NETGEAR's Q3 Revenue Drops 12% from Q2

NETGEAR reported Q3 net revenue of $179.4 million, a 6% decrease as compared to $191.7 million for the third quarter ended September 30, 2007, and a 12% decrease as compared to $204.5 million in the second quarter ended June 29, 2008. Net income for Q3 2008 (GAAP) was $3.1 million, or $0.09 per diluted share. This compared to net income of $13.3 million for the third quarter of 2007 and to net income of $11.1 million in the second quarter of 2008. Diluted earnings per share (GAAP) was $0.37 for the third quarter of 2007 and $0.31 for the second quarter of 2008.


Gross margin on a non-GAAP basis in the third quarter of 2008 was 35.5%, as compared to 34.0% in the year ago comparable quarter, and 33.2% in the second quarter of 2008.


"The September quarter showed weakness in demand for our consumer products across both retail and service provider channels in all geographies, resulting in a quarter-over-quarter and year-over-year decline in consumer product shipments. We believe the weakness in the global economy and tight credit markets worldwide are causing softness in end-user demand. As a result of the current environment, we expect subdued spending conditions to persist over the next few quarters until consumer confidence returns to the market. SMB (small and medium-sized business) demand is holding well with continuous momentum. The impact of current economic conditions on our operating margin was offset by continued successful product and operating cost reductions, healthy sales of ReadyNAS and Smart Switches and the reduction in air freight cost requirements as a result of increased on hand and available inventory. In the third quarter, our service provider net revenue was approximately $31.4 million, about 18% of our total net revenue, as compared to 22% in the year ago quarter, and 27% in the second quarter of 2008," commented Patrick Lo, Chairman and Chief Executive Officer of NETGEAR.http://www.netgear.com