|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|
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|
|
For the fiscal year ended December 31, 2012
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|
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|
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|
|
For the transition period from to
|
Delaware
|
77-0419172
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
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|
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350 East Plumeria Drive,
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95134
|
San Jose, California
|
(Zip Code)
|
(Address of principal executive offices)
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Title of each class
|
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Name of each exchange on which registered
|
Common Stock, par value $0.001
|
|
The NASDAQ Stock Market LLC
|
|
|
(NASDAQ Global Select Market)
|
Large Accelerated filer
|
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þ
|
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Accelerated filer
|
|
o
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Non-Accelerated filer
|
|
o
|
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Smaller reporting company
|
|
o
|
PART I
|
||
Item 1.
|
||
Item 1A.
|
||
Item 1B.
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
PART II
|
||
Item 5.
|
||
Item 6.
|
||
Item 7.
|
||
Item 7A.
|
||
Item 8.
|
||
Item 9.
|
||
Item 9A.
|
||
Item 9B.
|
||
PART III
|
||
Item 10.
|
||
Item 11.
|
||
Item 12.
|
||
Item 13.
|
||
Item 14.
|
||
PART IV
|
||
Item 15.
|
||
|
||
|
•
|
Ethernet switches, which are multiple port devices used to network PCs and peripherals via Ethernet wiring;
|
•
|
Wireless controllers, which are devices used to manage and control multiple WiFi base stations which in turn provide WiFi connections to PCs and peripherals;
|
•
|
Internet Security Appliances, which provide Internet access through capabilities such as anti-virus and anti-spam; and
|
•
|
Unified storage, which delivers file and block based data into a single shared storage system, meeting the demands of small enterprises and consumers through an easy-to-use interface for managing multiple storage protocols.
|
•
|
Routers, which connect the home or office networks to the Internet via broadband modems;
|
•
|
Gateways, which are routers with integrated modems, for Internet access;
|
•
|
IP telephony products, used for transmitting voice communications over a network; and
|
•
|
Media servers, which store files and multimedia content for access by PCs, laptops, smart phones and other Internet enabled devices.
|
•
|
Wireless access points and range extenders, which provide a wireless link between a wired network and wireless devices;
|
•
|
Wireless network interface cards and adapters, which enable devices to be connected to the network wirelessly;
|
•
|
Ethernet network interface cards and adapters, which enable devices to be connected to the network over Ethernet wiring;
|
•
|
Media adapters, which connect non PC entertainment devices such as TVs, audio players, and game consoles to a network;
|
•
|
Powerline adapters and bridges, which enable devices to be connected to the network over existing electrical wiring;
|
•
|
Multimedia over Coax Alliance standard (“MoCA”) adapters and bridges, which enable devices to be connected to the network over existing coaxial wiring; and
|
•
|
Remote video monitoring systems, which provide wire-free monitoring accessible by PC, MAC, or smartphone.
|
•
|
within the consumer markets, companies such as Apple, Belkin, D-Link, Dropcam, Foscam, the Linksys division of Cisco Systems (which was offered to be purchased by Belkin in January 2013), Logitech, Roku, TP Link and Western Digital; and
|
•
|
within the business markets, companies such as Allied Telesys, Barracuda, Buffalo, Data Robotics, Dell, D-Link, Fortinet, Hewlett-Packard, Huawei, Cisco Systems, QNAP Systems, Seagate Technology, SonicWALL, Synology, WatchGuard and Western Digital; and
|
•
|
within the service provider markets, companies such as Actiontec, Arcadyan, ARRIS, AVM, Comtrend, D-Link, Hitron, Huawei, Motorola, Pace, Sagem, Scientific Atlanta-a Cisco company, Sercomm, SMC Networks, TechniColor, Ubee, Compal Broadband, ZTE and ZyXEL.
|
|
December 31,
2012 |
|
December 31,
2011 |
|
December 31,
2010 |
||||||
United States
|
$
|
9,898
|
|
|
$
|
9,901
|
|
|
$
|
11,808
|
|
Americas (excluding U.S.)
|
36
|
|
|
44
|
|
|
22
|
|
|||
EMEA
|
1,173
|
|
|
331
|
|
|
205
|
|
|||
China
|
6,763
|
|
|
4,909
|
|
|
4,848
|
|
|||
APAC (excluding China)
|
1,155
|
|
|
699
|
|
|
620
|
|
|||
|
$
|
19,025
|
|
|
$
|
15,884
|
|
|
$
|
17,503
|
|
Name
|
Age
|
Position
|
|
Patrick C.S. Lo
|
56
|
|
Chairman and Chief Executive Officer
|
Christine M. Gorjanc
|
56
|
|
Chief Financial Officer
|
Mark G. Merrill
|
58
|
|
Chief Technical Officer
|
Michael P. Clegg
|
52
|
|
Senior Vice President and General Manager of Service Provider Business Unit
|
David S.G. Soares
|
46
|
|
Senior Vice President and General Manager of Retail Business Unit
|
Michael F. Falcon
|
56
|
|
Senior Vice President of Worldwide Operations and Support
|
Charles T. Olson
|
57
|
|
Senior Vice President of Engineering
|
Andrew W. Kim
|
42
|
|
Vice President, Legal and Corporate Development, Corporate Secretary
|
Item 1A.
|
Risk Factors
|
•
|
changes in the pricing policies of or the introduction of new products by us or our competitors;
|
•
|
unanticipated shift or decline in profit by geographical region that would adversely impact our tax rate;
|
•
|
slow or negative growth in the networking product, personal computer, Internet infrastructure, home electronics and related technology markets, as well as decreased demand for Internet access;
|
•
|
operational disruptions, such as transportation delays or failure of our order processing system, particularly if they occur at the end of a fiscal quarter;
|
•
|
geopolitical disruption leading to delay or even stoppage of our operations in manufacturing, transportation, technical support and research and development;
|
•
|
delay or failure of our service provider customers to purchase at the volumes that they forecast;
|
•
|
foreign currency exchange rate fluctuations in the jurisdictions where we transact sales and expenditures in local currency;
|
•
|
changes in or consolidation of our sales channels and wholesale distributor relationships or failure to manage our sales channel inventory and warehousing requirements;
|
•
|
delay or failure to fulfill orders for our products on a timely basis;
|
•
|
allowance for bad debts exposure with our existing customers and new customers, particularly as we expand into new international markets;
|
•
|
disruptions or delays related to our financial and enterprise resource planning systems;
|
•
|
our inability to accurately forecast product demand;
|
•
|
component supply constraints from our vendors;
|
•
|
unfavorable level of inventory and turns;
|
•
|
shift in overall product mix sales from higher to lower margin products, or from one business unit to another, that would adversely impact our margins;
|
•
|
terms of our contracts with customers or suppliers that cause us to incur additional expenses or assume additional liabilities;
|
•
|
the inability to maintain stable operations by our suppliers and other parties with which we have commercial relationships;
|
•
|
delays in the introduction of new products by us or market acceptance of these products;
|
•
|
an increase in price protection claims, redemptions of marketing rebates, product warranty and stock rotation returns or allowance for doubtful accounts;
|
•
|
litigation involving alleged patent infringement;
|
•
|
epidemic or widespread product failure, or unanticipated safety issues, in one or more of our products;
|
•
|
challenges associated with integrating acquisitions that we make, or with realizing value from our strategic investments in other companies;
|
•
|
failure to effectively manage our third party customer support partners which may result in customer complaints and/or harm to the NETGEAR brand;
|
•
|
our inability to monitor and ensure compliance with our anti-corruption compliance program and domestic and international anti-corruption laws and regulations, whether in relation to our employees or with our suppliers or customers;
|
•
|
labor unrest at facilities managed by our third-party manufacturers;
|
•
|
unanticipated increase in costs, including air freight, associated with shipping and delivery of our products;
|
•
|
our failure to implement and maintain the appropriate internal controls over financial reporting which may result in restatements of our financial statements; and
|
•
|
any changes in accounting rules.
|
•
|
actual or anticipated fluctuations in our operating results or our competitors' operating results;
|
•
|
actual or anticipated changes in the growth rate of the general networking sector, our growth rates or our competitors' growth rates;
|
•
|
conditions in the financial markets in general or changes in general economic conditions, including government efforts to stabilize currencies;
|
•
|
interest rate or currency exchange rate fluctuations;
|
•
|
our ability or inability to raise additional capital;
|
•
|
our ability to report accurate financial results in our periodic reports filed with the SEC; and
|
•
|
changes in stock market analyst recommendations regarding our common stock, other comparable companies or our industry generally.
|
•
|
loss of or delay in revenue and loss of market share;
|
•
|
negative publicity and damage to our reputation and brand;
|
•
|
a decline in the average selling price of our products;
|
•
|
adverse reactions in our sales channels, such as reduced shelf space, reduced online product visibility, or loss of sales channel; and
|
•
|
increased levels of product returns.
|
•
|
integrating the companies, assets, systems, products, sales channels and personnel that we acquire;
|
•
|
growing or maintaining revenues to justify the purchase price and the increased expenses associated with acquisitions;
|
•
|
entering into territories or markets that we have limited or no prior experience with;
|
•
|
establishing or maintaining business relationships with customers, vendors and suppliers who may be new to us;
|
•
|
overcoming the employee, customer, vendor and supplier turnover that may occur as a result of the acquisition;
|
•
|
diverting management's attention from running the day to day operations of our business; and
|
•
|
potential post-closing disputes.
|
•
|
changes in the regulatory environment;
|
•
|
changes in accounting and tax standards or practices
|
•
|
changes in the composition of operating income by tax jurisdiction; and
|
•
|
our operating results before taxes.
|
•
|
our reseller agreements generally do not require substantial minimum purchases;
|
•
|
our customers can stop purchasing and our resellers can stop marketing our products at any time; and
|
•
|
our reseller agreements generally are not exclusive.
|
•
|
unexpected increases in manufacturing and repair costs;
|
•
|
inability to control the quality and reliability of finished products;
|
•
|
inability to control delivery schedules;
|
•
|
potential lack of adequate capacity to manufacture all or a part of the products we require; and
|
•
|
potential labor unrest affecting the ability of the third-party manufacturers to produce our products.
|
•
|
political and economic instability, international terrorism and anti-American sentiment, particularly in emerging markets;
|
•
|
potential for violations of anti-corruption laws and regulations, such as those related to bribery and fraud;
|
•
|
preference for locally branded products, and laws and business practices favoring local competition;
|
•
|
exchange rate fluctuations;
|
•
|
increased difficulty in managing inventory;
|
•
|
delayed revenue recognition;
|
•
|
less effective protection of intellectual property;
|
•
|
stringent consumer protection and product compliance regulations, including but not limited to the Restriction of Hazardous Substances directive, the Waste Electrical and Electronic Equipment directive and the recently enacted Ecodesign directive (EuP) in Europe that are costly to comply with and may vary from country to country;
|
•
|
difficulties and costs of staffing and managing foreign operations;
|
•
|
business difficulties, including potential bankruptcy or liquidation, of any of our worldwide third party logistics providers; and
|
•
|
changes in local tax laws.
|
Item 1B.
|
Unresolved Staff Comments
|
Item 2.
|
Properties
|
Item 3.
|
Legal Proceedings
|
Item 4.
|
Mine Safety Disclosures
|
Item 5.
|
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|
Fiscal Year Ended December 31, 2011
|
High
|
Low
|
||||
First Quarter
|
$
|
38.00
|
|
$
|
29.97
|
|
Second Quarter
|
44.60
|
|
30.31
|
|
||
Third Quarter
|
45.31
|
|
24.87
|
|
||
Fourth Quarter
|
38.47
|
|
23.45
|
|
Fiscal Year Ended December 31, 2012
|
High
|
Low
|
||||
First Quarter
|
$
|
43.44
|
|
$
|
34.08
|
|
Second Quarter
|
40.08
|
|
28.98
|
|
||
Third Quarter
|
40.42
|
|
28.68
|
|
||
Fourth Quarter
|
39.48
|
|
32.48
|
|
|
December 31, 2007
|
|
|
December 31, 2008
|
|
|
December 31, 2009
|
|
|
December 31, 2010
|
|
|
December 31, 2011
|
|
|
December 31, 2012
|
|
||||||
NETGEAR, Inc.
|
$
|
100.00
|
|
|
$
|
31.99
|
|
|
$
|
60.81
|
|
|
$
|
94.42
|
|
|
$
|
94.11
|
|
|
$
|
110.54
|
|
NASDAQ Computer Index
|
$
|
100.00
|
|
|
$
|
53.31
|
|
|
$
|
91.06
|
|
|
$
|
106.95
|
|
|
$
|
107.47
|
|
|
$
|
120.88
|
|
NASDAQ Composite Index
|
$
|
100.00
|
|
|
$
|
59.46
|
|
|
$
|
85.55
|
|
|
$
|
100.02
|
|
|
$
|
98.22
|
|
|
$
|
113.85
|
|
Period
|
|
Total Number of
Shares Purchased (2)
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)
|
|
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
|
||||
October 1, 2012 - October 28, 2012
|
|
917
|
|
|
$37.32
|
|
—
|
|
|
4,831,220
|
|
|
October 29, 2012 - November 25, 2012
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,831,220
|
|
November 26, 2012 - December 31, 2012
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,831,220
|
|
Total
|
|
917
|
|
|
$37.32
|
|
—
|
|
|
|
(1)
|
On October 21, 2008, the Board of Directors authorized the repurchase of up to 6,000,000 shares of our outstanding common stock. Under this authorization, the timing and actual number of shares subject to repurchase are at the discretion of management and are contingent on a number of factors, such as levels of cash generation from operations, cash requirements for acquisitions and the price of our common stock. During the years ended December 31,
2012
,
2011
and
2010
, the Company did not repurchase any shares under this authorization.
