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Netgear, Inc April/03/2012 Presentors: Ryo-Seob(Joseph) Kim Jionghan(JD) Dai Han(Henry) Yang

Netgear, Inc April/03/2012 Presentors: Ryo-Seob(Joseph) Kim Jionghan(JD) Dai Han(Henry) Yang Pattharaporn (Pauline) Lertphaiboonsiri Yen-Hua(Gina) Huang. Overview. Netgear, INC.

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Netgear, Inc April/03/2012 Presentors: Ryo-Seob(Joseph) Kim Jionghan(JD) Dai Han(Henry) Yang

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  1. Netgear, Inc April/03/2012 Presentors: Ryo-Seob(Joseph) Kim Jionghan(JD) Dai Han(Henry) Yang Pattharaporn (Pauline) Lertphaiboonsiri Yen-Hua(Gina) Huang

  2. Overview • Netgear, INC. incorporated in 1996, engages in the design, development, marketing, and sale of networking products. It offers its products to connect users as well as commercial businesses, and also provides home networking service to customers. • Key Figures

  3. Netgear’s Market Performance EPS(11)=$2.41 EPS(07)=$1.28 Source: Yahoo Finance http://finance.yahoo.com/q/bc?s=NTGR&t=5y&l=on&z=l&q=l&c=

  4. Business Segments • Retail – Home networking products, including Routers, Network Adapters, Range Extenders • Commercial – Business networking solutions, including Network Security, Switches, Network Storage • Service Provider – Made-to-Order and retail proven, whole home networking solutions for residential and business customers. Source:Netgear homepagehttp://www.netgear.com

  5. Business Segments • Products Source:10-K (2011), revised by Joseph

  6. Geographic Segments Source:10-K (2011), revised by Joseph

  7. Important Macro Index • Main customers • Companies • Individuals • Companies defer unnecessary investment during recession • GDP • Individuals with lower income cut expenses in upgrading network • Personal income

  8. Important Macro Index • GDP • Personal income • Foreign exchange rate Source: Capital IQ

  9. Industry • Sector: technology • Industry: networking equipment manufacturing Source: http://clients.ibisworld.com/industryus/default.aspx?indid=745

  10. Revenue Drivers

  11. Key Success Factor

  12. Financial Analysis • Decrease in cash 2010 : from ST investment (net Increase 70 M) from 74M to 144M ) and the 2 M cash acquisition of IP and other assets of Leaf Networks, LLC (“Leaf”), a developer of virtual networking software, to boot networking technology research and development initiatives. • Increase in Cash 2011; from higher net income by 79% and sale of ST investment purchased in 2010. • - 37 million cash acquired for the Customer Networking Solutions division of Westell Technologies, Inc. (“Westell”)

  13. Financial ratio

  14. Business Performance • The increase in Revenue in 2010 and 2011 driven by revenue from consumers transitioning from wireless-G to wireless-N technology and service provider division. • The decrease in gross margin in 2011 was attributable to a higher % of revenue from sales to service providers, which generally carry lower gross margins. • Gross Margin : Retail = 17%, Commercial = 23%, Service Provider = 9%

  15. Dupont Analysis

  16. The competitors

  17. The Multiples

  18. The Target Price from Multiples

  19. Recommendation • Comparable valuation - $33.35 • DCF - $28.08 • Target price: $30 • Current price: $38.44 • Final recommendation: put on watch list and review the stock if price drop below $33

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