Netgear 2013 Annual Report Download - page 31

Table of Contents
We are expanding our operations and infrastructure, which may strain our operations and increase our operating expenses.
We are expanding our operations and pursuing market opportunities both domestically and internationally in order to grow our sales. As a result of
the acquisition of the AirCard business of Sierra Wireless, we have added two new locations with over 80 personnel housed at each site, one in Carlsbad,
California, and one in Richmond, British Columbia. We expect that this 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. Our 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. As part of this expansion and reorganization, we have also commenced
utilizing an alternative customer support model for certain of our end user technical support services. This alternative model permits a customer support
agent to attempt to sell additional services and/or products to an end user who calls for technical support. If we are unable to successfully manage this
alternative model, our end user customers may become frustrated with the customer experience and cease purchasing our products, and our business
would be harmed. 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 invest in companies for both strategic and financial reasons, but may not realize a return on our investments.
We have made, and continue to seek to make, investments in companies around the world to further our strategic objectives and support our key
business initiatives. These investments may include equity or debt instruments of public or private companies, and may be non-
marketable at the time of
our initial investment. We do not restrict the types of companies in which we seek to invest. These companies may range from early-
stage companies
that are often still defining their strategic direction to more mature companies with established revenue streams and business models. If any company in
which we invest fails, we could lose all or part of our investment in that company. If we determine that an other-than-
temporary decline in the fair value
exists for an equity or debt investment in a public or private company in which we have invested, we will have to write down the investment to its fair
value and recognize the related write-
down as an investment loss. The performance of any of these investments could result in significant impairment
charges and gains (losses) on other equity investments. We must also analyze accounting and legal issues when making these investments. If we do not
structure these investments properly, we may be subject to certain adverse accounting issues, such as potential consolidation of financial results.
Furthermore, if the strategic objectives of an investment have been achieved, or if the investment or business diverges from our strategic
objectives, we may seek to dispose of the investment. Our non-
marketable equity investments in private companies are not liquid, and we may not be
able to dispose of these investments on favorable terms or at all. The occurrence of any of these events could harm our results. Gains or losses from
equity securities could vary from expectations depending on gains or losses realized on the sale or exchange of securities and impairment charges related
to debt instruments as well as equity and other investments.
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