Netgear Files for IPO

By Thor Olavsrud

April 10, 2003

The network gear-maker, which focuses on home and small business products, looks to raise $115 million in an initial public offering.

In a move that the tech industry is sure to watch closely, home and small business networking equipment maker Netgear plans to go public.

The Santa Clara, Calif.-based firm filed an S-1 form with the U.S. Securities and Exchange Commission (SEC) Thursday, revealing that it aims to raise $115 million with the initial public offering (IPO).

The company is looking for a listing on the NASDAQ exchange under the ticker symbol "NTGR". Lehman Brothers is lead manager on the offering, with Merrill Lynch & Co. and UBS Warburg also taking part.

It also warned in its "risk factors" section about the virus hitting Asian markets, Severe Acute Respiratory Syndrome (SARS). "Our operations may be impacted by a number of SARS-related factors, including, but not limited to, disruptions at our third-party manufacturers that are primarily located in China, reduced sales in our international retail channels and increased supply chain costs," the filing said.

"If the number of cases continues to rise or spread to other areas, our international sales and operations could be harmed."

Netgear was created in January 1996 as a wholly-owned subsidiary of Bay Networks with the goal of focusing on networking products for small businesses and homes. Gear-maker Nortel Networks snapped the firm up in August 1998, along with its parent, before selling part of its ownership interest in Netgear to third parties in September 2000.

In February 2002, it parted with the rest of its ownership interest, granting it to Netgear in exchange for cash, non-cash consideration and a $20 million promissory note.

Netgear said it will use the funds raised through the IPO to repay the outstanding promissory note.

In its prospectus, Netgear said it achieved net revenue growth each year since its inception. It took in $237.3 million in 2002, and had turned a profit of $8.1 million. The prior year, it had lost $19.5 million.

The company said 63 percent of its sales in 2002 were in the U.S., with the remaining 37 percent coming from international sales.

The company uses a number of sales channels. On the retail side, it uses Best Buy, CompUSA and Staples in North America, as well as outfits like PC World in the U.K. and MediaMarkt in Germany.

Its products also have an online presence through retailers like Amazon.com and Buy.com. Netgear said it also uses direct market resellers both domestically and internationally, including CDW, MicroWarehouse and thousands of value added resellers (VARs).

It has also been making inroads with broadband service providers like Time Warner Cable and Telewest UK, both of which sell its products.



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