Netgear 2011 Annual Report Download - page 34

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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 are expanding and reorganizing our operations and infrastructure, which may strain our operations and increase our operating
expenses.
We are expanding and reorganizing our operations and pursuing market opportunities both domestically and internationally in order 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. In the second fiscal quarter of 2011, we reorganized our business into three business
units: retail, commercial, and service provider. The Company’s reorganization into three business units may cause significant distraction to our
management and employees. For example, channel and pricing conflicts may arise in certain territories as each of our business units may engage
in selling activities which may benefit that business unit at the expense of another business unit. In addition, disclosures of previously non-
public
information in connection with our reorganization may also provide our competitors with strategic data which may put us at a competitive
disadvantage and harm our business. These new disclosures about our performance may also cause our stock price to decline. If we fail to
continue to improve our management information systems, procedures and financial controls or encounter unexpected difficulties during
expansion and reorganization, 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.
We have had to restate our historical financial statements.
In July 2009, we announced that we had incorrectly reported our income tax provision for the three months ended March 29, 2009 and, as a
result of this error, we restated the financial statements in our quarterly report on Form 10-Q for the three months ended March 29, 2009. The
restatement, which related solely to the correction of
30
•
stringent consumer protection and product compliance regulations, including but not limited to the Restriction of Hazardous
Substances directive, the Waste Electrical and Electronic Equipment directive and the recently enacted Ecodesign directive (EuP) in
Europe, that may vary from country to country and that are costly to comply with;
•
difficulties and costs of staffing and managing foreign operations;
•
business difficulties, including potential bankruptcy or liquidation, of any of our worldwide third party logistics providers; and
•
changes in local tax laws.