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NETGEAR, INC
FORM 10-K
(Annual Report)
Filed 02/28/11 for the Period Ending 12/31/10
Address 350 EAST PLUMERIA DRIVE
SAN JOSE, CA 95134
Telephone 4089078000
CIK 0001122904
Symbol NTGR
SIC Code 3661 - Telephone and Telegraph Apparatus
Industry Communications Services
Sector Services
Fiscal Year 12/31
http://www.edgar-online.com
© Copyright 2011, 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 02/28/11 for the Period Ending 12/31/10 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 Services Services 12/...

  • Page 2
    ... 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 of each exchange on which registered...

  • Page 3
    DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement for the Registrant's 2011 Annual Meeting of Stockholders are incorporated by reference in Part III of this Form 10-K.

  • Page 4
    ... 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 Owners and Management and Related...

  • Page 5
    ...January 8, 1996. Our principal executive offices are located at 350 East Plumeria Drive, San Jose, California 95134, and our telephone number at that location is (408) 907-8000. We file reports, proxy statements and other information with the Securities and Exchange Commission, or SEC, in accordance...

  • Page 6
    ...through wholesale distributors. We work directly with our retail channels on market development activities, such as co-advertising, in-store promotions and demonstrations, instant rebate programs, event sponsorship and sales associate training, as well as establishing "store within a store" websites...

  • Page 7
    ...% Product Offerings Our product line consists of wired and wireless devices that enable commercial business networking, broadband access, network connectivity, network storage and security appliances. These products are available in multiple configurations to address the needs of our customers in...

  • Page 8
    ...lower price than higher security and configurability wireless offerings for the commercial business market. Our products for facilitating broadband access in the home are available with features such as parental control capabilities and firewall security, to allow for safer, more controlled Internet...

  • Page 9
    ... guides a less sophisticated user through the 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...

  • Page 10
    ... competitive factors in the commercial business, home user, and broadband service provider markets for networking products include product breadth, size and scope of the sales channel, brand name, timeliness of new product introductions, product availability, performance, features, functionality and...

  • Page 11
    ... 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. Our third party manufacturers generally purchase these components on our behalf on...

  • Page 12
    ... operate via sales and marketing subsidiaries and branch offices worldwide. Customer Support We design our products with "plug and play" ease of use. We respond globally to customer questions over the phone and Internet, including providing an online Knowledgebase and User Forum. Customer support is...

  • Page 13
    ... regulations and an ongoing compliance process to ensure that we and our suppliers are in compliance with all existing regulations. Employees As of December 31, 2010, we had 654 full-time employees, with 303 in sales, marketing and technical support, 178 in research and development, 75 in operations...

  • Page 14
    ... our operations in manufacturing, transportation, technical support and research and development; delay or failure of our service provider customers to purchase at the volumes that we forecast; foreign currency exchange rate fluctuations in the jurisdictions where we transact sales and expenditures...

  • Page 15
    ... products include Apple, Belkin, D-Link, the Linksys division of Cisco Systems, Samsung, Vizio, Sony and Roku. Our principal competitors in the broadband service provider market include Actiontec, ARRIS, Comtrend, D-Link, Hitron, Huawei, Motorola, Pace, Sagem, Scientific Atlanta-a Cisco company...

  • 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
    ... 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 18
    ... future success will depend in large part upon our ability to identify demand trends in the commercial business, home user, and broadband service provider markets and quickly develop, manufacture and sell products that satisfy these demands in a cost effective manner. Successfully predicting demand...

  • Page 19
    ... to sales of products and services and the use of intangible assets. Tax authorities could disagree with our intercompany charges, cross-jurisdictional transfer pricing or other matters and assess additional taxes. Any such disagreements may affect our profitability. We are subject to numerous...

  • Page 20
    ... of purchases, our net revenue could decline. We sell a substantial portion of our products through retailers, including Best Buy Co., Inc. and its affiliates, and wholesale distributors, including Ingram Micro, Inc. and Tech Data Corporation. During the fiscal quarter ended December 31, 2010, sales...

  • Page 21
    ... share, net revenue and brand, we must maintain 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...

  • Page 22
    .... 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 23
    ...restatements will not occur in the future. Execution of restatements like the one described above create a significant strain on our internal resources and could cause delays in our filing of quarterly or annual financial results, increase our costs and cause management distraction. Restatements may...

  • Page 24
    ...increased product returns, loss of customers and market share, and increased service, warranty and insurance costs. In addition, our reputation and brand could be damaged, and we could face legal claims regarding our products. A product liability or other claim could result in negative publicity and...