|
(2)
|
We repurchased 917 shares, or approximately $34,000 of common stock to help administratively facilitate the withholding and subsequent remittance of personal income and payroll taxes for individuals receiving RSUs during the three months ended December 31,
2012
. Similarly, during the three months ended December 31, 2011, we repurchased 917 shares, or approximately $27,000 of common stock, respectively, to help facilitate tax withholding for RSUs.
|
Item 6.
|
Selected Financial Data
|
|
|
Year Ended December 31,
|
||||||||||||||||||
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
|
2008
|
||||||||||
|
|
(In thousands, except per share data)
|
||||||||||||||||||
Consolidated Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net revenue
|
|
$
|
1,271,921
|
|
|
$
|
1,181,018
|
|
|
$
|
902,052
|
|
|
$
|
686,595
|
|
|
$
|
743,344
|
|
Cost of revenue (2)
|
|
888,368
|
|
|
811,572
|
|
|
602,805
|
|
|
480,195
|
|
|
502,320
|
|
|||||
Gross profit
|
|
383,553
|
|
|
369,446
|
|
|
299,247
|
|
|
206,400
|
|
|
241,024
|
|
|||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Research and development (2)
|
|
61,066
|
|
|
48,699
|
|
|
39,972
|
|
|
30,056
|
|
|
33,773
|
|
|||||
Sales and marketing (2)
|
|
149,766
|
|
|
154,562
|
|
|
131,570
|
|
|
106,162
|
|
|
121,687
|
|
|||||
General and administrative (2)
|
|
45,027
|
|
|
39,423
|
|
|
36,220
|
|
|
32,727
|
|
|
31,733
|
|
|||||
Restructuring and other charges (2)
|
|
1,190
|
|
|
2,094
|
|
|
(88
|
)
|
|
809
|
|
|
1,929
|
|
|||||
In-process research and development
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,800
|
|
|||||
Technology license arrangements
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,500
|
|
|
—
|
|
|||||
Litigation reserves, net
|
|
390
|
|
|
(201
|
)
|
|
211
|
|
|
2,080
|
|
|
711
|
|
|||||
Total operating expenses
|
|
257,439
|
|
|
244,577
|
|
|
207,885
|
|
|
174,334
|
|
|
191,633
|
|
|||||
Income from operations
|
|
126,114
|
|
|
124,869
|
|
|
91,362
|
|
|
32,066
|
|
|
49,391
|
|
|||||
Interest income
|
|
498
|
|
|
477
|
|
|
426
|
|
|
629
|
|
|
4,336
|
|
|||||
Other income (expense), net
|
|
2,670
|
|
|
(1,136
|
)
|
|
(564
|
)
|
|
(128
|
)
|
|
(8,384
|
)
|
|||||
Income before income taxes
|
|
129,282
|
|
|
124,210
|
|
|
91,224
|
|
|
32,567
|
|
|
45,343
|
|
|||||
Provision for income taxes
|
|
42,743
|
|
|
32,842
|
|
|
40,315
|
|
|
23,234
|
|
|
27,293
|
|
|||||
Net income
|
|
$
|
86,539
|
|
|
$
|
91,368
|
|
|
$
|
50,909
|
|
|
$
|
9,333
|
|
|
$
|
18,050
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic (1)
|
|
$
|
2.27
|
|
|
$
|
2.46
|
|
|
$
|
1.44
|
|
|
$
|
0.27
|
|
|
$
|
0.51
|
|
Diluted (1)
|
|
$
|
2.23
|
|
|
$
|
2.41
|
|
|
$
|
1.41
|
|
|
$
|
0.27
|
|
|
$
|
0.51
|
|
(1)
|
Information regarding calculation of per share data is described in Note 6,
Net Income Per Share
, in Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K.
|
|
|
As of December 31,
|
||||||||||||||||||
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
|
2008
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash, cash equivalents and short-term investments
|
|
$
|
376,877
|
|
|
$
|
353,695
|
|
|
$
|
270,737
|
|
|
$
|
247,100
|
|
|
$
|
203,009
|
|
Working capital
|
|
$
|
603,279
|
|
|
$
|
525,268
|
|
|
$
|
413,321
|
|
|
$
|
339,116
|
|
|
$
|
312,843
|
|
Total assets
|
|
$
|
1,034,569
|
|
|
$
|
971,370
|
|
|
$
|
780,321
|
|
|
$
|
633,121
|
|
|
$
|
586,209
|
|
Total current liabilities
|
|
$
|
260,930
|
|
|
$
|
308,961
|
|
|
$
|
254,723
|
|
|
$
|
195,609
|
|
|
$
|
176,505
|
|
Total non-current liabilities
|
|
$
|
19,028
|
|
|
$
|
23,652
|
|
|
$
|
25,162
|
|
|
$
|
23,359
|
|
|
$
|
18,746
|
|
Total stockholders' equity
|
|
$
|
754,611
|
|
|
$
|
638,757
|
|
|
$
|
500,436
|
|
|
$
|
414,153
|
|
|
$
|
390,958
|
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
Year Ended December 31,
|
||||||||||||||||
|
2012
|
|
% Change
|
|
2011
|
|
% Change
|
|
2010
|
||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||
Net revenue
|
$
|
1,271,921
|
|
|
7.7
|
%
|
|
$
|
1,181,018
|
|
|
30.9
|
%
|
|
$
|
902,052
|
|
Cost of revenue
|
888,368
|
|
|
9.5
|
%
|
|
811,572
|
|
|
34.6
|
%
|
|
602,805
|
|
|||
Gross profit
|
383,553
|
|
|
3.8
|
%
|
|
369,446
|
|
|
23.5
|
%
|
|
299,247
|
|
|||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
||||||||
Research and development
|
61,066
|
|
|
25.4
|
%
|
|
48,699
|
|
|
21.8
|
%
|
|
39,972
|
|
|||
Sales and marketing
|
149,766
|
|
|
(3.1
|
)%
|
|
154,562
|
|
|
17.5
|
%
|
|
131,570
|
|
|||
General and administrative
|
45,027
|
|
|
14.2
|
%
|
|
39,423
|
|
|
8.8
|
%
|
|
36,220
|
|
|||
Restructuring and other charges
|
1,190
|
|
|
(43.2
|
)%
|
|
2,094
|
|
|
**
|
|
|
(88
|
)
|
|||
Litigation reserves, net
|
390
|
|
|
**
|
|
|
(201
|
)
|
|
**
|
|
|
211
|
|
|||
Total operating expenses
|
257,439
|
|
|
5.3
|
%
|
|
244,577
|
|
|
17.7
|
%
|
|
207,885
|
|
|||
Income from operations
|
126,114
|
|
|
1.0
|
%
|
|
124,869
|
|
|
36.7
|
%
|
|
91,362
|
|
|||
Interest income
|
498
|
|
|
4.4
|
%
|
|
477
|
|
|
12.0
|
%
|
|
426
|
|
|||
Other income (expense), net
|
2,670
|
|
|
**
|
|
|
(1,136
|
)
|
|
101.4
|
%
|
|
(564
|
)
|
|||
Income before income taxes
|
129,282
|
|
|
4.1
|
%
|
|
124,210
|
|
|
36.2
|
%
|
|
91,224
|
|
|||
Provision for income taxes
|
42,743
|
|
|
30.1
|
%
|
|
32,842
|
|
|
(18.5
|
)%
|
|
40,315
|
|
|||
Net income
|
$
|
86,539
|
|
|
(5.3
|
)%
|
|
$
|
91,368
|
|
|
79.5
|
%
|
|
$
|
50,909
|
|
|
Year Ended December 31,
|
|||||||
|
2012
|
|
2011
|
|
2010
|
|||
Net revenue
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
Cost of revenue
|
69.8
|
|
|
68.7
|
|
|
66.8
|
|
Gross margin
|
30.2
|
|
|
31.3
|
|
|
33.2
|
|
Operating expenses:
|
|
|
|
|
|
|||
Research and development
|
4.8
|
|
|
4.1
|
|
|
4.5
|
|
Sales and marketing
|
11.9
|
|
|
13.1
|
|
|
14.6
|
|
General and administrative
|
3.5
|
|
|
3.3
|
|
|
4.0
|
|
Restructuring and other charges
|
0.1
|
|
|
0.2
|
|
|
0.0
|
|
Litigation reserves, net
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
Total operating expenses
|
20.3
|
|
|
20.7
|
|
|
23.1
|
|
Income from operations
|
9.9
|
|
|
10.6
|
|
|
10.1
|
|
Interest income
|
0.1
|
|
|
0.0
|
|
|
0.1
|
|
Other income (expense), net
|
0.2
|
|
|
(0.1
|
)
|
|
(0.1
|
)
|
Income before income taxes
|
10.2
|
|
|
10.5
|
|
|
10.1
|
|
Provision for income taxes
|
3.4
|
|
|
2.8
|
|
|
4.5
|
|
Net income
|
6.8
|
%
|
|
7.7
|
%
|
|
5.6
|
%
|
|
Year Ended December 31,
|
||||||||||||||||
|
2012
|
|
% Change
|
|
2011
|
|
% Change
|
|
2010
|
||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||
Total net revenue
|
$
|
1,271,921
|
|
|
7.7
|
%
|
|
$
|
1,181,018
|
|
|
30.9
|
%
|
|
$
|
902,052
|
|
|
Year Ended December 31,
|
||||||||||||||||
|
2012
|
|
% Change
|
|
2011
|
|
% Change
|
|
2010
|
||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||
Americas
|
$
|
679,419
|
|
|
15.7
|
%
|
|
$
|
587,056
|
|
|
25.8
|
%
|
|
$
|
466,542
|
|
Percentage of net revenue
|
53.4
|
%
|
|
|
|
49.7
|
%
|
|
|
|
51.7
|
%
|
|||||
EMEA
|
$
|
457,724
|
|
|
(4.2
|
)%
|
|
$
|
477,713
|
|
|
40.4
|
%
|
|
$
|
340,249
|
|
Percentage of net revenue
|
36.0
|
%
|
|
|
|
40.4
|
%
|
|
|
|
37.7
|
%
|
|||||
APAC
|
$
|
134,778
|
|
|
15.9
|
%
|
|
$
|
116,249
|
|
|
22.0
|
%
|
|
$
|
95,261
|
|
Percentage of net revenue
|
10.6
|
%
|
|
|
|
9.8
|
%
|
|
|
|
10.6
|
%
|
|
Year Ended December 31,
|
||||||||||||||||
|
2012
|
|
% Change
|
|
2011
|
|
% Change
|
|
2010
|
||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||
Cost of revenue
|
$
|
888,368
|
|
|
9.5
|
%
|
|
$
|
811,572
|
|
|
34.6
|
%
|
|
$
|
602,805
|
|
Gross margin percentage
|
30.2
|
%
|
|
|
|
31.3
|
%
|
|
|
|
33.2
|
%
|
|
Year Ended December 31,
|
||||||||||||||||
|
2012
|
|
% Change
|
|
2011
|
|
% Change
|
|
2010
|
||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||
Research and development expense
|
$
|
61,066
|
|
|
25.4
|
%
|
|
$
|
48,699
|
|
|
21.8
|
%
|
|
$
|
39,972
|
|
Percentage of net revenue
|
4.8
|
%
|
|
|
|
4.1
|
%
|
|
|
|
4.5
|
%
|
|
Year Ended December 31,
|
||||||||||||||||
|
2012
|
|
% Change
|
|
2011
|
|
% Change
|
|
2010
|
||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||
Sales and marketing expense
|
$
|
149,766
|
|
|
(3.1
|
)%
|
|
$
|
154,562
|
|
|
17.5
|
%
|
|
$
|
131,570
|
|
Percentage of net revenue
|
11.9
|
%
|
|
|
|
13.1
|
%
|
|
|
|
14.6
|
%
|
|
Year Ended December 31,
|
||||||||||||||||
|
2012
|
|
% Change
|
|
2011
|
|
% Change
|
|
2010
|
||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||
General and administrative expense
|
$
|
45,027
|
|
|
14.2
|
%
|
|
$
|
39,423
|
|
|
8.8
|
%
|
|
$
|
36,220
|
|
Percentage of net revenue
|
3.5
|
%
|
|
|
|
3.3
|
%
|
|
|
|
4.0
|
%
|
|
Year Ended December 31,
|
||||||||||||||||
|
2012
|
|
% Change
|
|
2011
|
|
% Change
|
|
2010
|
||||||||
|
( in thousands, except percentage data)
|
||||||||||||||||
Net revenue
|
$
|
504,797
|
|
|
4.8
|
%
|
|
$
|
481,795
|
|
|
10.6
|
%
|
|
$
|
435,484
|
|
Percentage of net revenue
|
39.7
|
%
|
|
|
|
40.8
|
%
|
|
|
|
48.3
|
%
|
|||||
Contribution income
|
86,808
|
|
|
6.4
|
%
|
|
81,589
|
|
|
13.5
|
%
|
|
71,862
|
|
|||
Contribution margin
|
17.2
|
%
|
|
|
|
16.9
|
%
|
|
|
|
16.5
|
%
|
|
Year Ended December 31,
|
||||||||||||||||
|
2012
|
|
% Change
|
|
2011
|
|
% Change
|
|
2010
|
||||||||
|
( in thousands, except percentage data)
|
||||||||||||||||
Net revenue
|
$
|
307,945
|
|
|
(7.1
|
)%
|
|
$
|
331,439
|
|
|
16.5
|
%
|
|
$
|
284,539
|
|
Percentage of net revenue
|
24.2
|
%
|
|
|
|
28.1
|
%
|
|
|
|
31.5
|
%
|
|||||
Contribution income
|
67,826
|
|
|
(9.3
|
)%
|
|
74,746
|
|
|
18.6
|
%
|
|
63,021
|
|
|||
Contribution margin
|
22.0
|
%
|
|
|
|
22.6
|
%
|
|
|
|
22.1
|
%
|
|
Year Ended December 31,
|
||||||||||||||||
|
2012
|
|
% Change
|
|
2011
|
|
% Change
|
|
2010
|
||||||||
|
( in thousands, except percentage data)
|
||||||||||||||||
Net revenue
|
$
|
459,179
|
|
|
24.9
|
%
|
|
$
|
367,784
|
|
|
102.0
|
%
|
|
$
|
182,029
|
|
Percentage of net revenue
|
36.1
|
%
|
|
|
|
31.1
|
%
|
|
|
|
20.2
|
%
|
|||||
Contribution income
|
40,794
|
|
|
24.4
|
%
|
|
32,797
|
|
|
133.8
|
%
|
|
14,026
|
|
|||
Contribution margin
|
8.9
|
%
|
|
|
|
8.9
|
%
|
|
|
|
7.7
|
%
|
|
Less Than
|
|
1-3
|
|
3-5
|
|
More Than
|
|
|
||||||||||
|
1 Year
|
|
Years
|
|
Years
|
|
5 Years
|
|
Total
|
||||||||||
Operating leases
|
$
|
8,192
|
|
|
$
|
11,907
|
|
|
$
|
8,201
|
|
|
$
|
3,517
|
|
|
$
|
31,817
|
|
Purchase obligations
|
149,603
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
149,603
|
|
|||||
|
$
|
157,795
|
|
|
$
|
11,907
|
|
|
$
|
8,201
|
|
|
$
|
3,517
|
|
|
$
|
181,420
|
|
Item 7A.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 8.
