Netgear 2010 Annual Report Download - page 31

Table of Contents
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. Significantly all of our critical enterprise-wide information technology systems, including our main servers, are currently
housed in colocation facilities near our headquarters in Northern California. While we have moved our critical information technology systems
in 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 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.
We depend significantly on worldwide economic conditions and their impact on levels of consumer spending, which have recently
deteriorated significantly in many countries and regions, including without limitation the United States, and may remain depressed for the
foreseeable future. Factors that could influence the levels of consumer spending include increases in fuel and other energy costs, conditions in
the residential real estate and mortgage markets, labor and healthcare costs, access to credit, consumer confidence and other macroeconomic
factors affecting consumer spending behavior.
In addition, war, terrorism, geopolitical uncertainties, public health issues, and other business interruptions have caused and could cause
damage or disruption to international commerce and the global economy, and thus could have a strong negative effect on us, our suppliers,
logistics providers, manufacturing vendors and customers. Our business operations are subject to interruption by natural disasters, fire, power
shortages, terrorist attacks, and other hostile acts, labor disputes, public health issues, and other events beyond our control. For example, recent
labor disputes at manufacturing facilities in China have been increasing and have led to workers going on strike. The recent trend of labor unrest
could materially affect our third-party manufacturers’ abilities to manufacture our products. Such events could decrease demand for our
products, make it difficult or impossible for us to make and deliver products to our customers or to receive components from our suppliers, and
create delays and inefficiencies in our supply chain. Should major public health issues, including pandemics, arise, we could be negatively
affected by more stringent employee travel restrictions, additional limitations in freight services, governmental actions limiting the movement of
products between regions, delays in production ramps of new products, and disruptions in the operations of our manufacturing vendors and
component suppliers.
None.
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Item 1B.
Unresolved Staff Comments