Netgear 2010 Annual Report Download - page 30

Table of Contents
We are required to comply with local environmental legislation and our customers rely on this compliance in order to sell our products. If
our customers do not agree with our interpretations and requirements of new legislation, such as the European Ecodesign directive (EuP), they
may cease to order our products and our revenue would be harmed.
We intend to expand our operations and infrastructure, which may strain our operations and increase our operating expenses.
We intend to expand our operations and pursue market opportunities domestically and internationally to grow our sales. We expect that
this attempted expansion will require enhancements to our existing management information systems, and operational and financial controls. In
addition, if we continue to grow, our expenditures will likely be significantly higher than our historical costs. We may not be able to install
adequate controls in an efficient and timely manner as our business grows, and our current systems may not be adequate to support our future
operations. The difficulties associated with installing and implementing new systems, procedures and controls may place a significant burden on
our management, operational and financial resources. In addition, if we grow internationally, we will have to expand and enhance our
communications infrastructure. If we fail to continue to improve our management information systems, procedures and financial controls or
encounter unexpected difficulties during expansion, our business could be harmed.
For example, we have invested, and will continue to invest, significant capital and human resources in the design and enhancement of our
financial and enterprise resource planning systems, which may be disruptive to our underlying business. We depend on these systems in order to
timely and accurately process 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 track our customers, fulfill contractual obligations, accurately report our financials and otherwise run
our business could be adversely affected. Even if we do not encounter these adverse effects, the enhancement of systems may be much more
costly than we anticipated. If we are unable to continue to enhance our information technology systems as planned, our financial position, results
of operations and cash flows could be negatively impacted.
Governmental regulations of imports or exports affecting Internet security could affect our net revenue.
Any additional governmental regulation of imports or exports or failure to obtain required export approval of our encryption technologies
could adversely affect our international and domestic sales. The United States and various foreign governments have imposed controls, export
license requirements, and restrictions on the import or export of some technologies, particularly encryption technology. In addition, from time to
time, governmental agencies have proposed additional regulation of encryption technology, such as requiring the escrow and governmental
recovery of private encryption keys. In response to terrorist activity, governments could enact additional regulation or restriction on the use,
import, or export of encryption technology. This additional regulation of encryption technology could delay or prevent the acceptance and use of
encryption products and public networks for secure communications, resulting in decreased 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 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
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difficulties and costs of staffing and managing foreign operations; and
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changes in local tax laws.