|
Financial Statements and Supplementary Data
|
|
December 31,
2012 |
|
December 31,
2011 |
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
149,032
|
|
|
$
|
208,898
|
|
Short-term investments
|
227,845
|
|
|
144,797
|
|
||
Accounts receivable, net
|
256,014
|
|
|
261,307
|
|
||
Inventories
|
174,903
|
|
|
163,724
|
|
||
Deferred income taxes
|
22,691
|
|
|
23,088
|
|
||
Prepaid expenses and other current assets
|
33,724
|
|
|
32,415
|
|
||
Total current assets
|
864,209
|
|
|
834,229
|
|
||
Property and equipment, net
|
19,025
|
|
|
15,884
|
|
||
Intangibles, net
|
27,621
|
|
|
20,956
|
|
||
Goodwill
|
100,880
|
|
|
85,944
|
|
||
Other non-current assets
|
22,834
|
|
|
14,357
|
|
||
Total assets
|
$
|
1,034,569
|
|
|
$
|
971,370
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
87,310
|
|
|
$
|
117,285
|
|
Accrued employee compensation
|
18,338
|
|
|
26,896
|
|
||
Other accrued liabilities
|
126,255
|
|
|
120,480
|
|
||
Deferred revenue
|
27,645
|
|
|
40,093
|
|
||
Income taxes payable
|
1,382
|
|
|
4,207
|
|
||
Total current liabilities
|
260,930
|
|
|
308,961
|
|
||
Non-current income taxes payable
|
13,735
|
|
|
18,657
|
|
||
Other non-current liabilities
|
5,293
|
|
|
4,995
|
|
||
Total liabilities
|
279,958
|
|
|
332,613
|
|
||
Commitments and contingencies (Note 9)
|
|
|
|
|
|
||
Stockholders’ equity:
|
|
|
|
||||
Preferred stock: $0.001 par value; 5,000,000 shares authorized; none issued or outstanding
|
—
|
|
|
—
|
|
||
Common stock: $0.001 par value; 200,000,000 shares authorized; shared issued and outstanding: 38,341,644 and 37,646,872 at December 31, 2012 and 2011, respectively
|
38
|
|
|
38
|
|
||
Additional paid-in capital
|
394,427
|
|
|
364,243
|
|
||
Cumulative other comprehensive income
|
4
|
|
|
23
|
|
||
Retained earnings
|
360,142
|
|
|
274,453
|
|
||
Total stockholders’ equity
|
754,611
|
|
|
638,757
|
|
||
Total liabilities and stockholders’ equity
|
$
|
1,034,569
|
|
|
$
|
971,370
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2012
|
|
2011
|
|
2010
|
||||||
Net revenue
|
|
$
|
1,271,921
|
|
|
$
|
1,181,018
|
|
|
$
|
902,052
|
|
Cost of revenue
|
|
888,368
|
|
|
811,572
|
|
|
602,805
|
|
|||
Gross profit
|
|
383,553
|
|
|
369,446
|
|
|
299,247
|
|
|||
Operating expenses:
|
|
|
|
|
|
|
||||||
Research and development
|
|
61,066
|
|
|
48,699
|
|
|
39,972
|
|
|||
Sales and marketing
|
|
149,766
|
|
|
154,562
|
|
|
131,570
|
|
|||
General and administrative
|
|
45,027
|
|
|
39,423
|
|
|
36,220
|
|
|||
Restructuring and other charges
|
|
1,190
|
|
|
2,094
|
|
|
(88
|
)
|
|||
Litigation reserves, net
|
|
390
|
|
|
(201
|
)
|
|
211
|
|
|||
Total operating expenses
|
|
257,439
|
|
|
244,577
|
|
|
207,885
|
|
|||
Income from operations
|
|
126,114
|
|
|
124,869
|
|
|
91,362
|
|
|||
Interest income
|
|
498
|
|
|
477
|
|
|
426
|
|
|||
Other income (expense), net
|
|
2,670
|
|
|
(1,136
|
)
|
|
(564
|
)
|
|||
Income before income taxes
|
|
129,282
|
|
|
124,210
|
|
|
91,224
|
|
|||
Provision for income taxes
|
|
42,743
|
|
|
32,842
|
|
|
40,315
|
|
|||
Net income
|
|
$
|
86,539
|
|
|
$
|
91,368
|
|
|
$
|
50,909
|
|
Net income per share:
|
|
|
|
|
|
|
||||||
Basic
|
|
$
|
2.27
|
|
|
$
|
2.46
|
|
|
$
|
1.44
|
|
Diluted
|
|
$
|
2.23
|
|
|
$
|
2.41
|
|
|
$
|
1.41
|
|
Weighted average shares outstanding used to compute net income per share:
|
|
|
|
|
|
|
||||||
Basic
|
|
38,057
|
|
|
37,121
|
|
|
35,385
|
|
|||
Diluted
|
|
38,747
|
|
|
37,932
|
|
|
36,124
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2012
|
|
2011
|
|
2010
|
||||||
Net income
|
|
$
|
86,539
|
|
|
$
|
91,368
|
|
|
$
|
50,909
|
|
Other comprehensive (loss) income, before tax:
|
|
|
|
|
|
|
||||||
Unrealized (loss) gain on derivative instruments
|
|
(30
|
)
|
|
(267
|
)
|
|
253
|
|
|||
Unrealized gain on available-for-sale securities
|
|
16
|
|
|
17
|
|
|
7
|
|
|||
Other comprehensive (loss) income, before tax
|
|
(14
|
)
|
|
(250
|
)
|
|
260
|
|
|||
Tax expense related to items of other comprehensive income
|
|
(5
|
)
|
|
(8
|
)
|
|
(3
|
)
|
|||
Other comprehensive (loss) income, net of tax
|
|
(19
|
)
|
|
(258
|
)
|
|
257
|
|
|||
Comprehensive income
|
|
$
|
86,520
|
|
|
$
|
91,110
|
|
|
$
|
51,166
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Shares
|
|
Amount
|
|
Additional Paid-In Capital
|
|
Cumulative Other Comprehensive Income (Loss)
|
|
Retained Earnings
|
|
Total
|
|||||||||||
Balance at December 31, 2009
|
34,733
|
|
|
$
|
35
|
|
|
$
|
280,256
|
|
|
$
|
24
|
|
|
$
|
133,838
|
|
|
$
|
414,153
|
|
Change in unrealized gains and losses on available-for-sale securities, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
4
|
|
|||||
Change in unrealized gains and losses on derivatives, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
253
|
|
|
—
|
|
|
253
|
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
50,909
|
|
|
50,909
|
|
|||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
12,177
|
|
|
—
|
|
|
—
|
|
|
12,177
|
|
|||||
Purchase and retirement of common stock
|
(32
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(736
|
)
|
|
(736
|
)
|
|||||
Issuance of common stock under stock-based compensation plans
|
1,472
|
|
|
1
|
|
|
20,116
|
|
|
—
|
|
|
—
|
|
|
20,117
|
|
|||||
Tax benefit from exercises and cancellations of stock options
|
—
|
|
|
—
|
|
|
3,559
|
|
|
—
|
|
|
—
|
|
|
3,559
|
|
|||||
Balance at December 31, 2010
|
36,173
|
|
|
36
|
|
|
316,108
|
|
|
281
|
|
|
184,011
|
|
|
500,436
|
|
|||||
Change in unrealized gains and losses on available-for-sale securities, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
9
|
|
|||||
Change in unrealized gains and losses on derivatives, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(267
|
)
|
|
—
|
|
|
(267
|
)
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
91,368
|
|
|
91,368
|
|
|||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
13,727
|
|
|
—
|
|
|
—
|
|
|
13,727
|
|
|||||
Purchase and retirement of common stock
|
(25
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(926
|
)
|
|
(926
|
)
|
|||||
Issuance of common stock under stock-based compensation plans
|
1,499
|
|
|
2
|
|
|
30,889
|
|
|
—
|
|
|
—
|
|
|
30,891
|
|
|||||
Tax benefit from exercises and cancellations of stock options
|
—
|
|
|
—
|
|
|
3,519
|
|
|
—
|
|
|
—
|
|
|
3,519
|
|
|||||
Balance at December 31, 2011
|
37,647
|
|
|
38
|
|
|
364,243
|
|
|
23
|
|
|
274,453
|
|
|
638,757
|
|
|||||
Change in unrealized gains and losses on available-for-sale securities, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
—
|
|
|
11
|
|
|||||
Change in unrealized gains and losses on derivatives, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(30
|
)
|
|
—
|
|
|
(30
|
)
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
86,539
|
|
|
86,539
|
|
|||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
14,366
|
|
|
—
|
|
|
—
|
|
|
14,366
|
|
|||||
Purchase and retirement of common stock
|
(22
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(850
|
)
|
|
(850
|
)
|
|||||
Issuance of common stock under stock-based compensation plans
|
717
|
|
|
—
|
|
|
14,697
|
|
|
—
|
|
|
—
|
|
|
14,697
|
|
|||||
Tax benefit from exercises and cancellations of stock options
|
—
|
|
|
—
|
|
|
1,121
|
|
|
—
|
|
|
—
|
|
|
1,121
|
|
|||||
Balance at December 31, 2012
|
38,342
|
|
|
$
|
38
|
|
|
$
|
394,427
|
|
|
$
|
4
|
|
|
$
|
360,142
|
|
|
$
|
754,611
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net income
|
$
|
86,539
|
|
|
$
|
91,368
|
|
|
$
|
50,909
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
16,775
|
|
|
14,735
|
|
|
13,439
|
|
|||
Purchase premium amortization on investments
|
2,490
|
|
|
986
|
|
|
468
|
|
|||
Non-cash stock-based compensation
|
14,372
|
|
|
13,762
|
|
|
12,201
|
|
|||
Income tax benefit associated with stock option exercises
|
1,121
|
|
|
3,519
|
|
|
3,559
|
|
|||
Gain on sale of cost method investment
|
(3,126
|
)
|
|
—
|
|
|
—
|
|
|||
Excess tax benefit from stock-based compensation
|
(1,552
|
)
|
|
(3,672
|
)
|
|
(3,470
|
)
|
|||
Deferred income taxes
|
(2,545
|
)
|
|
(4,621
|
)
|
|
(8,435
|
)
|
|||
Changes in assets and liabilities, net of effect of acquisitions:
|
|
|
|
|
|
||||||
Accounts receivable
|
5,317
|
|
|
(34,576
|
)
|
|
(63,878
|
)
|
|||
Inventories
|
(10,590
|
)
|
|
(30,039
|
)
|
|
(36,804
|
)
|
|||
Prepaid expenses and other assets
|
2,619
|
|
|
(7,935
|
)
|
|
(3,220
|
)
|
|||
Accounts payable
|
(30,615
|
)
|
|
28,131
|
|
|
20,074
|
|
|||
Accrued employee compensation
|
(8,782
|
)
|
|
2,765
|
|
|
13,090
|
|
|||
Other accrued liabilities
|
3,444
|
|
|
9,374
|
|
|
21,794
|
|
|||
Deferred revenue
|
(12,680
|
)
|
|
12,555
|
|
|
5,432
|
|
|||
Income taxes payable
|
(7,744
|
)
|
|
(342
|
)
|
|
1,192
|
|
|||
