Netgear Inc. (NTGR) reported fourth quarter 2010 Non-GAAP earnings per share of 44 cents beating the Zacks Consensus Estimate of 41 cents. The EPS increased 29.4% from the year-ago quarter but shed 2.2% sequentially.
For full year 2010, the non-GAAP earnings per diluted share soared 155.9% from last year to $1.74 per share. This surpassed the Zacks Consensus Estimate of $1.56 per share.
The Past Quarter & The Year
Management was elated by the performance of 2010 and the fourth quarter 2010 record quarterly revenue. Revenue for the quarter increased 9.5% sequentially and 18.1% from year ago quarter to $258.5 million. This surpassed the Zacks Consensus Revenue Estimate of $250 million and the record revenue was helped by higher than expected revenue contribution from new products. The company also launched a record 26 new products during the quarter.
Service providers contributed 25% of the total revenue versus 19% in the prior quarter and 28% in the prior year quarter.
Netgear also posted record revenue for full year 2010 and produced a robust growth of 31.4% from last year to $902.1 million. The Zacks Consensus Revenue Estimate was $893 million for full year 2010.
Gross margin increased 0.9 percentage points from prior year quarter to 32.0%, but decreased 0.7 percentage points sequentially. Operating margin increased 0.4 percentage points sequentially and 0.2 percentage points from last year same quarter to 11.4%.
At the end of the quarter, Netgear had $270.7 million in cash, cash equivalents and short-term investments versus $247.1 million at the end of the fourth quarter last year and $243.5 million at the end of last quarter.
Net inventory totaled $127.4 million versus $90.6 million at the prior year quarter and $110.4 million at the end of last quarter.
The Way Forward
Management expects to continue benefiting from research and development, which helped in new product introductions in the last 3 quarters and more to arrive. The strong new product portfolio will expectedly drive the growth in 2011.
In the next quarter, the company intends to launch at least another 20 new products and expects net revenue in the range of $250-$260 million. The non-GAAP operating margin is expected to be between 11% and 12%.
Conclusion
Estimates for the quarter had been stable in the run-up to the earnings release, with no analysts revising estimates in the last two months. The full-year estimate for next year is $1.80 per share. The full-year Zacks Consensus Estimate for current year was $1.56 per share.
Peers for Netgear include NetScout Systems Inc. (NTCT), QLogic Corp. (QLGC) and Extreme Networks Inc. (EXTR).
We currently have a Zacks #3 Rank for Netgear which translates into a Hold rating on short term basis. For long term, we currently have a Neutral recommendation.
EXTREME NETWRKS (EXTR): Free Stock Analysis Report
NETSCOUT SYSTMS (NTCT): Free Stock Analysis Report
NETGEAR INC (NTGR): Free Stock Analysis Report
QLOGIC CORP (QLGC): Free Stock Analysis Report
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