NETGEAR, Inc Q2 2010 Earnings Call Transcript

NETGEAR, Inc Q2 2010 Earnings Call Transcript
Publish date:


Q2 2010 Earnings Call

July 21, 2010 5:00 pm ET


Joseph Villalta - IR, The Ruth Group

Patrick Lo - Chairman and CEO

Christine Gorjanc - CFO


Hamed Khorsand - BWS Financial

Jeff Kvaal - Barclays Capital

Douglas Ireland - JMP Securities

Woo Jin Ho - Bank of America-Merrill Lynch

Erin Riley - Goldman Sachs

Sanjit Singh - Wedbush Securities



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Welcome to the NETGEAR Inc. Second Quarter 2010 Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Joseph Villalta of The Ruth Group. Thank you, you may begin.

Joseph Villalta

Good afternoon and welcome to NETGEAR's second quarter 2010 financial results conference call. Joining us from the company are Mr. Patrick Lo, Chairman and Chief Executive Officer; and Ms. Christine Gorjanc, Chief Financial Officer.

The format of the call will be a brief business review by Patrick, followed by Christine providing detail on the financials. We'll then have time for any questions. If you have not yet received a copy of today's earnings release, please call The Ruth Group at 646-536-7028 or you go to NETGEAR's corporate website at

Before we begin the formal remarks, the company's attorneys advise us that today's conference call contains forward-looking statements within the meaning of the US Private Securities Litigation Reform Act of 1995. The words anticipate, expect, believe, will, may, should, estimate, project, outlook, forecast or other similar words are used to identify such forward-looking statements. However, the absence of these words do not mean that these statements are not forward-looking.

The forward-looking statements represent NETGEAR Inc.'s expectations or beliefs concerning future events based on information, available at the time such statements were made and include statements among others regarding NETGEAR's expected revenue, earnings, gross and operating income and margins.

The effect of the global economic environment on the company's business, the market size of our new product categories, our position in the market relative to our competition, the long-term future and growth of NETGEAR's business, SMB revenue for the second half of the year, our ability to innovate anticipated new product offerings, current and future demand for the company's existing and anticipated new products, expectations of outpacing competitors and the new product introductions, the company's strategy for innovation and new products. Willingness of consumers to purchase and use the company's products, larger revenue share from service provider customers during the second half of 2010. DOCSIS 3.0 products deployment by our service provider customers, future Wi-Fi demand and the ability to increase distribution of market share for the company's products domestically and worldwide.

These statements are based on management's current expectations and are subject to certain risks and uncertainties, including, without limitation, the following: future demand of the company's products may be lower than anticipated; consumers may choose not to adopt the company's new product offerings or adopt competing products; product performance may be adversely affected by real world operating conditions; the company may be unsuccessful or experience delays in manufacturing and distributing its new and existing products; telecommunications service providers may choose to slow their deployment of the company's products or utilize competing products; the company may be unable to collect receivables as they become due; the company may fail to manage costs, including the cost of developing new products and manufacturing and distribution of its existing offerings; channel inventory information reported as estimated based on the average number of weeks of inventory on hand on the last Saturday of the quarter, as reported by certain of NETGEAR's customers; changes in the level of NETGEAR's cash resources and the company's planned usage of such resources; changes in the company's stock price and developments in the business that could increase the company's cash needs, and fluctuations in foreign exchange rates.

Further, certain forward-looking statements are based on assumptions as to future events that may not prove to be accurate. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Further information on potential risk factors are detailed in the company's periodic filings with the SEC, including, but not limited to, those risks and uncertainties listed in the section entitled "Part II - Item 1A. Risk Factors," pages 32 through 47, in the company's Quarterly Report on Form 10-Q for the quarter ended March 28, 2010, filed with the SEC on May 6, 2010.

NETGEAR undertakes no obligation to release publicly any revisions to any forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

In addition, several non-GAAP financial measures will be mentioned on this call. Information relating to the corresponding GAAP measures and reconciliation of the non-GAAP and GAAP measures can be found in our press release or on our Investor Relation site at

At this time, I would now like to turn the call over to Mr. Patrick Lo. Please go ahead sir.

Patrick Lo

Thank you Joseph and thank you everyone for joining today's call. We're extremely pleased to announce a 35% year-on-year growth in revenue in the second quarter of 2010. Again, we are seeing year-over-year growth in all three regions with a very impressive 48% growth in North America.

The growth in North America was primarily due to our achieving the number one position for US retail market share in the networking category as well as significant growth in the retail market generally.

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