Net cash provided by operating activities
|
55,043
|
|
|
96,010
|
|
|
26,351
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Purchases of short-term investments
|
(369,939
|
)
|
|
(228,871
|
)
|
|
(185,128
|
)
|
|||
Proceeds from maturities of short-term investments
|
284,418
|
|
|
227,669
|
|
|
115,000
|
|
|||
Purchase of property and equipment
|
(14,762
|
)
|
|
(8,211
|
)
|
|
(8,720
|
)
|
|||
Loan issued, net of loan repaid
|
—
|
|
|
—
|
|
|
(102
|
)
|
|||
Payments for patents
|
(1,400
|
)
|
|
—
|
|
|
(1,270
|
)
|
|||
Cost method investments
|
—
|
|
|
—
|
|
|
(3,009
|
)
|
|||
Payments made in connection with business acquisitions, net of cash acquired
|
(28,625
|
)
|
|
(37,509
|
)
|
|
(12,000
|
)
|
|||
Net cash used in investing activities
|
(130,308
|
)
|
|
(46,922
|
)
|
|
(95,229
|
)
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Purchase and retirement of common stock
|
(850
|
)
|
|
(926
|
)
|
|
(738
|
)
|
|||
Proceeds from exercise of stock options
|
12,700
|
|
|
29,139
|
|
|
18,915
|
|
|||
Proceeds from issuance of common stock under employee stock purchase plan
|
1,997
|
|
|
1,752
|
|
|
1,202
|
|
|||
Excess tax benefit from stock-based compensation
|
1,552
|
|
|
3,672
|
|
|
3,470
|
|
|||
Net cash provided by financing activities
|
15,399
|
|
|
33,637
|
|
|
22,849
|
|
|||
Net (decrease) increase in cash and cash equivalents
|
(59,866
|
)
|
|
82,725
|
|
|
(46,029
|
)
|
|||
Cash and cash equivalents, at beginning of period
|
208,898
|
|
|
126,173
|
|
|
172,202
|
|
|||
Cash and cash equivalents, at end of period
|
$
|
149,032
|
|
|
$
|
208,898
|
|
|
$
|
126,173
|
|
Supplemental Cash Flow Information:
|
|
|
|
|
|
||||||
Cash paid for income taxes
|
$
|
52,403
|
|
|
$
|
34,365
|
|
|
$
|
44,083
|
|
|
Year Ended December 31,
|
||||||
|
2012
|
|
2011
|
||||
Balance as of beginning of the period
|
$
|
44,846
|
|
|
$
|
40,513
|
|
Provision for warranty liability made during the period
|
61,985
|
|
|
60,285
|
|
||
Settlements made during the period
|
(60,172
|
)
|
|
(55,952
|
)
|
||
Balance at end of period
|
$
|
46,659
|
|
|
$
|
44,846
|
|
Net tangible assets acquired
|
$
|
172
|
|
Deferred tax assets, net
|
5,937
|
|
|
Intangible assets, net
|
6,000
|
|
|
Goodwill
|
11,895
|
|
|
Total consideration
|
$
|
24,004
|
|
Intangible assets, net
|
$
|
4,159
|
|
Goodwill
|
3,041
|
|
|
Total consideration
|
$
|
7,200
|
|
Net tangible assets acquired (liabilities assumed)
|
$
|
5,763
|
|
Intangible assets, net
|
19,500
|
|
|
Goodwill
|
11,746
|
|
|
Total consideration
|
$
|
37,009
|
|
Intangible assets, net
|
$
|
2,000
|
|
Goodwill
|
900
|
|
|
Total purchase price allocation
|
$
|
2,900
|
|
|
As of
|
||||||||||||||||||||||||||||||
|
December 31, 2012
|
|
December 31, 2011
|
||||||||||||||||||||||||||||
|
Cost
|
|
Unrealized Gain
|
|
Unrealized Loss
|
|
Estimated Fair Value
|
|
Cost
|
|
Unrealized Gain
|
|
Unrealized Loss
|
|
Estimated Fair Value
|
||||||||||||||||
U.S. Treasuries
|
$
|
225,016
|
|
|
$
|
48
|
|
|
$
|
(2
|
)
|
|
$
|
225,062
|
|
|
$
|
144,673
|
|
|
$
|
34
|
|
|
$
|
(4
|
)
|
|
$
|
144,703
|
|
Certificates of Deposits
|
2,783
|
|
|
—
|
|
|
—
|
|
|
2,783
|
|
|
94
|
|
|
—
|
|
|
—
|
|
|
94
|
|
||||||||
Total
|
$
|
227,799
|
|
|
$
|
48
|
|
|
$
|
(2
|
)
|
|
$
|
227,845
|
|
|
$
|
144,767
|
|
|
$
|
34
|
|
|
$
|
(4
|
)
|
|
$
|
144,797
|
|
|
As of
|
||||||
|
December 31,
2012 |
|
December 31,
2011 |
||||
Gross accounts receivable
|
$
|
276,084
|
|
|
$
|
279,932
|
|
Allowance for doubtful accounts
|
(1,256
|
)
|
|
(1,335
|
)
|
||
Allowance for sales returns
|
(17,031
|
)
|
|
(13,360
|
)
|
||
Allowance for price protection
|
(1,783
|
)
|
|
(3,930
|
)
|
||
Total allowances
|
(20,070
|
)
|
|
(18,625
|
)
|
||
Total accounts receivable, net
|
$
|
256,014
|
|
|
$
|
261,307
|
|
|
As of
|
||||||
|
December 31,
2012 |
|
December 31,
2011 |
||||
Raw materials
|
$
|
4,447
|
|
|
$
|
4,676
|
|
Finished goods
|
170,456
|
|
|
159,048
|
|
||
Total inventories
|
$
|
174,903
|
|
|
$
|
163,724
|
|
|
As of
|
||||||
|
December 31,
2012 |
|
December 31,
2011 |
||||
Computer equipment
|
$
|
7,290
|
|
|
$
|
7,109
|
|
Furniture, fixtures and leasehold improvements
|
12,761
|
|
|
9,757
|
|
||
Software
|
21,521
|
|
|
19,974
|
|
||
Machinery and equipment
|
31,694
|
|
|
21,797
|
|
||
Construction in progress
|
385
|
|
|
662
|
|
||
Total property and equipment, gross
|
73,651
|
|
|
59,299
|
|
||
Accumulated depreciation and amortization
|
(54,626
|
)
|
|
(43,415
|
)
|
||
Total property and equipment, net
|
$
|
19,025
|
|
|
$
|
15,884
|
|
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
||||||
December 31, 2012
|
|
|
|
|
|
||||||
Technology
|
$
|
32,259
|
|
|
$
|
(22,065
|
)
|
|
$
|
10,194
|
|
Customer contracts and relationships
|
16,000
|
|
|
(3,301
|
)
|
|
12,699
|
|
|||
Other
|
6,870
|
|
|
(3,142
|
)
|
|
3,728
|
|
|||
Finite-lived intangibles, net
|
55,129
|
|
|
(28,508
|
)
|
|
26,621
|
|
|||
Indefinite-lived intangible assets
|
1,000
|
|
|
—
|
|
|
1,000
|
|
|||
Total purchased intangible assets, net
|
56,129
|
|
|
(28,508
|
)
|
|
27,621
|
|
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
||||||
December 31, 2011
|
|
|
|
|
|
||||||
Technology
|
$
|
24,800
|
|
|
$
|
(19,905
|
)
|
|
$
|
4,895
|
|
Customer contracts and relationships
|
15,700
|
|
|
(1,308
|
)
|
|
14,392
|
|
|||
Other
|
4,070
|
|
|
(2,401
|
)
|
|
1,669
|
|
|||
Total purchased intangible assets, net
|
$
|
44,570
|
|
|
$
|
(23,614
|
)
|
|
$
|
20,956
|
|
Year Ending December 31,
|
Amount
|
||
2013
|
$
|
5,663
|
|
2014
|
5,339
|
|
|
2015
|
4,722
|
|
|
2016
|
4,360
|
|
|
2017
|
3,017
|
|
|
Thereafter
|
3,520
|
|
|
Total expected amortization expense
|
$
|
26,621
|
|
|
|
|
New Segments
|
|
|
||||||||||||||
|
Old Segment
|
|
Retail
|
|
Commercial
|
|
Service Provider
|
|
Total
|
||||||||||
Goodwill at December 31, 2010
|
$
|
74,198
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
74,198
|
|
Relative fair value approach
|
(74,198
|
)
|
|
33,546
|
|
|
32,043
|
|
|
8,609
|
|
|
—
|
|
|||||
Net additions related to acquisitions
|
—
|
|
|
—
|
|
|
—
|
|
|
11,746
|
|
|
11,746
|
|
|||||
Goodwill at December 31, 2011
|
—
|
|
|
33,546
|
|
|
32,043
|
|
|
20,355
|
|
|
85,944
|
|
|||||
Goodwill acquired during the period
|
—
|
|
|
11,895
|
|
|
3,041
|
|
|
—
|
|
|
14,936
|
|
|||||
Goodwill at December 31, 2012
|
$
|
—
|
|
|
$
|
45,441
|
|
|
$
|
35,084
|
|
|
$
|
20,355
|
|
|
$
|
100,880
|
|
|
As of
|
||||||
|
December 31, 2012
|
|
December 31, 2011
|
||||
Non-current deferred income taxes
|
$
|
16,856
|
|
|
$
|
7,977
|
|
Cost method investment
|
1,322
|
|
|
3,009
|
|
||
Other
|
4,656
|
|
|
3,371
|
|
||
Total other non-current assets
|
$
|
22,834
|
|
|
$
|
14,357
|
|
|
As of
|
||||||
|
December 31,
2012 |
|
December 31,
2011 |
||||
Sales and marketing programs
|
$
|
43,652
|
|
|
$
|
44,394
|
|
Warranty obligation
|
46,659
|
|
|
44,846
|
|
||
Freight
|
4,457
|
|
|
7,940
|
|
||
Other
|
31,487
|
|
|
23,300
|
|
||
Total other accrued liabilities
|
$
|
126,255
|
|
|
$
|
120,480
|
|
|
Accrued Restructuring and Other Charges at December 31, 2011
|
|
Additions
|
|
Cash Payments
|
|
Accrued Restructuring and Other Charges at December 31, 2012
|
||||||||
|
(In thousands)
|
||||||||||||||
Accrued restructuring
|
$
|
—
|
|
|
$
|
1,190
|
|
|
$
|
(191
|
)
|
|
$
|
999
|
|
|
Accrued Restructuring and Other Charges at December 31, 2010
|
|
Additions
|
|
Cash Payments
|
|
Accrued Restructuring and Other Charges at December 31, 2011
|
||||||||
|
(In thousands)
|
||||||||||||||
Accrued restructuring and other charges
|
$
|
—
|
|
|
$
|
2,094
|
|
|
$
|
(2,094
|
)
|
|
$
|
—
|
|
Derivative Assets
|
|
Balance Sheet
Location
|
|
Fair value at December 31, 2012
|
|
Balance Sheet
Location
|
|
Fair value at December 31, 2011
|
||||
Derivative assets not designated as hedging instruments
|
|
Prepaid expenses and other current assets
|
|
$
|
1,142
|
|
|
Prepaid expenses and other current assets
|
|
$
|
1,196
|
|
Derivative assets designated as hedging
instruments
|
|
Prepaid expenses and other current assets
|
|
2
|
|
|
Prepaid expenses and other current assets
|
|
41
|
|
||
Total
|
|
|
|
$
|
1,144
|
|
|
|
|
$
|
1,237
|
|
Derivative Liabilities
|
|
Balance Sheet
Location
|
|
Fair value at December 31, 2012
|
|
Balance Sheet
Location
|
|
Fair value at December 31, 2011
|
||||
Derivative liabilities not designated as hedging instruments
|
|
Other accrued liabilities
|
|
$
|
(1,616
|
)
|
|
Other accrued liabilities
|
|
$
|
(654
|
)
|
Derivative liabilities designated as hedging instruments
|
|
Other accrued liabilities
|
|
(3
|
)
|
|
Other accrued liabilities
|
|
(69
|
)
|
||
Total
|
|
|
|
$
|
(1,619
|
)
|
|
|
|
$
|
(723
|
)
|
Derivatives Designated as Hedging Instruments
|
|
Year Ended December 31, 2012
|
||||||||||||||
|
Gain or (Loss)
Recognized in
