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Netgear Idea Proposal (NTGR)

Netgear Idea Proposal (NTGR)
 

Will Netgear’s commercial and retail business segments achieve expected 10% revenue growth in 2017?

Report Available: February 2, 2017

 

Blueshift’s initial research found NTGR counting heavily on its retail and commercial segments to drive growth in 2017. The company introduced a new Nighthawk wireless router, an improved Arlo security camera, and unveiled the Orbi tri-band Wi-Fi match system for its retail customers. NTGR continues to push its Ethernet switches on the commercial side. Reviews of the new retail products are favorable, though all raised concerns about the high price.

 

Observations

  1. NTGR’s Q3 was marked by success with its retail and commercial businesses, but further disappointment with its service provider business. Overall, Q3 revenue fell 1% year to year as the service provider unit was down $42 million from a year ago. However, the retail business revenue was up 18% and commercial revenue climbed 13% year to year. Home products now account for 78% of revenue with business products at 22%. Wireless products are 76% of the business with 24% wired. And products introduced in the last 15 months accounted for 38% of Q3 shipments.
  2. NTGR’s retail products are driven by three mainstays: Nighthawk wireless routers, Arlo in-home security cameras, and the new Orbi tri-band Wi-Fi match system aimed at overcoming dead spots found with traditional routers. Together, these three products account for the majority of NTGR’s retail sales.
  3. The newest Nighthawk is the X10, retailing for $499. A review lauded the router’s 1.7 GHz quad-core Annapurna Labs processor and powerful storage features, ranking it higher than the TP-LINK Talon AD7200 Wireless Tri-Band Gigabit Router, though raising concerns about its high price tag and wondering if owners can even make use of all its features. Another review said the X10 is ideal for gamers, VR enthusiasts, and those who stream a lot of media, but the price and heavyweight specs show that it is beyond the needs of the average consumer. Orbi is hailed as the best of the multi-unit Wi-Fi systems. It gets 5 out of 5 stars.
  4. The Arlo Pro is the latest in the line of NTGR’s security cameras. It is wireless, with two-way audio and rechargeable batteries, as well as motion detection and a siren to scare off intruders. The wireless feature gives flexibility to place it anywhere in the house or outside. Storage is local, battery life is extensive, and audio is clear. On the down side, there is a delay on the video, the field of view is narrower than competitor offerings, the video quality is less than others, and the app has too many bugs – though none are deal-breakers. Arlo Pro only records when it detects motion or sound, keeping users from pouring over hours of unwanted footage. It also includes a free cloud service that stores clips up to seven days, with an option for longer-term storage for a fee. Price, again, is one of the concerns.
  5. On the more profitable commercial side, NTGR’s largest revenue component is Ethernet switches, but also includes wireless controllers and access points, Internet security appliances, and unified storage. Inventory levels are healthy now as SMBs upgrade to multi-gig and 10-gig switches, though expectations for Q4 are flat sequentially.

 

What is happening at the retail level with sales of the X10, Orbi, and Arlo Pro? How is inventory for these products? How are selling prices? How do they stack up compared to competitors? How are sales trends with the commercial products? To answer these and other questions, Blueshift will issue a market research report by gathering data from independent sources in the following areas: Retail personnel, Supply chain, VARs, Competitors, and Industry specialists.

 

Companies: Netgear (NTGR)

 

Research Begins: Jan. 16, 2017