1. Netgear, Inc April/03/2012 Presentors: Ryo-Seob(Joseph) Kim Jionghan(JD) Dai Han(Henry) Yang Pattharaporn (Pauline) Lertphaiboonsiri Yen-Hua(Gina) Huang

2. Overview  Netgear, INC. incorporated in 1996, engages in the design, development, marketing, and sale of networking products. It offers its products to connect users as well as commercial businesses, and also provides home networking service to customers.  Key Figures M. Cap1.44 BilROE(2011)16.04% Shares Outstanding38 MilNet Debt-354 Mil Current Price38.203yr Avg. Growth in Sales18% Trailing PS1.233yr Avg. OP Margin8% Trailing PE15.853yr Avg. Growth in OI62% PEG Ratio0.773yr Avg. NP Margin5% Trailing PB2.263yr Avg. Growth in NI159%

3. Netgear’s Market Performance Source: Yahoo Finance http://finance.yahoo.com/q/bc?s=NTGR&t=5y&l=on&z=l&q=l&c= EPS(11)= $2.41 EPS(07)= $1.28

4.  Retail – Home networking products, including Routers, Network Adapters, Range Extenders  Commercial – Business networking solutions, including Network Security, Switches, Network Storage  Service Provider – Made-to-Order and retail proven, whole home networking solutions for residential and business customers. Business Segments Source: Netgear homepage http://www.netgear.com http://www.netgear.com

5. Business Segments  Products Source: 10-K (2011), revised by Joseph

6. Geographic Segments Source: 10-K (2011), revised by Joseph

7. Important Macro Index  Main customers  Companies  Individuals  Companies defer unnecessary investment during recession  GDP  Individuals with lower income cut expenses in upgrading network  Personal income

8. Important Macro Index  GDP  Personal income  Foreign exchange rate Source: Capital IQ

9.  Sector: technology  Industry: networking equipment manufacturing Industry Source: http://clients.ibisworld.com/industryus/default.aspx?indid=745

10. Revenue Drivers Demand from customers Improving economic conditions have encou raged customers to upgrade networks Technological innovation Cost reduction Manufacturers in this industry operate in highly globalized supply chains Increasing outsourcing

11. Key Success Factor Strong sales forces Remain on the cutting edge of technology Effective quality cont rol

12. -Decrease in cash 2010 : from ST investment (net Increase 70 M) from 74M to 144M ) and the 2 M cash acquisition of IP and other assets of Leaf Networks, LLC (“Leaf”), a developer of virtual networking software, to boot networking technology research and development initiatives. -Increase in Cash 2011; from higher net income by 79% and sale of ST investment purchased in 2010. - 37 million cash acquired for the Customer Networking Solutions division of Westell Technologies, Inc. (“Westell”) Financial Analysis

13. Financial ratio Asset Turnover 20072008 2009 2010 2011 Total Asset Turnover 1.32 1.27 1.08 1.16 1.22 Fixed Asset Turnover 64.95 36.63 40.65 51.54 74.35 Accounts Receivable Turnover 4.61 5.38 4.22 3.98 4.52 Day Sales outstanding 79.12 67.90 86.57 91.74 80.76 Inventory Turnover 8.77 6.62 7.58 7.08 7.21 Inventory Days 41.64 55.11 48.16 51.55 50.60 AP Turnover8.778.366.956.766.92 AP Days 41.63 43.65 52.51 53.98 52.75 Short Term Liquidity Current Ratio2.672.512.442.392.51 Quick Ratio1.431.421.301.391.38

14. 20072008200920102011 Net revenue Growth 2%-8%31% % Gross Margin33%32%30%33%31% % Net margin6%2%1%6%8% The increase in Revenue in 2010 and 2011 driven by revenue from consumers transitioning from wireless-G to wireless-N technology and service provider division. The decrease in gross margin in 2011 was attributable to a higher % of revenue from sales to service providers, which generally carry lower gross margins. Gross Margin : Retail = 17%, Commercial = 23%, Service Provider = 9% Business Performance

15. Dupont Analysis DuPont Ratios20072008200920102011 Tax Burden 59.81%39.81%28.66%55.81%73.56% Interest Burden 118.01%91.80%101.56%99.85%99.47% EBIT Margin 8.95%6.64%4.67%10.13%10.57% Asset Turnover 132.06%126.81%108.45%115.60%121.58% Leverage 148.34%149.94%152.87%155.93%152.07% ROE 12.37%4.62%2.25%10.17%14.30%

16. The competitors Company NameTickerstock priceForward P/EEBIT/TAEBIT/EV NetGear IncNTGR38.21223%11% Cisco System IncCSCO21.1510.6319%10% Hewlett-Packard Co HPQ23.835.3970%13% Aruba Network IncARUN22.2827.17-227%-44% Adtran IncADTN30.9513.7552%11%

17. The Multiples NTGRCSCOHPQARUNADTNIndustryAve Market Cap. 14501139104722024501980 Current P/E 15.9516.458.3646.4514.5923.613.84 Forward P/E 1210.635.3927.1713.7525.115.67 Profit Margin 7.74%15.61%4.75%12.80%19.32%5.80%11.00% P/B2.32.311.25.912.874.43.165 P/S1.222.540.384.672.78N/A2.318 ROA10.40%7.09%5.33%0.01%15.66%9.40%8% ROE16.00%14.74%14.64%18.81%21.92%10.00%16%

18. The Target Price from Multiples Target P/E13.84 EPS2.41 Target Price33.35

19. Recommendation  Comparable valuation - $33.35  DCF - $28.08  Target price: $30  Current price: $38.44  Final recommendation: put on watch list and review the stock if price drop below $33