Netgear 2012 Annual Report Download - page 97

Table of Contents NETGEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following 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):
The Company recognizes these compensation costs net of the estimated forfeitures on a straight-
line basis over the requisite service period of
the award, which is generally the option vesting term of four years .
Total stock-based compensation cost capitalized in inventory was less than $250,000 in each of the years ended December 31, 2012 , 2011
and
2010 .
As of December 31, 2012 , $24.1 million
of total unrecognized compensation cost related to stock options is expected to be recognized over a
weighted-average period of 1.4 years . As of December 31, 2012 , $1.7 million of total unrecognized compensation cost related to non-
vested RSUs
is expected to be recognized over a weighted-average period of 0.8 years .
401(k) Plan
In April 2000, the Company adopted the NETGEAR 401(k) Plan to which employees may contribute up to 100%
of salary subject to the legal
maximum. In the first quarter of 2012, the Company began matching 50%
of contributions for employees that remain active with the company
through the end of the fiscal year, up to a maximum of $6,000 in employee contributions. During the year ended December 31, 2012
, the Company
recognized $689,000 in expenses related to the 401(k) match. No match was offered in 2010 and 2011 and thus no
expenses were recorded related to
matching employee contributions during those years.
Note 12. Segment Information, Operations by Geographic Area and Customer Concentration
Operating segments are components of an enterprise about which separate financial information is available and is regularly evaluated by
management, namely the Chief Operating Decision Maker (“CODM”)
of an organization, in order to determine operating and resource allocation
decisions. By this definition, the Company operates 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 providers for sale to their customers. Each business unit is managed by a Senior Vice President/General Manager. The Company believes this
structure enables it to better focus its efforts on the Company's core customer segments and allows it to be more nimble and opportunistic as a
company overall.
In the second quarter of 2012, the CEO began temporarily serving as interim General Manager of the commercial business unit due to the
previous general manager's departure from the Company. The CEO will continue to serve as interim general manager until a replacement is
established.
The results of the reportable segments are derived directly from the Company's management reporting system. The results are based on the
Company's method of internal reporting and are not necessarily in conformity with accounting principles generally accepted in the United States.
Management measures the performance of each segment based on several metrics, including contribution income. Segment contribution income
includes all product line segment revenues less the related cost of sales, research and development and sales and marketing costs. Contribution
income is used, in part, to evaluate the performance of, and allocate resources to, each of the segments. Certain operating expenses are not allocated
to segments because they are separately managed at the corporate level. These unallocated indirect costs include corporate costs, such as corporate
research and development, general
93
Year Ended December 31,
2012
2011 2010
Cost of revenue
$
1,347
$
999
$
913
Research and development
2,787
2,476
2,271
Sales and marketing
4,751
5,136
4,710
General and administrative
5,487
5,151
4,307
Total
$
14,372
$
13,762
$
12,201