Thursday, April 25, 2013

NETGEAR Posts Lower Sales for Q1, Cites Product Transition Issues

NETGEAR reported Q1 net sales of $293.4 million, as compared to $325.6 million for the first quarter ended April 1, 2012, and $310.4 million in the fourth quarter ended December 31, 2012.  Net income  (GAAP) was $15.3 million, or $0.39 per diluted share.  This compares to GAAP net income of $25.1 million, or $0.65 per diluted share, for the first quarter of 2012, and GAAP net income of $16.1 million, or $0.41 per diluted share, in the fourth quarter of 2012. Gross margin on a non-GAAP basis in the first quarter of 2013 was 30.5%, as compared to 31.0% in the year ago comparable quarter, and 30.0% in the fourth quarter of 2012.

Patrick Lo, Chairman and Chief Executive Officer of NETGEAR commented, "The lower than expected operating margin in the first quarter was driven by product mix, primarily due to difficulties in the transition to our new ReadyNAS line of products. The transition occurred late in the quarter and difficulty securing components and some last minute bug fixes led to unanticipated delays. This marked the first time we completely replaced an entire line of products, which involved obsoleting ten models and replacing them with seven brand new models. The execution was much harder than anticipated and we learned a valuable lesson in engineering and manufacturing planning. The good news is that our supply is now in full swing and customer feedback on the new product line has been very positive."

"We continue to see large market opportunities created by the ever expanding access to high speed Internet connectivity among consumers and businesses.  We are very focused today on building our product portfolios for intermediate and long term growth in all three of our business units. In retail, we continue to gain traction with the 11ac upgrade cycle and we are gaining share in the Smart Home space, specifically with our Internet video streaming solutions. In our Commercial Business Unit, the launches of the new ReadyNAS and 10GBaseT switches in the first quarter were received enthusiastically by the market, positioning us for growth in the months and years ahead. And in our Service Provider Business Unit, we introduced our first LTE gateway into the North American fixed mobile data market and have attracted interest from multiple service providers."