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Q3 2010 Earnings Call

October 26, 2010 5:00 pm ET


Joseph Villalta - VP, IR The Ruth Group

Patrick Lo - Chairman and CEO

Christine Gorjanc - CFO


Hamed Khorsand - BWS Financial

Jeff Kvaal - Barclays Plc

Woo Jin Ho - Bank of America-Merrill Lynch

Doug Ireland - JMP Securities

Rohit Chopra - Wedbush Securities

Jonathan Goldberg - Deutsche Bank



Welcome to the NETGEAR Incorporated third quarter 2010 results conference call. (Operator Instructions) It is now my pleasure to introduce your host, Mr. Joseph Villalta of The Ruth Group.

Joseph Villalta

Good afternoon and welcome to NETGEAR's third quarter 2010 financial results conference call. Joining us from the company are Mr. Patrick Lo, Chairman and CEO; and Ms. Christine Gorjanc, CFO.

The format of the call will be a brief business review by Patrick, followed by Christine providing detail on the financials. We'll then have time for any questions. If you have not yet received a copy of today's release, please call The Ruth Group at 646-536-7009 or you go to NETGEAR's corporate website at netgear.com.

Before we begin the formal remarks, the company's attorneys advise us that today's conference call contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. The words anticipate, expect, believe, will, may, should, estimate, project, outlook, forecast or other similar words are used to identify such forward-looking statements. However, the absence of these words does not mean that these statements are not forward-looking.

Forward-looking statements represent NETGEAR Inc.'s expectations or beliefs concerning future events based on information, available at the time such statements were made and include statements among others regarding NETGEAR's expected revenue, earnings, gross and operating income and margins, tax expenses, the market size of our new product categories, our position in the market relative to our competition, the long-term future and growth of NETGEAR's business, current and future demand for the company's existing and anticipated new products, the company's strategy for innovation and new products. Willingness of consumers to purchase and use the company's products, expectations of larger revenue share from service provider customers. DOCSIS 3.0 products deployment by our service provider customers, and the ability to increase distribution of market share for the company's products domestically and worldwide.

These statements are based on management's current expectations and are subject to certain risks and uncertainties, including, without limitation, the following: future demand for the company's products may be lower than anticipated; consumers may choose not to opt the company's new product offerings or adopt competing products; product performance may be adversely affected by real world operating conditions; the company may be unsuccessful or experience delays in manufacturing and distributing its new and existing products; telecommunications service providers may choose to slow their deployment of the company's products or utilize competing products; the company may be unable to collect receivables as they become due; the company may fail to manage costs, including the cost of developing new products and manufacturing and distribution of its existing offerings; channel inventory information reported as estimated based on average number of weeks inventory on hand on the last Saturday of the quarter, as reported by certain of NETGEAR's customers; changes in the level of NETGEAR's cash resources and the company's planned usage of such resources; changes in the company's stock price, developments in the business that could increase the company's cash needs, and fluctuations in foreign exchange rates.

Further, certain forward-looking statements are based on assumptions as to future events that may not prove to be accurate. Therefore, actual outcomes and results may differ materially from what is expected or forecast in such forward-looking statements. Further information on potential risk factors are detailed in the company's periodic files with the SEC, including, but not limited to those risks and uncertainties listed in the section Part II - Item 1A Risk Factors, pages 32 to 52, and the company's quarterly report on Form 10-Q for the quarter ended June 27, 2010, filed with the SEC on August 5, 2010.

NETGEAR undertakes no obligation to release publicly any revisions to any forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. In addition, several non-GAAP financial measures will be mentioned on this call. Information relating to the corresponding GAAP measures and reconciliation of the non-GAAP and GAAP measures can be found in our press release or on our Investor Relation website at www.netgear.com.

At this time, I would now like to turn the call over to Mr. Patrick Lo.

Patrick Lo

Thank you Joseph and thank you everyone for joining today's call. We're extremely pleased to announce 38% year-on-year growth in revenue in the third quarter of 2010. We’re again seeing year-on-year growth in all three regions with a very impressive 62% growth in North America. The growth in North America was primarily due to our strong performance in the back-to-school promotions in the U.S. retail market.

Our new TV connectivity product such as Push2TV, Universal TV, Wi-Fi adapters, Xbox connectivity kit and the NETGEAR Roku Player helped to power our continuous growth in market share in U.S. retail.

In Q3 end market demand for networking products continued to grow in all three geographic regions from both consumers and businesses in both local currency and U.S. dollar terms. Thus, we are pleased to be making significant progress in our business amidst the slowly improving macro economic environment.

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