  • Page 25
    ...execute forward contracts in all currencies in which we conduct business. In addition, in the second fiscal quarter of 2009, we commenced implementation of a hedging program to reduce the impact of volatile exchange rates on net revenues, gross profit and operating profit for limited periods of time...

  • Page 26
    ... could be harmed and our stock price could decline. From time to time, we will undertake acquisitions to add new product lines and technologies, gain new sales channels or enter into new sales territories. Acquisitions involve numerous risks and challenges, including but not limited to the following...

  • Page 27
    ... on gains or losses realized on the sale or exchange of securities and impairment charges related to debt instruments as well as equity and other investments. If we lose the services of our Chairman and Chief Executive Officer, Patrick C.S. Lo, or our other key personnel, we may not be able to...

  • Page 28
    ... our ability to offer new or competitive products and increase our costs of production. As a result, our margins, market share, and operating results could be significantly harmed. We also utilize third-party software development companies to develop, customize, maintain and support software that is...

  • Page 29
    ... 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 30
    ...demand for our products and services. In addition, 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...

  • Page 31
    ... 2010 to colocation facilities in a different geographic region in the United States, our headquarters and warehouses remain susceptible to seismic activity so long as they are located in California. In addition, substantially all of our manufacturing occurs in two geographically concentrated areas...

  • Page 32
    ..., under a lease entered into in February 2006 and expiring in December 2026. Our international sales personnel are based out of local sales offices or home offices in Austria, Australia, Brazil, Canada, China, Czech Republic, Denmark, France, Germany, Hong Kong, India, Italy, Japan, Korea, Mexico...

  • Page 33
    ... NETGEAR, Mr. Kim served as Special Counsel in the Corporate and Securities Department of Wilson Sonsini Goodrich & Rosati, a private law firm, where he represented public and private technology companies in a wide range of matters, including mergers and acquisitions, debt and equity financing...

  • Page 34
    ... our United States Director of Sales, E-Commerce and DMR from December 2002 to December 2003 and as our Eastern regional sales director from October 1998 to December 2002. Prior to joining us, Mr. Werdann worked for three years at Iomega Corporation, a computer hardware company, as a sales director...

  • Page 35
    ... of our Board of Directors under all existing equity compensation plans, including the 2000 Plan (which was terminated as to new 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...

  • Page 36
    ..., 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 intend to retain future earnings, if any, to finance the operation...

  • Page 37
    ... 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, 2010-January 31...

  • Page 38
    ...2010 Year Ended December 31, 2009 2008 2007 (In thousands, except per share data) 2006 Consolidated Statement of Operations Data: Net revenue Cost of revenue(2) Gross profit Operating expenses: Research and development(2) Sales and marketing(2) General and administrative(2) Restructuring In-process...

  • Page 39
    ... 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, Fry...

  • Page 40
    ... 31, 2010 primarily attributable to higher sales in several of our product categories. These include wireless-N products sold to retailers and existing service provider customers, as well as Powerline products, ReadyNAS products, and switch products. The commercial business, home user, and broadband...

  • Page 41
    ... 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 42
    ... flows; a sustained, 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 2010, we completed the annual impairment...

  • Page 43
    ...during those periods. In the fourth quarter of 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...

  • Page 44
    ... December 31, Percentage 2010 Percentage 2008 2009 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 45
    ... 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. 2010 Net Revenue Compared to 2009 Net Revenue...

  • Page 46
    .... We believe this outsourcing 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 44

  • Page 47
    ..., 2010, from $30.1 million for the year ended December 31, 2009. The increase was primarily attributable to increased costs of $7.2 million related to an increase in payroll and other employee expenses principally resulting from increased variable compensation, as well as increased overall research...

  • Page 48
    ... costs related to our new enterprise resource planning software. As of December 31, 2009, we had 149 employees engaged in research and development, down from 158 employees as of December 31, 2008. Sales and Marketing Expense Year Ended December 31, Percentage 2010 Percentage 2008 Change Change 2009...

  • Page 49
    ... of new enterprise resource planning software in 2008. 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...

  • Page 50
    ... in the year ended December 31, 2009. Litigation Reserves and Payments During the year ended December 31, 2010, we recorded a litigation reserve expense of $211,000 for estimated costs related to the settlement of potential lawsuits or lawsuits already filed against us. For a detailed discussion of...

  • Page 51
    ... to non-deductible stock-based compensation, state taxes, other non-deductible expenses, and tax credits. Additionally, in 2010 tax attributable to foreign operations increased the effective tax rate by 5.1 percentage points compared to an increase of 28.4 percentage points for 2009. In both years...