OCI -
Effective
Portion (a)
|
|
Location of
Gain or (Loss)
Reclassified from OCI
into Income - Effective
Portion
|
|
Gain or (Loss)
Reclassified
from
OCI into
Income -
Effective
Portion (a)
|
|
Location of
Gain or (Loss)
Recognized in
Income and
Excluded from
Effectiveness Testing
|
|
Amount of Gain or (Loss) Recognized in
Income and
Excluded from
Effectiveness Testing
|
|||||||
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign currency forward contracts
|
|
$
|
164
|
|
|
Net revenue
|
|
$
|
262
|
|
|
Other income (expense), net
|
|
$
|
(158
|
)
|
Foreign currency forward contracts
|
|
—
|
|
|
Cost of revenue
|
|
(1
|
)
|
|
Other income (expense), net
|
|
—
|
|
|||
Foreign currency forward contracts
|
|
—
|
|
|
Operating expenses
|
|
(67
|
)
|
|
Other income (expense), net
|
|
—
|
|
|||
Total
|
|
$
|
164
|
|
|
|
|
$
|
194
|
|
|
|
|
$
|
(158
|
)
|
Derivatives Designated as
Hedging Instruments
|
|
Year Ended December 31, 2011
|
||||||||||||||
|
Gain or (Loss)
Recognized in
OCI -
Effective
Portion (a)
|
|
Location of
Gain or (Loss)
Reclassified from OCI
into Income - Effective
Portion
|
|
Gain or (Loss)
Reclassified
from
OCI into
Income -
Effective
Portion (a)
|
|
Location of
Gain or (Loss)
Recognized in
Income and
Excluded from
Effectiveness Testing
|
|
Amount of Gain or (Loss) Recognized in
Income and
Excluded from
Effectiveness Testing
|
|||||||
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign currency forward contracts
|
|
$
|
542
|
|
|
Net revenue
|
|
$
|
967
|
|
|
Other income (expense), net
|
|
$
|
(310
|
)
|
Foreign currency forward contracts
|
|
—
|
|
|
Cost of revenue
|
|
(4
|
)
|
|
Other income (expense), net
|
|
—
|
|
|||
Foreign currency forward contracts
|
|
—
|
|
|
Operating expenses
|
|
(154
|
)
|
|
Other income (expense), net
|
|
—
|
|
|||
Total
|
|
$
|
542
|
|
|
|
|
$
|
809
|
|
|
|
|
$
|
(310
|
)
|
Derivatives Designated as
Hedging Instruments
|
|
Year Ended December 31, 2010
|
||||||||||||||
|
Gain or (Loss)
Recognized in
OCI -
Effective
Portion (a)
|
|
Location of
Gain or (Loss)
Reclassified from OCI
into Income - Effective
Portion
|
|
Gain or (Loss)
Reclassified
from
OCI into
Income -
Effective
Portion (a)
|
|
Location of
Gain or (Loss)
Recognized in
Income and
Excluded from
Effectiveness Testing
|
|
Amount of Gain or (Loss) Recognized in
Income and
Excluded from
Effectiveness Testing
|
|||||||
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign currency forward contracts
|
|
$
|
2,257
|
|
|
Net revenue
|
|
$
|
2,755
|
|
|
Other income (expense), net
|
|
$
|
(261
|
)
|
Foreign currency forward contracts
|
|
—
|
|
|
Cost of revenue
|
|
(27
|
)
|
|
Other income (expense), net
|
|
—
|
|
|||
Foreign currency forward contracts
|
|
—
|
|
|
Operating expenses
|
|
(724
|
)
|
|
Other income (expense), net
|
|
—
|
|
|||
Total
|
|
$
|
2,257
|
|
|
|
|
$
|
2,004
|
|
|
|
|
$
|
(261
|
)
|
(a)
|
Refer to Note 10,
Stockholders' Equity
, which summarizes the cumulative other comprehensive income activity related to derivatives.
|
Derivatives Not Designated as Hedging Instruments
|
|
Location of Gains or (Losses)
Recognized in Income on Derivative
|
Amount of Gains or (Losses)
Recognized in Income on Derivative
|
|||||
Year Ended December 31, 2012
|
|
Year Ended December 31, 2011
|
||||||
Foreign currency forward contracts
|
|
Other income (expense), net
|
(502
|
)
|
|
$
|
(957
|
)
|
|
|
Year Ended
|
||||||||||
|
|
December 31,
2012 |
|
December 31,
2011 |
|
December 31,
2010 |
||||||
Net income
|
|
$
|
86,539
|
|
|
$
|
91,368
|
|
|
$
|
50,909
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
||||||
Basic
|
|
38,057
|
|
|
37,121
|
|
|
35,385
|
|
|||
Dilutive potential common shares
|
|
690
|
|
|
811
|
|
|
739
|
|
|||
Total diluted
|
|
38,747
|
|
|
37,932
|
|
|
36,124
|
|
|||
|
|
|
|
|
|
|
||||||
Basic net income per share
|
|
$
|
2.27
|
|
|
$
|
2.46
|
|
|
$
|
1.44
|
|
Diluted net income per share
|
|
$
|
2.23
|
|
|
$
|
2.41
|
|
|
$
|
1.41
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
Foreign currency transaction gain (loss), net
|
$
|
204
|
|
|
$
|
131
|
|
|
$
|
(130
|
)
|
Foreign currency contract loss, net
|
(660
|
)
|
|
(1,267
|
)
|
|
(434
|
)
|
|||
Gain on sale of cost method investment
|
3,126
|
|
|
—
|
|
|
—
|
|
|||
Total
|
$
|
2,670
|
|
|
$
|
(1,136
|
)
|
|
$
|
(564
|
)
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
United States
|
$
|
102,159
|
|
|
$
|
79,318
|
|
|
$
|
95,291
|
|
International
|
27,123
|
|
|
44,892
|
|
|
(4,067
|
)
|
|||
Total
|
$
|
129,282
|
|
|
$
|
124,210
|
|
|
$
|
91,224
|
|
|
Year Ended December 31,
|
||||||
|
2012
|
|
2011
|
||||
Deferred Tax Assets:
|
|
|
|
||||
Accruals and allowances
|
$
|
20,738
|
|
|
$
|
22,329
|
|
Net operating loss carryforwards
|
7,837
|
|
|
326
|
|
||
Stock-based compensation
|
8,133
|
|
|
6,304
|
|
||
Deferred rent
|
2,258
|
|
|
2,138
|
|
||
Deferred revenue
|
1,552
|
|
|
411
|
|
||
Tax credit carryforwards
|
1,410
|
|
|
1,433
|
|
||
Acquired intangible assets
|
—
|
|
|
566
|
|
||
Other
|
261
|
|
|
256
|
|
||
|
42,189
|
|
|
33,763
|
|
||
|
|
|
|
||||
Deferred Tax Liabilities:
|
|
|
|
||||
Acquired intangible assets
|
(1,107
|
)
|
|
—
|
|
||
Depreciation and amortization
|
(1,535
|
)
|
|
(2,698
|
)
|
||
|
(2,642
|
)
|
|
(2,698
|
)
|
||
Net deferred tax assets
|
39,547
|
|
|
31,065
|
|
||
|
|
|
|
||||
Current portion
|
22,691
|
|
|
23,088
|
|
||
Non-current portion
|
16,856
|
|
|
7,977
|
|
||
Net deferred tax assets
|
$
|
39,547
|
|
|
$
|
31,065
|
|
|
Year Ended December 31,
|
|||||||
|
2012
|
|
2011
|
|
2010
|
|||
Tax at federal statutory rate
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
State, net of federal benefit
|
2.1
|
%
|
|
1.5
|
%
|
|
4.2
|
%
|
Impact of international operations
|
(4.8
|
)%
|
|
(9.5
|
)%
|
|
5.1
|
%
|
Stock-based compensation
|
0.6
|
%
|
|
—
|
%
|
|
0.7
|
%
|
Tax credits
|
0.1
|
%
|
|
(0.7
|
)%
|
|
(0.7
|
)%
|
Others
|
0.1
|
%
|
|
0.1
|
%
|
|
(0.1
|
)%
|
Provision for income taxes
|
33.1
|
%
|
|
26.4
|
%
|
|
44.2
|
%
|
|
Federal, State, and Foreign Tax
|
||
Gross UTB Balance at December 31, 2009
|
$
|
16,501
|
|
Additions based on tax positions related to the current year
|
3,371
|
|
|
Additions for tax positions of prior years
|
409
|
|
|
Settlements
|
(47
|
)
|
|
Reductions for tax positions of prior years
|
(1,805
|
)
|
|
Reductions due to lapse of applicable statutes
|
3
|
|
|
Gross UTB Balance at December 31, 2010
|
18,432
|
|
|
Additions based on tax positions related to the current year
|
1,795
|
|
|
Additions for tax positions of prior years
|
1,015
|
|
|
Settlements
|
(179
|
)
|
|
Reductions for tax positions of prior years
|
(2
|
)
|
|
Reductions due to lapse of applicable statutes
|
(3,699
|
)
|
|
Adjustments due to foreign exchange rate movement
|
(27
|
)
|
|
Gross UTB Balance at December 31, 2011
|
17,335
|
|
|
Additions based on tax positions related to the current year
|
711
|
|
|
Additions for tax positions of prior years
|
956
|
|
|
Settlements
|
(2,620
|
)
|
|
Reductions for tax positions of prior years
|
(3,590
|
)
|
|
Reductions due to lapse of applicable statutes
|
(449
|
)
|
|
Adjustments due to foreign exchange rate movement
|
(4
|
)
|
|
Gross UTB Balance at December 31, 2012
|
$
|
12,339
|
|
Year Ending December 31,
|
|
||
2013
|
$
|
8,192
|
|
2014
|
6,547
|
|
|
2015
|
5,359
|
|
|
2016
|
4,242
|
|
|
2017
|
3,959
|
|
|
Thereafter
|
3,518
|
|
|
Total minimum lease payments
|
$
|
31,817
|
|
|
As of
|
||||||
|
December 31,
2012 |
|
December 31,
2011 |
||||
Net unrealized (loss) gain on derivative instruments
|
$
|
(24
|
)
|
|
$
|
6
|
|
Net unrealized gain on available-for-sale securities
|
28
|
|
|
17
|
|
||
Total cumulative other comprehensive income, net of taxes
|
$
|
4
|
|
|
$
|
23
|
|
|
Outstanding Options
|
|||||||||||
|
Number of
Shares
|
|
Weighted Average
Exercise Price Per
Share
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
|||||
|
(In thousands)
|
|
(In dollars)
|
|
(In years)
|
|
(In thousands)
|
|||||
December 31, 2011
|
3,950
|
|
|
$
|
27.03
|
|
|
|
|
|
||
Granted
|
1,332
|
|
|
34.01
|
|
|
|
|
|
|||
Exercised
|
(548
|
)
|
|
23.16
|
|
|
|
|
|
|||
Cancelled and expired
|
(410
|
)
|
|
30.98
|
|
|
|
|
|
|||
December 31, 2012
|
4,324
|
|
|
$
|
29.29
|
|
|
7.4
|
|
$
|
43,887
|
|
|
|
|
|
|
|
|
|
|||||
As of December 31, 2012:
|
|
|
|
|
|
|
|
|||||
Vested and expected to vest
|
4,030
|
|
|
$
|
29.06
|
|
|
7.3
|
|
$
|
41,837
|
|
Exercisable Options
|
2,100
|
|
|
$
|
25.94
|
|
|
6.0
|
|
$
|
28,342
|
|
|
Options Outstanding
|
|
Options Exercisable
|
||||||||||||
Range of Exercise Prices
|
Shares
Outstanding
|
|
Weighted-
Average
Remaining
Contractual
Life
|
|
Weighted-
Average
Exercise
Price Per
Share
|
|
Shares
Exercisable
|
|
Weighted-
Average
Exercise
Price Per
