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Netgear Profit Declines; Stock Down - Update

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Networking products company Netgear Inc. (NTGR: Quote), Tuesday reported a lower fourth-quarter profit, hurt by reduced margins that offset a slight rise in revenues stemming from growth in retail business. Nevertheless, the company's quarterly earnings and revenues came in ahead of Wall Street estimates.

Moving forward, Netgear provided a weak revenue guidance for the first quarter, citing reduced spending from its service provider customers amid soft economic conditions. Following the announcement of results, the company's stock declined over 7 percent in after-hours trade on the Nasdaq.

CEO Patrick Lo said, "The worldwide macroeconomic environment proved challenging for us during the second half of 2012. In the fourth quarter, we witnessed reduced spending among our service provider customers and Commercial Business Unit customers."

"We expect the first half of 2013 to be tempered by reduced spending from our service provider customers and macroeconomic uncertainty with growth in the second half of the year," Lo added.

San Jose, California-based Netgear offers networking and storage products to home users and commercial businesses. The company reported fourth-quarter net income of $16 million or $0.41 per share, compared with $22.8 million or $0.60 per share last year.

Excluding items, adjusted earnings for the quarter were $21.5 million or $0.55 per share, compared with $26.5 million or $0.69 per share in the prior year.

On average, seven analysts polled by Thomson Reuters expected earnings of $0.54 per share for the quarter. Analysts' estimates typically exclude special items.

Net revenues for the quarter rose marginally to $310.4 million from $309.2 million a year ago. Analysts on consensus estimated revenues of $307.70 million for the quarter.

Gross margin on a non-GAAP basis for the fourth quarter was 30.0 percent, compared to 31.1 percent in the year ago quarter. Non-GAAP operating margin was 11.4 percent, down from 12.4 percent last year.

For the first quarter, the company expects net revenues of $290 million to $305 million, while analysts currently estimate revenues of $317.55 million.

Netgear closed Tuesday at $36.50, down 1.30%, on a volume of 0.5 million shares. In after hours, the stock dropped $2.70 or 7.40%.

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by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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Editors Pick
After ending the previous session mostly higher, stocks may see some further upside in early trading on Wednesday. The major index futures are currently pointing to a modestly higher open for the markets, with the Dow futures up by 17 points. The Bank of Spain on Wednesday boosted its growth projections for Spain this year and the next after the economy grew at a faster rate in the second quarter. In its monthly economic bulletin, the bank raised the growth forecast for this year to 1.3 percent from the 1.2 percent seen previously. The projection for the next year was lifted to 2 percent from 1.7 percent. Bank of England policymakers unanimously decided to maintain the key interest rate and quantitative easing at the meeting held on July 9 and 10, but signaled the possibility of a rate hike late this year as growth became more established.
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