Netgear 2011 Annual Report Download - page 42

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Table of Contents
You should read the following discussion of our financial condition and results of operations together with the audited consolidated
financial statements and notes to the financial statements included elsewhere in this Form 10
-K. This discussion contains forward-looking
statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on current
expectations, estimates, assumptions and projections about our industry, business and future financial results. Our actual results could differ
materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed under “Risk
Factors
” in Part I, Item 1A above.
Business Overview
We are a global networking company that delivers innovative products to consumers, businesses and service providers. For consumers, we
make high performance, dependable and easy-to-use home networking, storage and digital media products to connect people with the Internet
and their content and devices. For businesses, we provide networking, storage and security solutions without the cost and complexity of Big IT.
We also supply leading service providers with retail, whole home networking solutions for their customers. Our products are built on a variety of
proven technologies such as wireless, Ethernet and powerline, with a focus on reliability and ease-of-use.
Our product line consists of wired and wireless devices that enable networking, broadband access, network connectivity, network storage
and security appliances. These products are available in multiple configurations to address the needs of our end-users in each geographic region
in which our products are sold.
We sell our networking products through multiple sales channels worldwide, including traditional retailers, online retailers, wholesale
distributors, direct market resellers (“DMRs”), value-added resellers (“VARs”), and broadband service providers. Our retail channel includes
traditional retail locations domestically and internationally, such as Best Buy, Fry’s Electronics, Radio Shack, Staples, Wal-Mart, Argos (U.K.),
Dixons (U.K.), PC World (U.K.), MediaMarkt (Germany, Austria), Dick Smith (Australia), JB HiFi (Australia) and Elkjop (Norway). Online
retailers include Amazon.com, Dell, Newegg.com and Buy.com. Our DMRs include CDW Corporation, Insight Corporation and PC Connection
in domestic markets and Misco throughout Europe. In addition, we also sell our products through broadband service providers, such as multiple
system operators (“MSOs”), DSL, and other broadband technology operators domestically and internationally. Some of these retailers and
broadband service providers purchase directly from us, while others are fulfilled through wholesale distributors around the world. A substantial
portion of our net revenue to date has been derived from a limited number of wholesale distributors and retailers, including Ingram Micro and
Best Buy. We expect that these wholesale distributors and retailers will continue to contribute a significant percentage of our net revenue for the
foreseeable future. Our service provider business has grown substantially and it is difficult to ascertain a seasonal pattern given that the business
is less predictable than our other core businesses.
In the second fiscal quarter of 2011, we made organizational changes that resulted in changes to the way in which the CODM manages and
evaluates the business. Our business is now managed in three specific business units: retail, commercial, and service provider. The retail
business unit consists of high performance, dependable and easy-to-use home networking, storage and digital media products to connect people
with the Internet and their content and devices. The commercial business unit consists of business networking, storage and security solutions
without the cost and complexity of Big IT. The service provider business unit consists of made-to-order and retail proven, whole home
networking solutions sold to service provider for sale to their customers. Each business unit is managed by a Senior Vice President/General
Manager. There is no change in the CODM before and after the reorganization of the segments. We believe this new structure enables us to
better focus our efforts on our core customer segments and allows us to be more nimble and opportunistic as a company overall. Additionally, in
the first fiscal quarter of 2011, we combined our North American, Central American and South American sales forces to form the Americas
territory. Previously, North America was its own geographic region and the Central American and South American territories were categorized
within the Asia Pacific (“APAC”) geographic region. Following this change, we are now organized into the following three geographic
territories: Americas, Europe, Middle-East
38
Item 7.
Management
’
s Discussion and Analysis of Financial Condition and Results of Operations