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NetGear`s Home Invasion Plan Arik Hesseldahl, 01.12.04, 12:43 PM ET LAS VEGAS - In 1976 Patrick Lo arrived in America with $200 in his pocket and a scholarship to Brown University. A China native reared in Hong Kong, he raised from family friends the money for a $700 airline ticket to the U.S. More on NetGear Tear Sheet It was a warm-up act for what would come later in his career. He`s now the president and chief executive of NetGear (nasdaq: NTGR - news - people ), and in 2000 he was raising millions in venture capital money to fund the company`s separation from Nortel Networks (nyse: NO - news - people ). NetGear is now one of the market leaders in the ever-growing but margin-thin home networking business. Lo, now 48, took Santa Clara, Calif.-based NetGear public in July, and the company is on track to clear $293 million in 2003 sales. The timing certainly was right. As home broadband Internet connections have grown--almost 50 million Americans have a broadband connection, according to Nielsen NetRatings--more home Internet users are connecting two or more PCs to a network that shares the broadband connection. According to one estimate by market research firm InStat/MDR in Scottsdale, Ariz., the number of networked homes in the U.S. and Canada, which numbered only 9.2 million in 2002, will grow to 28 million by 2007. And while it`s one thing to connect a few computers to share an Internet connection and a printer, the main force encouraging these novice networking engineers is digital entertainment. Lo is making a big push to broaden NetGear`s entertainment-related products. This dovetails with one of the overarching themes--the mainstreaming of digital entertainment--of this year`s International Consumer Electronics Show (CES), where we caught up with Lo last week. While Microsoft (nasdaq: MSFT - news - people ), Hewlett-Packard (nyse: HPQ - news - people ) and Gateway (nyse: GTW - news - people ) want to sell you a $2,000 Media Center PC and maybe a flat-panel TV to go with it, NetGear will be happy selling you a $200 router for sharing your broadband Internet connection throughout your home, using existing PCs. A new product, the $150 MP101, streams music stored on a PC to any home stereo over a wireless network and comes with a free trial for RealNetworks` (nasdaq: RNWK - news - people ) Rhapsody digital music service. A product that does similar things for video and photos by connecting to an existing TV is already in the works for later this year. A third product combines a wireless router with the ability to easily connect hard drives to the network for sharing files independent of particular PCs. Beyond entertainment, Lo wants to get into making equipment for voice-over-Internet-Protocol telephone calls. "This isn`t just about connecting TVs to the Internet," Lo says. "The model of providing entertainment is changing from broadcasters pushing their content to consumers pulling what they want. We`re going to have an environment that mixes both, but right now the kids are showing us that they like the pull mode better," he says, referring to music download services like Kazaa and the original Napster. He may have big plans, but he also has big competitors. Last year networking giant Cisco Systems (nasdaq: CSCO - news - people ) paid $500 million to acquire Linksys, NetGear`s main rival and the market segment`s leader. Taiwan-based D-Link Systems is also a big competitor. Both showed up at CES with their competitive guns blazing. Linksys announced a DVD player that can play media files stored on a PC over a network. D-Link announced a PC card that can access both Wi-Fi networks and wireless data services over the GSM mobile phone networks. D-Link also announced a deal with Time Warner`s (nyse: TWX - news - people ) America Online to sell its customers a D-Link device that lets them see their digital pictures on a TV set and listen to their music downloads on a stereo. But NetGear does have allies in the fight. Its products sell well with retailers like Best Buy (nyse: BBY - news - people ), CompUSA and Staples (nasdaq: SPLS - news - people ). Both Time Warner Cable and Comcast (nyse: CMCSA - news - people ) sell NetGear routers to their cable modem customers. The increase in products and sales is helping the company dig itself out of the red. Last year, NetGear reported a loss per share of 32 cents. For this fiscal year, the mean estimate on Thomson Financial/First Call is net income of 35 cents per share. Sales are expected to rise 23% this year. It hasn`t been all good news for the company. On its first day of trading in July, shares rose 26% to $17.69 from $14, but they are currently trading lower, around $16.68. Margins have been thinner than Lo planned for. In its most recent quarter, NetGear had an operating margin of 5.6%. He`s promised to push that to 10% by 2005. If nothing else, Lo runs a tight ship. He has no assistant and expects other NetGear execs do without them. And to his credit, the competitive scrap over consumer home entertainment networks is still in its early stages. Chipmaker Intel (nasdaq: INTC - news - people ) said last week it plans to invest $200 million in companies looking for ways to let consumers use their digital media on their home entertainment gear. There are no apparent winners yet. |
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| aus der Diskussion: | NetGear(NTGR) |
| Autor (Datum des Eintrages): | panik (12.01.04 23:09:47) |
| Beitrag: | 21 von 27 (ID:11825512) |
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