  • Page 52
    ... and our employee stock purchase program, as well as the excess tax benefit from exercises and cancellations of stock options. Our days sales outstanding increased from 71 days as of December 31, 2009 to 78 days as of December 31, 2010, primarily due to our increased sales to U.S. retailers, who...

  • Page 53
    ..., the Board of Directors approved plans to repurchase shares of our common stock in the open market. During the years ended December 31, 2010 and 2009, we did not repurchase any shares of common stock under this repurchase authorization. As of December 31, 2010, we were authorized to purchase up to...

  • Page 54
    ...non-cancelable purchase commitments with suppliers. We expect to sell all products for which we have committed purchases from suppliers. We adopted the guidance related to the recognition and measurement of uncertain tax positions on January 1, 2007. As of December 31, 2010 and December 31, 2009, we...

  • Page 55
    Table of Contents We are exposed to risks associated 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 ...

  • Page 56
    ... 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 57
    ...payable Accrued employee compensation Other accrued ...shares authorized in 2010 and 2009; none outstanding in 2010 or 2009 Common stock: $0.001 par value; 200,000,000 shares authorized in 2010 and 2009; shares issued and outstanding: 36,173,406 in 2010 and 34,732,579 in 2009 Additional paid-in capital...

  • Page 58
    ... NETGEAR, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) 2010 Year Ended December 31, 2009 2008 Net revenue Cost of revenue Gross profit Operating expenses: Research and development Sales and marketing General and administrative Restructuring In-process research...

  • Page 59
    ... expense Purchase and retirement of common stock Issuance of common stock under stock-based compensation plans Tax benefit from exercises and cancellations of stock options Balance at December 31, 2009 Comprehensive income: Change in unrealized gains and losses on availablefor-sale securities, net...

  • Page 60
    ...2010 Year Ended December 31, 2009 2008 Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Purchase premium amortization (discount accretion) on investments Non-cash stock-based compensation...

  • Page 61
    ... of proven technologies such as wireless, Ethernet and powerline, with a focus on reliability and ease-of-use. The Company sells products primarily through a global sales channel network, which includes traditional retailers, online retailers, wholesale distributors, direct market resellers, or DMRs...

  • Page 62
    ...-grade securities, and the Company's cash and investments are held and managed by recognized financial institutions. The Company's customers are primarily distributors as well as retailers and broadband service providers who sell or distribute the products to a large group of end-users. The Company...

  • Page 63
    ... summarizes the percentage of the Company's total accounts receivable represented by customers with balances in excess of 10% of its total accounts receivable as of December 31, 2010 and 2009. December 31, 2010 2009 Best Buy Co., Inc. and Affiliates Wal-mart Stores, Inc. Fair value measurements 25...

  • Page 64
    ... a significant decline in the Company's expected future cash flows; a sustained, significant decline in the Company's 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. For...

  • Page 65
    ... 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 66
    ... has an insignificant amount of product offerings with multiple elements. The Company's multiple-element product offerings include networking hardware with embedded software, various software subscription services, and support, which are considered separate units of accounting. In general, the...

  • Page 67
    ... 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 68
    ... available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, the Company ...windfall deduction. In addition, the Company accounts for the indirect effects of stock-based compensation on the research tax credit and the foreign tax...

  • Page 69
    ... issued ASU No. 2009-14, "Certain Revenue Arrangements That Include Software Elements" (ASU 2009-14). ASU 2009-14 excludes software that is contained on a tangible product from the scope of software revenue guidance if the software is essential to the tangible product's functionality. The Company...

  • Page 70
    ...results of operations of CP Secure prior to the acquisition were not material to the Company's results of operations. The accompanying consolidated financial statements reflect a purchase price of approximately $14.6 million, consisting of cash, and other costs directly related to the acquisition as...

  • Page 71
    ... of products under development to the Company's overall development plans, estimated the costs to develop the purchased in-process research and development into commercially viable products, estimated the resulting net cash flows from the products when completed and discounted the net cash flows to...

  • Page 72
    ... costs directly related to the acquisition as follows (in thousands): Purchase price Direct acquisition costs Total consideration $60,000 254 $60,254 In accordance with the purchase method of accounting, the Company allocated the total purchase price to tangible assets, liabilities and identifiable...

  • Page 73
    ... of products under development to the Company's overall development plans, estimated the costs to develop the purchased in-process research and development into commercially viable products, estimated the resulting net cash flows from the products when completed and discounted the net cash flows to...

