Netgear Shares Fall On Weak 2Q Report, 3Q View

NEW YORK (AP) â¿¿ Shares of Netgear dropped on Friday after the maker of networking equipment reported a smaller-than-expected rise in its second-quarter net income and offered a disappointing third-quarter forecast.

THE SPARK: Netgear said late Thursday that it expects revenue from its service provider small business unit will be down as its customers cut down on marketing programs. However, it expects its retail and commercial business units to benefit from business generated by the back-to-school season.

THE DETAILS: For the April to June period, Netgear reported net income of $21.5 million, or 56 cents per share, up from $20.6 million or 54 cents per share last year. Excluding one-costs for restructuring and other items, net income totaled 64 cents per share. That missed expectations of 68 cents per share by analysts surveyed by FactSet.

Revenue rose 10 percent to $320.7 million from $291.2 million last year. Analysts expected revenue of $323 million.

THE BACKGROUND: Started in 1996, Netgear Inc. makes products such as routers and adaptors that connect computers for homes and small businesses. The San Jose, Calif.-based company has been growing through acquisitions. During the quarter it bought an engineering company in India to enhance its small campus wireless router offerings for commercial businesses. And it bought Avaak Inc., in July, a maker of home video monitoring system.

THE OUTLOOK: Netgear predicts revenue of $310 to $325 million, while analysts expect revenue of $343.9 million.

SHARE ACTION: Shares fell $3.08, or 8.8 percent, to $31.92 in morning trading. The stock had been up 4 percent since the beginning of the year.

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