Taiwan) Netgear Asia Pte. Limited (Singapore) Netgear Asia Holdings Limited (Hong Kong)

  • Page 109
    ... and 333136895) of NETGEAR, Inc. of our report dated March 1, 2010 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 1, 2010

  • Page 110
    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 111
    ..., 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 necessary to make the statements made, in light of the circumstances...

  • Page 112
    ... connection with the Annual Report of NETGEAR, Inc. (the "Company") on Form 10-K for the year ended December 31, 2009, 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 113
    ... In connection with the Annual Report of NETGEAR, Inc. (the "Company") on Form 10-K for the year ended December 31, 2009, 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...