Netgear: Fiscal 4Q10 Financial Results

NETGEAR, Inc. reported financial results for the fourth quarter and fiscal year ended December 31, 2010.

Net revenue for the fourth quarter ended December 31, 2010 was $258.5 million, as compared to $218.8 million for the fourth quarter ended December 31, 2009, and as compared to $236.0 million in the third quarter ended October 3, 2010.  Net income, computed in accordance with GAAP, for the fourth quarter of 2010 was $13.6 million, or $0.37 per diluted share. This compared to GAAP net income of $7.9 million, or $0.22 per diluted share, for the fourth quarter of 2009, and to GAAP net income of $13.1 million, or $0.36 per diluted share, in the third quarter of 2010. 

Gross margin on a non-GAAP basis in the fourth quarter of 2010 was 32.0%, as compared to 31.1% in the year ago comparable quarter, and 32.7% in the third quarter of 2010. Non-GAAP operating margin was 11.4% in the fourth quarter of 2010, as compared to 11.2% in the fourth quarter of 2009, and 11.0% in the third quarter of 2010. Non-GAAP net income was $0.44 per diluted share in the fourth quarter of 2010, as compared to non-GAAP net income of $0.34 per diluted share in the fourth quarter of 2009, and non-GAAP net income of $0.45 per diluted share in the third quarter of 2010. 

The differences between GAAP and non-GAAP financial measures include adjustments, net of any tax effect, for amortization of purchased intangibles, stock-based compensation, restructuring, technology license arrangements, acquisition related compensation, and litigation reserves. The accompanying schedules provide a reconciliation of financial measures computed on a GAAP basis to financial measures computed on a non-GAAP basis.

Net revenue for the full year 2010 was $902.1 million, a 31% increase as compared to $686.6 million for 2009.  Net income, computed in accordance with GAAP, for 2010 was $50.9 million, or $1.41 per diluted share. This net income was a 447% increase compared to net income of $9.3 million for 2009. Earnings per share, computed in accordance with GAAP, was $0.27 per diluted share for the full year 2009.

Non-GAAP net income for the full year 2010 was $62.9 million, a 165% increase compared to non-GAAP net income of $23.7 million for 2009. Non-GAAP net income was $1.74 per diluted share for 2010, as compared to $0.68 per diluted share for 2009, a 156% increase.

Patrick Lo, Chairman and Chief Executive Officer of NETGEAR, commented: "We are extremely pleased with our full year 2010 business performance. The fourth quarter 2010 represented another new record in our quarterly revenue, and our full year 2010 also marked a year of record revenue and strong year-over-year growth. Our net revenue from service providers was approximately 25% of total net revenue in the fourth quarter 2010, as compared to 19% in the third quarter of 2010, and 28% in the fourth quarter of 2009."

"The strong revenue performance in the fourth quarter was driven by higher than expected revenue contribution from new products. We introduced a record 26 new products during the fourth quarter 2010. In total, we introduced an unprecedented 81 new products in 2010. Notable new products include the industry’s first 500Mbps Powerline adapter, the Neo TV 550 Digital/Internet Media Player, the ReadyNAS Ultra 2 Media Server Network Storage, the 4G LTE WiFi router, and a 10Gbps Ethernet Switch for medium size businesses. At the Las Vegas International Consumer Electronics Show in January, three of our new products were the recipients of 2011 Innovations Design and Engineering awards."

Christine Gorjanc, Chief Financial Officer of NETGEAR, said: "We ended the fourth quarter of 2010 with $270.7 million in cash, cash equivalents and short-term investments, compared to $247.1 million at the end of the fourth quarter of 2009, and $243.5 million at the end of the third quarter of 2010. Our net inventory ended at $127.4 million, compared to $90.6 million at the end of the fourth quarter of 2009, and $110.4 million at the end of the third quarter of 2010."

Looking forward, Mr. Lo added: "We continue to benefit from our unwavering commitment to research and development, resulting in unprecedented new product introductions in the last 3 quarters with more to come. We continue to believe that our strong new product pipeline will be the driving engine of our growth in 2011. In the first quarter of 2011, we intend to roll out at least another 20 new products. Specifically, for the first quarter 2011, we expect net revenue in the range of approximately $250 million to $260 million, with non-GAAP operating margin to be in the range of 11% to 12%."