Netgear 2009 Annual Report Download - page 28

Table of Contents
effectiveness, reliability, scalability, breadth and depth of our products. In addition, a change in the mix of our customers, or a change in the mix
of direct and indirect sales, could adversely affect our revenue and gross margins.
Although our financial performance may depend on large, recurring orders from certain customers and resellers, we do not generally have
binding commitments from them. For example:
Further, our revenue may be impacted by significant one-time purchases which are not contemplated to be repeatable. While such
purchases are reflected in our financial statements, we do not rely on and do not forecast for 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, or the loss of any significant customer or reseller, could harm or otherwise disrupt our business. Although our
largest customers may vary from period to period, we anticipate that our operating results for any given period will continue to depend on large
orders from a small number of customers.
We are exposed to credit risk and fluctuations in the market values of our investment portfolio.
Although we have not recognized any material losses on our cash equivalents and short-term investments, future declines in their market
values could have a material adverse effect on our financial condition and operating results. Given the global nature of our business, we have
investments with both domestic and international financial institutions. If these financial institutions default on their obligations or their credit
ratings are negatively impacted by liquidity issues, credit deterioration or losses, financial results, or other factors, the value of our cash
equivalents and short-term investments could decline and result in a material impairment, which could have a material adverse effect on our
financial condition and operating results.
Economic conditions, political events, war, terrorism, public health issues, natural disasters and other circumstances could materially
adversely affect us.
Our corporate headquarters are located in Northern California and one of our warehouses is located in Southern California, regions known
for seismic activity. In addition, substantially all of our manufacturing occurs in two geographically concentrated areas in mainland China, where
disruptions from natural disasters, health epidemics and political, social and economic instability may affect the region. If our manufacturers or
warehousing facilities are disrupted or destroyed, we would be unable to distribute our products on a timely basis, which could harm our
business.
Moreover, if our computer information systems or communication systems, or those of our vendors or customers, are subject to disruptive
hacker attacks or other disruptions, our business could suffer. We have not established a formal disaster recovery plan. Our back-up operations
may be inadequate and our business interruption insurance may not be enough to compensate us for any losses that may occur. A significant
business interruption could result in losses or damages and harm our business. For example, much of our order fulfillment process is automated
and the order information is stored on our servers. If our computer systems and servers go down even for a short period at the end of a fiscal
quarter, our ability to recognize revenue would be delayed until we were again able to process and ship our orders, which could cause our stock
price to decline significantly.
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our reseller agreements generally do not require substantial minimum purchases;
•
our customers can stop purchasing and our resellers can stop marketing our products at any time; and
•
our reseller agreements generally are not exclusive and are for one
-
year terms, with no obligation of the resellers to renew the
agreements.