  • Page 74
    Table of Contents Accounts receivable and related allowances consist of the following: December 31, 2010 2009 Gross accounts receivable Less: Allowance for doubtful accounts Allowance for sales returns Allowance for price protection Total allowances Accounts receivable, net Inventories consist of ...

  • Page 75
    ...06 0.73 1.67 - 0.99 Amortization expense related to intangibles in the years ended December 31, 2010, 2009 and 2008 was $5.3 million, $5.0 million and $4.7 million, respectively. In the year ended December 31, 2008 the Company recorded an impairment charge within cost of revenue in the Consolidated...

  • Page 76
    ... in Santa Clara and Fremont, California, and consolidated all personnel and operations from those locations to its new corporate headquarters in San Jose, California. The last of these operating leases expired in December 2010. The following is a summary of the accrued restructuring charges related...

  • Page 77
    ... of its anticipated foreign currency exposure for three to five months. The Company enters into about six forward contracts per quarter with an average size of about $6 million USD equivalent related to its cash flow hedge program. The Company expects to reclass to earnings all of the amounts...

  • Page 78
    ... hedges range from one to five 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 of hedging particular exposures. There can...

  • Page 79
    ... comprehensive income and the Consolidated Statement of Operations for the year ended December 31, 2010 and December 31, 2009 are summarized as follows: Derivatives Designated as Hedging Instruments Location of Gain or (Loss) Reclassified from OCI into Income-Effective Portion Year ended December...

  • Page 80
    ...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. Net income per share for the years ended December 31, 2010, 2009...

  • Page 81
    ... consists of the following (in thousands): 2010 Year Ended December 31, 2009 2008 United States International Total The provision for income taxes consists of...December 31, 2010 2009 Deferred Tax Assets: Accruals and allowances Net operating loss carryforwards Stock-based compensation Deferred rent...

  • Page 82
    ... amount of $3.6 million, $136,000 and $81,000 related to stock options were credited to additional paid-in capital during the years ended December 31, 2010, 2009 and 2008, respectively. As a result of changes in fair value of available for sale securities, income tax expense of $3,000, $40,000 and...

  • Page 83
    ... tax benefits related to temporary differences would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period. With the exception of those foreign sales subsidiaries for which deferred tax has been provided, the Company intends to...

  • Page 84
    ... to its wireless networking products compliant with the IEEE 802.11 standards and ADSL products compliant with the ITUG.992 standards. Wi-Lan also sued 21 other technology companies alleging similar claims of patent infringement. The Company filed its answer to the lawsuit in the first quarter of...

  • Page 85
    ... 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 reexamination of the...

  • Page 86
    ... products infringe certain claims of U.S. Patent Nos. 4,977,577 and 5,987,058. The Company filed its answer to the lawsuit in the fourth quarter of 2008. On January 21, 2009, the District Court granted a motion to transfer the case to the U.S. District Court, Northern District of California...

  • Page 87
    ... Client Software, Dual WAN gigabit SSL VPN Firewall, ProSafe Dual WAN VPN Firewall with 8-port 10/100 Switch, ProSafe VPN Firewall with 8-port 10/100 Switch, ProSafe VPN Firewall 8 with 8-Port 10/100 Switch, ProSafe VPN Firewall 8 with 4-Port 10/100 Mbps Switch, ProSafe 802 11 g Wireless ADSL Modem...

  • Page 88
    ... invalidity of the asserted patents. Discovery in this case has not yet commenced. Fujitsu v. NETGEAR On September 3, 2010, Fujitsu filed a complaint against Belkin International, Inc., Belkin, Inc., D-Link Corporation, D-Link Systems, Inc., NETGEAR, Inc., ZyXEL Communications Corporation, and Zyxel...

  • Page 89
    ... Research Organization ("CSIRO"), 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...

  • Page 90
    ... on certain of its PoE products which will be recognized as a component of cost of revenue as the related products are sold. IP Indemnification Claims In addition, in its sales agreements, the Company typically agrees to indemnify its direct customers, distributors and resellers (the "Indemnified...

  • Page 91
    ... or may be enacted in other jurisdictions, including in the United States, Canada, Mexico, China, India, Australia and Japan. The Company adopted the authoritative guidance for asset retirement and environmental obligations in the third quarter of fiscal 2005 and has determined that its effect did...

  • Page 92
    ... one year of a change in control, such employees are entitled to full acceleration (for the Chief Executive Officer) and up to two years acceleration (for other key executives) of any unvested portion of his or her stock options. Leases The Company leases office space, cars and equipment under non...