Share
|
||||||
|
(In thousands)
|
|
(In years)
|
|
(In dollars)
|
|
(In thousands)
|
|
(In dollars)
|
||||||
$0.00 - 10.00
|
1
|
|
|
1.56
|
|
$
|
9.26
|
|
|
1
|
|
|
$
|
9.26
|
|
10.01 - 20.00
|
489
|
|
|
5.22
|
|
13.45
|
|
|
466
|
|
|
13.42
|
|
||
20.01 - 30.00
|
1,262
|
|
|
6.04
|
|
24.82
|
|
|
935
|
|
|
25.31
|
|
||
30.01 - 40.00
|
2,463
|
|
|
8.46
|
|
34.26
|
|
|
680
|
|
|
35.01
|
|
||
40.01 - 50.00
|
109
|
|
|
9.09
|
|
40.01
|
|
|
18
|
|
|
40.01
|
|
||
Total
|
4,324
|
|
|
7.40
|
|
$
|
29.29
|
|
|
2,100
|
|
|
$
|
25.94
|
|
|
Outstanding RSUs
|
|||||||||||
|
Number of
Shares
|
|
Weighted Average
Exercise Price Per
Share
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic Value |
|||||
|
(In thousands)
|
|
(In dollars)
|
|
(In years)
|
|
(In thousands)
|
|||||
December 31, 2011
|
177
|
|
|
27.86
|
|
|
|
|
|
|||
RSUs granted
|
51
|
|
|
31.79
|
|
|
|
|
|
|||
RSUs vested
|
(105
|
)
|
|
28.77
|
|
|
|
|
|
|||
RSUs cancelled
|
(11
|
)
|
|
32.42
|
|
|
|
|
|
|||
December 31, 2012
|
112
|
|
|
$
|
28.36
|
|
|
1.08
|
|
$
|
4,419
|
|
|
Year Ended December 31,
|
|||||||
|
2012
|
|
2011
|
|
2010
|
|||
Expected life (in years)
|
4.4
|
|
|
4.4
|
|
|
4.4
|
|
Risk-free interest rate
|
0.64
|
%
|
|
1.63
|
%
|
|
1.74
|
%
|
Expected volatility
|
52.09
|
%
|
|
50.31
|
%
|
|
49.87
|
%
|
Dividend yield
|
—
|
|
|
—
|
|
|
—
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
Cost of revenue
|
$
|
1,347
|
|
|
$
|
999
|
|
|
$
|
913
|
|
Research and development
|
2,787
|
|
|
2,476
|
|
|
2,271
|
|
|||
Sales and marketing
|
4,751
|
|
|
5,136
|
|
|
4,710
|
|
|||
General and administrative
|
5,487
|
|
|
5,151
|
|
|
4,307
|
|
|||
Total
|
$
|
14,372
|
|
|
$
|
13,762
|
|
|
$
|
12,201
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
Net revenues:
|
|
|
|
|
|
||||||
Retail
|
$
|
504,797
|
|
|
$
|
481,795
|
|
|
$
|
435,484
|
|
Commercial
|
307,945
|
|
|
331,439
|
|
|
284,539
|
|
|||
Service provider
|
459,179
|
|
|
367,784
|
|
|
182,029
|
|
|||
Total net revenues
|
$
|
1,271,921
|
|
|
$
|
1,181,018
|
|
|
$
|
902,052
|
|
Contribution income:
|
|
|
|
|
|
||||||
Retail
|
$
|
86,808
|
|
|
$
|
81,589
|
|
|
$
|
71,862
|
|
Retail contribution margin
|
17.2
|
%
|
|
16.9
|
%
|
|
16.5
|
%
|
|||
Commercial
|
67,826
|
|
|
74,746
|
|
|
63,021
|
|
|||
Commercial contribution margin
|
22.0
|
%
|
|
22.6
|
%
|
|
22.1
|
%
|
|||
Service Provider
|
40,794
|
|
|
32,797
|
|
|
14,026
|
|
|||
Service Provider contribution margin
|
8.9
|
%
|
|
8.9
|
%
|
|
7.7
|
%
|
|||
Total segment contribution income
|
195,428
|
|
|
189,132
|
|
|
148,909
|
|
|||
Corporate and unallocated costs
|
(47,766
|
)
|
|
(43,301
|
)
|
|
(39,244
|
)
|
|||
Amortization of intangible assets (1)
|
(4,763
|
)
|
|
(4,658
|
)
|
|
(5,293
|
)
|
|||
Stock-based compensation expense
|
(14,372
|
)
|
|
(13,762
|
)
|
|
(12,201
|
)
|
|||
Restructuring and other charges
|
(1,190
|
)
|
|
(2,094
|
)
|
|
88
|
|
|||
Acquisition related compensation and expense
|
(833
|
)
|
|
(40
|
)
|
|
(686
|
)
|
|||
Impact to cost of sales from acquisition accounting adjustments to inventory
|
—
|
|
|
(609
|
)
|
|
—
|
|
|||
Litigation reserves, net
|
(390
|
)
|
|
201
|
|
|
(211
|
)
|
|||
Interest income
|
498
|
|
|
477
|
|
|
426
|
|
|||
Other income (expense), net
|
2,670
|
|
|
(1,136
|
)
|
|
(564
|
)
|
|||
Income before income taxes
|
$
|
129,282
|
|
|
$
|
124,210
|
|
|
$
|
91,224
|
|
(1)
|
Amount excludes amortization expense related to patents within purchased intangible assets in costs of revenues.
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
United States
|
$
|
660,998
|
|
|
$
|
570,143
|
|
|
$
|
454,179
|
|
Americas (excluding U.S.)
|
18,421
|
|
|
16,913
|
|
|
12,363
|
|
|||
United Kingdom
|
184,404
|
|
|
165,522
|
|
|
100,357
|
|
|||
EMEA (excluding U.K.)
|
273,320
|
|
|
312,191
|
|
|
239,892
|
|
|||
APAC
|
134,778
|
|
|
116,249
|
|
|
95,261
|
|
|||
Total net revenue
|
$
|
1,271,921
|
|
|
$
|
1,181,018
|
|
|
$
|
902,052
|
|
|
December 31,
2012 |
|
December 31,
2011 |
||||
United States
|
$
|
9,898
|
|
|
$
|
9,901
|
|
Americas (excluding U.S.)
|
36
|
|
|
44
|
|
||
EMEA
|
1,173
|
|
|
331
|
|
||
China
|
6,763
|
|
|
4,909
|
|
||
APAC (excluding China)
|
1,155
|
|
|
699
|
|
||
|
$
|
19,025
|
|
|
$
|
15,884
|
|
|
Year Ended December 31,
|
|||||||
|
2012
|
|
2011
|
|
2010
|
|||
Best Buy Co., Inc. and Affiliates (Retailer)
|
9
|
%
|
|
11
|
%
|
|
15
|
%
|
Ingram Micro, Inc. and Affiliates (Distributor)
|
9
|
%
|
|
10
|
%
|
|
11
|
%
|
All others
|
82
|
%
|
|
79
|
%
|
|
74
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
As of December 31, 2012
|
||||||||||
|
Total
|
|
Quoted market
prices in active
markets
(Level 1)
|
|
Significant
other
observable
inputs
(Level 2)
|
|
Significant
unobservable
inputs
(Level 3)
|
||||
Cash equivalents-money-market funds
|
3,061
|
|
|
3,061
|
|
|
—
|
|
|
—
|
|
Available-for-sale securities-Treasuries (1)
|
225,062
|
|
|
225,062
|
|
|
—
|
|
|
—
|
|
Available-for-sale securities-Certificates of Deposit (1)
|
2,783
|
|
|
2,783
|
|
|
—
|
|
|
—
|
|
Foreign currency forward contracts (2)
|
1,144
|
|
|
—
|
|
|
1,144
|
|
|
—
|
|
Total assets measured at fair value
|
232,050
|
|
|
230,906
|
|
|
1,144
|
|
|
—
|
|
(1)
|
Included in short-term investments on the Company's consolidated balance sheet.
|
(2)
|
Included in prepaid expenses and other current assets on the Company's consolidated balance sheet.
|
|
As of December 31, 2012
|
||||||||||
|
Total
|
|
Quoted market
prices in active
markets
(Level 1)
|
|
Significant
other
observable
inputs
(Level 2)
|
|
Significant
unobservable
inputs
(Level 3)
|
||||
Foreign currency forward contracts (3)
|
(1,619
|
)
|
|
—
|
|
|
(1,619
|
)
|
|
—
|
|
Total liabilities measured at fair value
|
(1,619
|
)
|
|
—
|
|
|
(1,619
|
)
|
|
—
|
|
(3)
|
Included in other accrued liabilities on the Company's consolidated balance sheet.
|
|
As of December 31, 2011
|
||||||||||||||
|
Total
|
|
Quoted market
prices in active
markets
(Level 1)
|
|
Significant
other
observable
inputs
(Level 2)
|
|
Significant
unobservable
inputs
(Level 3)
|
||||||||
Cash equivalents-money-market funds
|
$
|
24,844
|
|
|
$
|
24,844
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Available-for-sale securities-Treasuries (1)
|
144,703
|
|
|
144,703
|
|
|
—
|
|
|
—
|
|
||||
Available-for-sale securities-Certificates of Deposit (1)
|
94
|
|
|
94
|
|
|
—
|
|
|
—
|
|
||||
Foreign currency forward contracts (2)
|
1,237
|
|
|
—
|
|
|
1,237
|
|
|
—
|
|
||||
Total assets measured at fair value
|
$
|
170,878
|
|
|
$
|
169,641
|
|
|
$
|
1,237
|
|
|
$
|
—
|
|
(1)
|
Included in short-term investments on the Company's consolidated balance sheet.
|
(2)
|
Included in prepaid expenses and other current assets on the Company's consolidated balance sheet.
|
|
As of December 31, 2011
|
||||||||||||||
|
Total
|
|
Quoted market
prices in active
markets
(Level 1)
|
|
Significant
other
observable
inputs
(Level 2)
|
|
Significant
unobservable
inputs
(Level 3)
|
||||||||
Foreign currency forward contracts (3)
|
$
|
(723
|
)
|
|
$
|
—
|
|
|
$
|
(723
|
)
|
|
$
|
—
|
|
Total liabilities measured at fair value
|
$
|
(723
|
)
|
|
$
|
—
|
|
|
$
|
(723
|
)
|
|
$
|
—
|
|
(3)
|
Included in other accrued liabilities on the Company's consolidated balance sheet.
|
|
December 31,
2012 |
September 30,
2012 |
July 1,
2012 |
April 1,
2012 |
||||||||
Net revenue
|
$
|
310,436
|
|
$
|
315,210
|
|
$
|
320,655
|
|
$
|
325,620
|
|
Gross profit
|
$
|
91,378
|
|
$
|
97,688
|
|
$
|
94,638
|
|
$
|
99,849
|
|
Provision for income taxes
|
$
|
12,325
|
|
$
|
9,920
|
|
$
|
9,933
|
|
$
|
10,565
|
|
Net income
|
$
|
16,079
|
|
$
|
23,791
|
|
$
|
21,522
|
|
$
|
25,147
|
|
Net income per share—basic
|
$
|
0.42
|
|
$
|
0.62
|
|
$
|
0.57
|
|
$
|
0.67
|
|
Net income per share—diluted
|
$
|
0.41
|
|
$
|
0.61
|
|
$
|
0.56
|
|
$
|
0.65
|
|
|
|
|
|
|
||||||||
|
December 31,
2011 |
October 2,
2011 |
July 3,
2011 |
April 3,
2011 |
||||||||
Net revenue
|
$
|
309,155
|
|
$
|
301,800
|
|
$
|
291,240
|
|
$
|
278,823
|
|
Gross profit
|
$
|
94,973
|
|
$
|
96,310
|
|
$
|
90,377
|
|
$
|
87,786
|
|
Provision for income taxes
|
$
|
10,780
|
|
$
|
6,178
|
|
$
|
6,742
|
|
$
|
9,142
|
|
Net income
|
$
|
22,835
|
|
$
|
26,747
|
|
$
|
20,597
|
|
$
|
21,189
|
|
Net income per share—basic
|
$
|
0.61
|
|
$
|
0.71
|
|
$
|
0.56
|
|
$
|
0.58
|
|
Net income per share—diluted
|
$
|
0.60
|
|
$
|
0.70
|
|
$
|
0.54
|
|
$
|
0.57
|
|
Item 9.
|
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
|
Item 9A.
|
Controls and Procedures
|
Item 9B.
|
Other Information
|
Item 10.
|
Directors, Executive Officers and Corporate Governance
|
Item 11.
|
Executive Compensation
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence
|
Item 14.
|
Principal Accounting Fees and Services
|
Item 15.
|
Exhibits, Financial Statement Schedule
|
|
Page
|
Report of Independent Registered Public Accounting Firm
|
|
Consolidated Balance Sheets as of December 31, 2012 and 2011
|
|
Consolidated Statements of Operations for the three years ended December 31, 2012, 2011 and 2010
|
|
Consolidated Statements of Comprehensive Income for the three years ended December 31, 2012, 2011 and 2010
|
|
Consolidated Statements of Stockholders’ Equity for the three years ended December 31, 2012, 2011 and 2010
|
|
Consolidated Statements of Cash Flows for the three years ended December 31, 2012, 2011 and 2010
|
|
Notes to Consolidated Financial Statements
|
|
Quarterly Financial Data (unaudited)
|
|
Management’s Report on Internal Control Over Financial Reporting
|
|
Balance at
Beginning
of Year
|
|
Additions
|
|
Deductions
|
|
Balance
at End of
Year
|
||||||||
Allowance for doubtful accounts:
|
|
|
|
|
|
|
|
||||||||
Year ended December 31, 2012
|
$
|
1,335
|
|
|
$
|
43
|
|
|
$
|
(122
|
)
|
|
$
|
1,256
|
|
Year ended December 31, 2011
|
1,481
|
|
|
(21
|
)
|
|
(125
|
)
|
|
1,335
|
|
||||
Year ended December 31, 2010
|
2,038
|
|
|
(202
|
)
|
|
(355
|
)
|
|
1,481
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Allowance for sales returns and product warranty:
|
|
|
|
|
|
|
|
||||||||
Year ended December 31, 2012
|
58,206
|
|
|
100,806
|
|
|
(95,322
|
)
|
|
63,690
|
|
||||
Year ended December 31, 2011
|
50,786
|
|
|
86,310
|
|
|
(78,890
|
)
|
|
58,206
|
|
||||
Year ended December 31, 2010
|
42,603
|
|
|
78,280
|
|
|
(70,097
|
)
|
|
50,786
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Allowance for price protection:
|
|
|
|
|
|
|
|
||||||||
Year ended December 31, 2012
|
3,930
|
|
|
9,925
|
|
|
(12,072
|
)
|
|
1,783
|
|
||||
Year ended December 31, 2011
|
3,147
|
|
|
15,688
|
|
|
(14,905
|
)
|
|
3,930
|
|
||||
Year ended December 31, 2010
|
1,545
|
|
|
13,011
|
|
|
(11,409
|
)
|
|
3,147
|
|
NETGEAR, INC.
|
Registrant
|
/s/ PATRICK C.S. LO
|
Patrick C.S. Lo
|
Chairman of the Board and Chief Executive Officer
|
(Principal Executive Officer)
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/S/ PATRICK C.S. LO
|
|
Chairman of the Board and Chief Executive Officer
|
|
February 26, 2013
|
Patrick C.S. Lo
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
/S/ CHRISTINE M. GORJANC
|
|
Chief Financial Officer
|
|
February 26, 2013
|
Christine M. Gorjanc
|
|
(Principal Financial and Accounting Officer)
|
|
|
|
|
|
|
|
|
|
Director
|
|
|
Jocelyn Carter-Miller
|
|
|
|
|
|
|
|
|
|
/S/ RALPH E. FAISON
|
|
Director
|
|
February 26, 2013
|
Ralph E. Faison
|
|
|
|
|
|
|
|
|
|
/S/ A. TIMOTHY GODWIN
|
|
Director
|
|
February 26, 2013
|
A. Timothy Godwin
|
|
|
|
|
|
|
|
|
|
/S/ JEF GRAHAM
|
|
Director
|
|
February 26, 2013
|
Jef Graham
|
|
|
|
|
|
|
|
|
|
/S/ LINWOOD A. LACY, JR.
|
|
Director
|
|
February 26, 2013
|
Linwood A. Lacy, Jr.
|
|
|
|
|
|
|
|
|
|
/S/ GREGORY J. ROSSMANN
|
|
Director
|
|
February 26, 2013
|
Gregory J. Rossmann
|
|
|
|
|
|
|
|
|
|
/S/ BARBARA V. SCHERER
|
|
Director
|
|
February 26, 2013
|
Barbara V. Scherer
|
|
|
|
|
|
|
|
|
|
/S/ JULIE A. SHIMER
|
|
Director
|
|
February 26, 2013
|
Julie A. Shimer
|
|
|
|
|
Exhibit Number
|
Description
|
2.1**
|
Asset Purchase Agreement, dated as of September 22, 2008, by and among CP Secure International Holding Limited, the stockholders thereof and the registrant(1)
|
3.3
|
Amended and Restated Certificate of Incorporation of the registrant(2)
|
3.5
|
Amended and Restated Bylaws of the registrant(2)
|
4.1
|
Form of registrant's common stock certificate(2)
|
10.1
|
Form of Indemnification Agreement for directors and officers(2)
|
10.2#
|
2000 Stock Option Plan and forms of agreements thereunder(2)
|
10.3#
|
2003 Stock Plan and forms of agreements thereunder, as amended
|
10.4#
|
2003 Employee Stock Purchase Plan, as amended
|
10.5#
|
Offer Letter, dated December 3, 1999, between the registrant and Patrick C.S. Lo(2)
|
10.8#
|
Offer Letter, dated December 9, 1999, between the registrant and Mark G. Merrill(2)
|
10.9#
|
Employment Agreement, dated November 4, 2002, between the registrant and Michael F. Falcon(2)
|
10.10#
|
Employment Agreement, dated January 6, 2003, between the registrant and Charles T. Olson(2)
|
10.12#
|
Employment Agreement, dated November 16, 2005, between the registrant and Christine M. Gorjanc(3)
|
10.14*
|
Distributor Agreement, dated March 1, 1997, between the registrant and Tech Data Product Management, Inc.(2)
|
10.15*
|
Distributor Agreement, dated March 1, 1996, between the registrant and Ingram Micro Inc., as amended by Amendment dated October 1, 1996 and Amendment No. 2 dated July 15, 1998(2)
|
10.24*
|
Warehousing Agreement, dated July 5, 2001, between the registrant and APL, Logistics Americas, Ltd.(2)
|
10.25*
|
Distribution Operation Agreement, dated April 27, 2001, between the registrant and DSV Solutions B.V. (formerly Furness Logistics BV)(2)
|
10.26*
|
Distribution Operation Agreement, dated December 1, 2001, between the registrant and Kerry Logistics (Hong Kong) Limited(2)
|
10.33#
|
2006 Long Term Incentive Plan and forms of agreements thereunder(4)
|
10.34
|
Agreement and Plan of Merger, dated as of July 26, 2006, by and among the registrant, SKJM Holdings Corporation, SkipJam Corp., Michael Spilo, Jonathan Daub, Francis Refol, Dennis Aldover and Zhicheng Qiu(5)
|
10.35
|
Asset Purchase Agreement, dated as of January 28, 2013, by and among the registrant, NETGEAR Holdings Limited, NETGEAR International Limited, NETGEAR Canada Limited, NETGEAR Australia PTY, LTD, Sierra Wireless, Inc., Sierra Wireless, Inc., Sierra Wireless America, Inc. and Sierra Wireless (Australia) PTY LTD
|
10.41**
|
Agreement and Plan of Merger, dated as of May 2, 2007, by and among the registrant, NAS Holdings Corporation, Infrant Technologies, Inc., certain Infrant shareholders thereof, and Paul Tien as the Holders Representative (6)
|
10.44
|
Office Lease, dated as of September 25, 2007, by and between the registrant and BRE/Plumeria, LLC (7)
|
10.45
|
First Amendment to Office Lease, dated as of April 23, 2008, by and between the registrant and BRE/Plumeria, LLC (8)
|
10.46#
|
Amended and Restated 2006 Long-Term Incentive Plan (9)
|
10.47#
|
NETGEAR, Inc. Executive Bonus Plan (9)
|
10.49#
|
Amendment to Employment Agreement, dated December 29, 2008, between the registrant and Michael F. Falcon (10)
|
10.50#
|
Amendment to Employment Agreement, dated December 31, 2008, between the registrant and Christine Gorjanc (10)
|
10.51#
|
Amendment to Offer Letter, dated December 23, 2008, between the registrant and Patrick Lo (10)
|
10.52#
|
Amendment to Offer Letter, dated December 28, 2008, between the registrant and Mark Merrill (10)
|
10.53#
|
Amendment to Employment Agreement, dated December 24, 2008, between the registrant and Chuck Olson (10)
|
10.54#
|
Amendment to Employment Agreement, dated December 30, 2008, between the registrant and Michael Werdann (10)
|
10.55#
|
Amendment #2 to Employment Agreement, dated September 21, 2009, between the registrant and Christine Gorjanc (11)
|
10.56#
|
Change of Control and Severance Agreement dated March 31, 2011 by and between NETGEAR, Inc. and David Soares (12)
|
21.1
|
List of subsidiaries and affiliates (13)
|
23.1
|
Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm (13)
|
24.1
|
Power of Attorney (included on signature page) (13)
|
31.1
|
Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) / 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (13)
|
31.2
|
Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) / 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (13)
|
32.1
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (13)
|
32.2
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (13)
|
101.INS***
|
XBRL Instance Document
|
101.SCH***
|
XBRL Taxonomy Extension Schema Document
|
101.CAL***
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF***
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB***
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE***
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
#
|
Indicates management contract or compensatory plan or arrangement.
|
*
|
Confidential treatment has been granted as to certain portions of this Exhibit.
|
**
|
Registrant hereby agrees to furnish a copy of the omitted schedules and exhibits to the Securities and Exchange Commission upon its request.
|
***
|
XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purpose of Section 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
|
(1)
|
Incorporated by reference to the exhibit bearing the same number filed with the Registrant's Current Report on Form 8-K filed on September 23, 2008 with the Securities and Exchange Commission.
|
(2)
|
Incorporated by reference to an exhibit filed with the Registrant's Registration Statement on Form S-1 (Registration Statement 333-104419), which the Securities and Exchange Commission declared effective on July 30, 2003.
|
(3)
|
Incorporated by reference to Exhibit 10.32 of the Registrant's Current Report on Form 8-K filed on November 22, 2005 with the Securities and Exchange Commission.
|
(4)
|
Incorporated by reference to the copy included in the Registrant's Proxy Statement for the 2006 Annual Meeting of Stockholders filed on April 21, 2006 with the Securities and Exchange Commission.
|
(5)
|
Incorporated by reference to Exhibit 2.1 of the Registrant's Current Report on Form 8-K filed on July 27, 2006 with the Securities and Exchange Commission.
|
(6)
|
Incorporated by reference to Exhibit 2.1 of the Registrant's Current Report on Form 8-K filed on May 3, 2007 with the Securities and Exchange Commission.
|
(7)
|
Incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed on September 27, 2007 with the Securities and Exchange Commission.
|
(8)
|
Incorporated by reference to Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q filed on May 9, 2008 with the Securities and Exchange Commission.
|
(9)
|
Incorporated by reference to the copy included in the Registrant's Proxy Statement for the 2008 Annual Meeting of Stockholders filed on April 28, 2008 with the Securities and Exchange Commission.
|
(10)
|
Incorporated by reference to the copy included in the Registrant's Annual Report on Form 10-K filed on March 4, 2009 with the Securities and Exchange Commission.
|
(11)
|
Incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed on September 21, 2009 with the Securities and Exchange Commission.
|
(12)
|
Incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed on April 4, 2011 with the Securities and Exchange Commission.
|
(13)
|
Previously filed as an exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2011.
|
15.
|
Adjustments Upon Changes in Capitalization, Dissolution or Liquidation or Change in Control
.
|
I.
|
NOTICE OF STOCK OPTION GRANT
|
II.
|
AGREEMENT
|
|
NETGEAR, INC.
|
19.
|
Adjustments Upon Changes in Capitalization, Dissolution, Liquidation or Change of Control
.
|
20.
|
Amendment or Termination
.
|
1.
|
____________________ hereby elects to participate in the NetGear, Inc. Employee Stock Purchase Plan (the “Employee Stock Purchase Plan”) and subscribes to purchase shares of the Company’s Common Stock in accordance with this Subscription Agreement and the Employee Stock Purchase Plan.
|
2.
|
I hereby authorize payroll deductions from each paycheck in the amount of ____% of my Compensation on each payday (from 0 to 10%) during the Offering Period in accordance with the Employee Stock Purchase Plan. (Please note that no fractional percentages are permitted.)
|
3.
|
I understand that said payroll deductions shall be accumulated for the purchase of shares of Common Stock at the applicable Purchase Price determined in accordance with the Employee Stock Purchase Plan. I understand that if I do not withdraw from an Offering Period, any accumulated payroll deductions will be used to automatically exercise my option and purchase Common Stock under the Employee Stock Purchase Plan.
|
4.
|
I have received a copy of the complete Employee Stock Purchase Plan. I understand that my participation in the Employee Stock Purchase Plan is in all respects subject to the terms of the Plan. I understand that my ability to exercise the option under this Subscription Agreement is subject to shareholder approval of the Employee Stock Purchase Plan.
|
5.
|
Shares of Common Stock purchased for me under the Employee Stock Purchase Plan should be issued in the name(s) of ____________________ (Eligible Employee or Eligible Employee and Spouse only).
|
6.
|
I understand that if I dispose of any shares received by me pursuant to the Plan within 2 years after the Offering Date (the first day of the Offering Period during which I purchased such shares) or 1 year after the Exercise Date, whichever is later, I will be treated for federal income tax purposes as having received ordinary income at the time of such disposition in an amount equal to the excess of the Fair Market Value of the shares at the time such shares were purchased by me over the price which I paid for the shares.