  • Page 93
    ...table sets forth the total stock-based compensation expense resulting from stock options, restricted stock awards, and the Employee Stock Purchase Plan included in the Company's Consolidated Statements of Operations (in thousands): 2010 Year Ended December 31, 2009 2008 Cost of revenue Research and...

  • Page 94
    ...issued under the 2006 plan by an additional 1,500,000 shares. As of December 31, 2010, 1,483,848 shares were reserved for future grants under the 2006 Plan. Options granted under the 2006 Plan may be either ISOs or NSOs. ISOs may be granted only to Company employees (including officers and directors...

  • Page 95
    ... an Employee Stock Purchase Plan (the "ESPP"), pursuant to which eligible employees may contribute up to 10% of compensation, subject to certain income limits, to purchase shares of the Company's common stock. Prior to January 1, 2006, employees were able to purchase stock semi-annually at a price...

  • Page 96
    ... restricted stock units, were $10.80, $6.10 and $9.57, respectively. Stock options activity under the stock option plans during the years ended December 31, 2008, 2009 and 2010 were as follows (share data in thousands): Outstanding Options Weighted Average Number of Shares Exercise Price Per Share...

  • Page 97
    ... above represent the total pre-tax intrinsic values (the difference between the Company's closing stock price on the last trading day of 2010, 2009, and 2008 and the exercise price, multiplied by the number of shares underlying the in-themoney options) that would have been received by the option...

  • Page 98
    ... and sale of networking products for the commercial business, home user, and broadband service provider 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...

  • Page 99
    ... Ended December 31, 2010 2009 United States EMEA China Asia Pacific and rest of the world (excluding China) $ $ Customer concentration (as a percentage of net revenue): 2010 11,808 205 4,848 642 17,503 $ $ 13,226 282 2,860 523 16,891 Year Ended December 31, 2009 2008 Best Buy Co., Inc. and...

  • Page 100
    ... of December 31, 2010 and December 31, 2009: As of December 31, 2010 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...

  • Page 101
    ... table sets forth the components of cumulative other comprehensive income, net of related taxes, as of December 31, 2010 and December 31, 2009 (in thousands): As of December 31, 2010 2009 Net unrealized gains on derivative instruments Net unrealized gains on available-for-sale securities Total...

  • Page 102
    ... registered public accounting firm, as stated in their report which is included in this Annual Report on Form 10-K. Changes in Internal Control Over Financial Reporting There was no change in our internal control over financial reporting that occurred during the fourth quarter of fiscal year 2010...

  • Page 103
    ...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 104
    ... by Part III is incorporated herein by reference from our proxy statement related to our 2011 Annual Meeting of Stockholders, which we intend to file no later than 120 days after the end of the fiscal year covered by this Form 10-K. Item 10. Directors, Executive Officers and Corporate Governance...

  • Page 105
    ...Quarterly Financial Data (unaudited) Management's Report on Internal Control Over Financial Reporting (2) Financial Statement Schedule. 54 55 56 57 58 59 100 100 The following financial statement schedule of NETGEAR, Inc. for the fiscal years ended December 31, 2010, 2009 and 2008 is filed as part...

  • Page 106
    ... 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 28th day of February 2011. NETGEAR, Inc. Registrant /s/ P ATRICK C.S. L O Patrick C.S. Lo Chairman of the Board and Chief Executive Officer (Principal...

  • Page 107
    Table of Contents Signature Title Date / S/ /S/ G EORGE G. C. P ARKER George G. C. Parker Director Director Director 105 February 28, 2011 February 28, 2011 February 28, 2011 G REGORY J. R OSSMANN Gregory J. Rossmann / S/ J ULIE A. S HIMER Julie A. Shimer

  • Page 108
    ... of the registrant(2) Form of registrant's common stock certificate(2) Form of Indemnification 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...

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    ...the omitted schedules and exhibits to the Securities and Exchange Commission upon its request. Incorporated by reference to the exhibit 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...

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    ... to Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q filed on May 9, 2008 with the Securities and Exchange Commission. (10) 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...

  • Page 111
    ...the Registrant NETGEAR, Inc. NETGEAR International, Inc. NETGEAR Global, Inc. NETGEAR Japan, KK NETGEAR Deutschland GmbH NETGEAR Technologies India Private Limited NETGEAR Taiwan Co., Ltd. NETGEAR Netherlands B.V. NETGEAR UK Limited NETGEAR Austria GmbH NETGEAR Cyprus Ltd. NETGEAR International, Ltd...

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    ... 333-168349) of NETGEAR, Inc. of our report dated February 28, 2011 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 February 28...

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    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...

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    ...results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; The Registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15...

  • Page 115
    ... 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...

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    ... 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...