I hereby agree to notify the Company in writing within 30 days after the date of any disposition of my shares and I will make adequate provision for Federal, state or other tax withholding obligations, if any, which arise upon the disposition of the Common Stock
. The Company may, but will not be obligated to, withhold from my
|
7.
|
I hereby agree to be bound by the terms of the Employee Stock Purchase Plan. The effectiveness of this Subscription Agreement is dependent upon my eligibility to participate in the Employee Stock Purchase Plan.
|
8.
|
In the event of my death, I hereby designate the following as my beneficiary(ies) to receive all payments and shares due me under the Employee Stock Purchase Plan:
|
ARTICLE 1 DEFINITIONS AND INTERPRETATIONS
|
2
|
1.1
|
Certain Definitions
2
|
1.2
|
Additional Definitions
14
|
1.3
|
Certain Interpretations
17
|
ARTICLE 2 THE TRANSACTIONS
|
17
|
2.1
|
Sale and Transfer of Assets
17
|
2.2
|
Excluded Assets
18
|
2.3
|
Assumed Liabilities
20
|
2.4
|
Liabilities Not Assumed
21
|
2.5
|
Transfer of Acquired Assets and Assumed Liabilities
22
|
2.6
|
Non-Assignable Assets
23
|
2.7
|
Transfer of Acquired Assets; Risk of Loss
24
|
ARTICLE 3 PURCHASE PRICE
|
25
|
3.1
|
Purchase Price
25
|
3.2
|
Purchase Price Adjustment
26
|
3.3
|
Allocation
28
|
3.4
|
Withholding
29
|
ARTICLE 4 CLOSING
|
29
|
4.1
|
Closing
29
|
4.2
|
Closing Deliveries
29
|
4.3
|
Closing Conditions
31
|
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLERS
|
35
|
5.1
|
Sellers’ Organization and Good Standing; Authority and Enforceability
36
|
5.2
|
Governmental Approvals
36
|
5.3
|
Conflicts
37
|
5.4
|
Title
37
|
5.5
|
Sufficiency of Assets
37
|
5.6
|
AirCard Business Financial Statements
38
|
5.7
|
Absence of Changes
38
|
5.8
|
Taxes
38
|
5.9
|
Personal Property
39
|
5.10
|
Real Property
39
|
5.11
|
Environmental Matters
40
|
5.12
|
Intellectual Property
41
|
5.13
|
Contracts
45
|
5.14
|
Customers and Suppliers
46
|
5.15
|
Employee Matters
46
|
5.16
|
Employee Benefits Plans
48
|
5.17
|
Legal Proceedings
49
|
5.18
|
Compliance with Laws; Permits
49
|
5.19
|
Brokerage Fees
50
|
5.20
|
Related Party Transactions
50
|
5.21
|
Credit Support
50
|
5.22
|
Anticorruption
50
|
5.23
|
Export Control Laws
50
|
5.24
|
AirCard Products; Product Defect and Warranty
51
|
5.25
|
Books and Records
52
|
5.26
|
Complete Copies of Materials
52
|
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF BUYERS
|
52
|
6.1
|
Organization and Good Standing
52
|
6.2
|
Authority and Enforceability
. 52
|
6.3
|
Governmental Approvals
53
|
6.4
|
Conflicts
53
|
6.5
|
Funds
53
|
6.6
|
Brokers and Finders
53
|
6.7
|
GST/HST Registration
53
|
ARTICLE 7 INTERIM CONDUCT OF AIRCARD BUSINESS
|
54
|
7.1
|
Conduct of AirCard Business
54
|
7.2
|
Restrictions on AirCard Business
54
|
ARTICLE 8 COVENANTS OF PARTIES
|
56
|
8.1
|
Reasonable Best Efforts
56
|
8.2
|
Regulatory Filings; Permits
. 56
|
8.3
|
Access to Information
. 57
|
8.4
|
Notification of Certain Matters
. 58
|
8.5
|
Confidentiality
. 58
|
8.6
|
Exclusivity
61
|
8.7
|
Public Statements
62
|
8.8
|
Record Retention
62
|
8.9
|
Bulk Sales
62
|
8.10
|
Business Relationships; Payment
s. 63
|
8.11
|
Carve-Out Financial Statements
. 63
|
8.12
|
Other Actions Required to Be Taken
. 64
|
8.13
|
Cooperation Regarding Intellectual Property Matters
65
|
ARTICLE 9 EMPLOYEE MATTERS
|
66
|
9.1
|
Employment Offers
66
|
9.2
|
Sellers Payment of Pre-Closing Wages and Seller Benefit Plan Contributions
67
|
9.3
|
280G Information
67
|
9.4
|
Buyers’ 401(k) Plan
67
|
9.5
|
No Third Party Beneficiaries
67
|
ARTICLE 10 TAX MATTERS
|
67
|
10.1
|
Straddle Period
67
|
10.2
|
Transfer Taxe
s 68
|
10.3
|
Tax Elections
68
|
10.4
|
Tax Characterization of Payments Under this Agreement
68
|
10.5
|
Records
69
|
ARTICLE 11 PRE-CLOSING TERMINATION
|
69
|
11.1
|
Pre-Closing Termination
69
|
11.2
|
Effect of Pre-Closing Termination
70
|
ARTICLE 12 POST-CLOSING INDEMNIFICATION
|
70
|
12.1
|
Survival of Representations and Warranties
. 70
|
12.2
|
Indemnification
71
|
12.3
|
Limitations on Indemnification
72
|
12.4
|
Indemnification Claims
. 74
|
12.5
|
Third Party Claims
75
|
12.6
|
Tax Treatment
76
|
12.7
|
Mitigation
76
|
ARTICLE 13 MISCELLANEOUS
|
76
|
13.1
|
Notices
76
|
13.2
|
Amendments and Waivers
77
|
13.3
|
Successors and Assigns
78
|
13.4
|
Severability
78
|
13.5
|
Expenses
78
|
13.6
|
Specific Performance
78
|
13.7
|
Other Remedies
78
|
13.8
|
No Third Party Beneficiaries
79
|
13.9
|
Entire Agreement
79
|
13.10
|
Governing Law
79
|
13.11
|
Dispute Resolution
79
|
13.12
|
Consent to Jurisdiction
81
|
13.13
|
WAIVER OF JURY TRIAL
81
|
13.14
|
Counterparts
81
|
Schedule 1.1(wwww)(ii)
|
Transferred Tangible Property: All Other Transferred Tangible Property Not Located at Carlsbad
|
Term
|
Section
|
|
Assumed Liabilities
|
2.3
|
|
Australian Buyer
|
Preamble
|
|
Australian Seller
|
Preamble
|
|
Bills of Sale
|
4.2(a)(vi)
|
|
Business Confidential Information
|
8.5(b)
|
|
Buyer Indemnified Parties
|
12.2(a)
|
|
Buyers
|
Preamble
|
|
Buyers Relocation Deadline
|
2.7(a)
|
|
Canadian Buyer
|
Preamble
|
|
Canadian Seller
|
Preamble
|
|
Claim Certificate
|
12.4(a)
|
|
Closing
|
4.1
|
|
Closing Date
|
4.1
|
|
Closing Inventory
|
3.2(a)(ii)
|
|
Closing MDF Liabilities
|
3.2(a)(iii)
|
|
Confidentiality Agreement
|
8.5(a)
|
|
Copyrights
|
1.1(qq)(iii)
|
|
Demand
|
13.11(f)
|
|
Dispute
|
13.11(a)
|
|
Dispute Statement
|
3.2(d)
|
|
Dollars
|
1.3(c)
|
|
Domain Names
|
1.1(qq)(iv)
|
|
Electronic Delivery
|
13.14
|
|
ERISA
|
1.1(aa)
|
|
ERISA Affiliate
|
1.1(aa)
|
|
Escrow Fund
|
4.2(c)
|
|
Estimated Adjusted Cash Purchase Price
|
3.2(b)
|
|
Excluded Assets
|
2.2
|
|
Excluded Carlsbad Tangible Property
|
1.1(wwww)
|
|
Excluded Liabilities
|
2.4
|
|
Excluded Sellers Facility
|
2.7(a)
|
|
Export Approvals
|
5.23(a)
|
|
Final Adjusted Cash Purchase Price
|
3.2(f)
|
|
Governmental Approvals
|
5.2
|
|
GST
|
5.8(f)
|
|
HST
|
5.8(f)
|
|
In-Licenses
|
5.13(a)(v)
|
|
Indemnification Claim
|
12.4(a)
|
|
International Buyer
|
Preamble
|
|
IP Assignment Agreement
|
4.2(a)(viii)
|
|
IP Buyer
|
Preamble
|
|
Loss Threshold
|
12.3(a)
|
|
M2M
|
Recitals
|
|
Material Contracts
|
5.13(a)
|
|
Non-Assignable Assets
|
2.6(a)
|
|
Non-Patent IP
|
1.1(qq)(vii)
|
|
Non-Paying Party
|
10.1
|
|
Non-Prime Transferred Technology
|
1.1(xxxx)
|
|
Term
|
Section
|
|
Non-Competition and Non-Solicitation Agreement
|
1.1(fff)
|
|
Out-Licenses
|
5.13(a)(iv)
|
|
Party
|
Preamble
|
|
Parties
|
Preamble
|
|
Patents
|
1.1(qq)(i)
|
|
Paying Party
|
10.1
|
|
Post-Closing Buyers Facility
|
2.7(a)
|
|
Post-Closing Statement
|
3.2(c)
|
|
Pre-Closing Statement
|
3.2(b)
|
|
Prime Transferred Technology
|
1.1(xxxx)
|
|
Purchase Price
|
3.1(a)
|
|
Related Party
|
5.20
|
|
Resolution Period
|
3.2(e)
|
|
Response
|
13.11(f)
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Retained Business Confidential Information
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8.5(c)
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|
Retained Patents
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2.2(b)
|
|
Review Period
|
3.2(d)
|
|
SEC
|
1.1(q)
|
|
Sellers
|
Preamble
|
|
Sellers Disclosure Schedule
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Article 5
|
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Seller Indemnified Parties
|
12.2(b)
|
|
Sellers Relocation Deadline
|
2.7(a)
|
|
Specified Matters
|
2.4(p)
|
|
Straddle Period
|
10.1
|
|
Straddle Period Taxes
|
10.1
|
|
Survival Period
|
12.1(b)
|
|
Target Inventory
|
3.2(a)(iv)
|
|
Target MDF Liabilities
|
3.2(a)(v)
|
|
Third Party Claim
|
12.5
|
|
Trademarks
|
1.1(qq)(v)
|
|
Transaction Confidential Information
|
8.5(d)
|
|
Transactions
|
Recitals
|
|
Transfer Taxes
|
10.2
|
|
Transferred Contracts
|
1.1(pppp)
|
|
Transferred Employees
|
9.1(a)
|
|
Transferred Leasehold Property
|
5.10(b)
|
|
Transferred Leases
|
1.1(ssss)
|
|
Transferred Permits
|
1.1(vvvv)
|
|
Unadjusted Cash Purchase Price
|
3.1(a)
|
|
US Buyer
|
Preamble
|
|
US Seller
|
Preamble
|
|
Wages
|
5.15(n)
|
|
NETGEAR, INC.
|
NETGEAR INTERNATIONAL, INC.
|
SKIPJAM CORP
|
Avaak, Inc,
|
INFRANT TECHNOLOGIES LLC
|
Netgear Canada Ltd.
|
NETGEAR HOLDINGS LTD
|
NETGEAR INTERNATIONAL LTD
|
Netgear Asia Holding Ltd
|
NETGEAR ASIA PTE. LIMITED
|
Netgear Australia Pty Ltd.
|
NETGEAR AUSTRIA GMBH
|
Netgear (Beijing) Network Technology Co., Ltd
|
NETGEAR Belgium BVBA
|
NETGEAR Cyprus Ltd.
|
NETGEAR CZECH REPUBLIC SRO
|
Netgear Denmark ApS
|
NETGEAR DEUTSCHLAND GMBH
|
NETGEAR DO BRASIL PRODUTOS ELECTRONICS LTDA
|
NETGEAR FRANCE SAS
|
NETGEAR HONG KONG LIMITED
|
NETGEAR Italy Srl
|
NETGEAR JAPAN GK
|
Netgear Luxembourg SARL
|
NETGEAR MEXICO S. DE R.L.
|
NETGEAR NETHERLANDS B.V.
|
NETGEAR NEW ZEALAND
|
NETGEAR POLAND SP ZOO
|
Netgear Research India Pvt. Ltd.
|
NETGEAR SWITZERLAND GMBH
|
NETGEAR TAIWAN CO LTD
|
NETGEAR TECHNOLOGIES PRIVATE LIMITED
|
NETGEAR U.K. LTD
|
1.
|
I have reviewed this annual report on Form 10-K of NETGEAR, Inc. (the “Registrant”);
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
|
4.
|
The Registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and
|
5.
|
The Registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.
|
|
/s/ PATRICK C.S. LO
|
|
Patrick C.S. Lo
|
|
Chairman and
|
|
Chief Executive Officer
|
|
NETGEAR, Inc.
|
1.
|
I have reviewed this annual report on Form 10-K of NETGEAR, Inc. (the “Registrant”);
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
|
4.
|
The Registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.
|