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NETGEAR

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by

Abigail Waldman

on 15 October 2014

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Transcript of NETGEAR

N E T G E A R
Business Overview
Marketing Mix
SWOT Analysis
Economic
GDP: North America v. Europe
Social
Devices : People Ratio
Networks as a commodity
Technological
PC Usage
Tablets
External Storage
Environmental
Energy Star Partner
Outsourcing
External Analysis
Bargaining Power of Suppliers
Only a few suppliers
Threat of New Entrants
Steep learning curve
Threat of Substitutes
Networking as a commodity
Bargaining Power of Consumers
Commodity & service offerings
Rivalry
Similarities - competition & offerings

Porter's Five Forces
Financial Analysis
Cisco Systems
Size advantage (~74,000)
Similar product offerings
Stockholder equity
40% intangible assets

Western Digital
Size (~96,000 employees)
Focus on hard drives
Revenue stream (APAC)
Majority of yearly revenue
Competitor Analysis
Key Concerns & Evaluation

How do we expand our "cloud" computing service offering?
How can we increase our commercial product offering?
How do we optimize our management to extend our reach to different markets and demographics?
NETGEAR's Future
LogMeIn Acquisition Financial Analysis
Strategy Implementation
Grand Strategy Matrix
Netgear
Substantial Competitive Advantage
Growing Market Opportunities
Cisco
Follows close behind, industry leader
Size advantage
Western Digital
Hard drive disk advantage
More focused product offerings
At Netgear, our ability to combine our strong competitive advantage and an industry with high growth opportunities leads us to pursue a competitive strategy implementation.
Company Profile:
Founding
Patrick Lo, 1995
“Family Dinner”
3 Markets:
Personal/Home
Business
Service Providers
QSPM Scores
LogMeIn Acquisition
6.43
CentriaTM
6.37
Latin American Headquarters
5.75
Company Profile, Pt. 2:
Based in San Jose, CA
National & International Presence
Goal: Preferred, customer-driven networking technology provider
SPACE MATRIX
Our Focus:
“At NETGEAR, we turn ideas into innovative networking products that connect people, power businesses, and advance the way we live. Easy to use. Powerful. Smart. And designed just for you.”
Our Vision:
“Our goal is to be the leading provider of innovative networking products to the consumer, business, and service provider markets”
Who We Are
Strengths
High performance
and
dependable
devices that are
easier to operate
Less expensive
than comparable products
Reduced labor costs
Experienced
business units and
talented
workforce
Top
global brand
and distribution platform
High profitability
and
revenue
Weaknesses
Great responsibility resting on CEO Patrick Lo - no successor has been groomed
Low R&D funding
On average, most companies spend 5-15% of revenue
Competitors spend 8-12% while NETGEAR spends 4.8%
Rely few manufacturers

Opportunities
New acquisition
: LogMeIn
CentriaTM
: automatic, all-in-one router with backup capabilities for PCs and Macs
Ratio of devices to people is rapidly growing
People need higher performance network connectivity devices
Competitors do not dominate European

market
Capitalize on European recovery in the future
Expand customer base in growing technology hubs
: Europe (Budapest), Boston, Mexico
Threats
Consumers view networking products as “
commodities

Tablet usage increasing
Need for
Cloud computing
growing
All supplies come from a few manufacturers
and some of whom
also produce products for competitors
Best Buy
struggling to compete with online retailers
--> Best Buy accounts for 10% of our revenues
Place
Placement
gives company an
edge over competitors

Large global footprint with offices in over
twenty-five countries
across the globe
44,000 retail
locations and
37,000 value-added
resellers

Price & Promotion
Competitive pricing model
with promotional cash-back
rebates

Challenging to hold our competitive advantage because many people perceive our products as “commodities”

Product
Enable network connectivity, broadband access and networking
Innovative product line features:
wired and wireless devices

Connected entertainment

products
: provide streaming, game adapters, and screen mirroring
Security appliances
: Prosafe and Home Video Monitoring
Multiple configurations
available to fit customer needs
People
More connected devices than people in the world
Broad range of clientele
Connect people
to cyber-markets
Provide communications, information, entertainment, sales, education and more
Energy Star Partner
Promotes sustainability
Partnership coincides with our
values
, while serving as a
strategic advantage
Products
grows with our customers
needs and values
Innovatively continue to advance the way we live

Acquire LogMeIn.

Further develop the CentriaTM’s capabilities and brand image.

Develop a Latin American headquarters in Mexico City.
Remain aware of the costs and risks associated.
After the acquisition:
Retain the technological skills and talent from LogMeIn
Minor changes to the acquired offices to keep company culture consistent
CentriaTM is new, so no broad brand image has been created.
Need to carefully market to efficiently capitalize.
Mexico City as the first primary Latin American office.
Mexico City has an emerging tech market and proximity to the United States.
Cost and travel time reduced.
If successful, expansion further south.

CentriaTM Brand
Latin American HQ
The CentriaTM is a two-in-one router and backup system.
Further R&D from LogMeIn.
USB vs. Firewire.
Security solutions.
Marketing campaign to capitalize on iCloud’s hacking problem.

LogMeIn Acquisition

LogMeIn is a Hungarian company founded in 2003.
Specializes in cloud computing and remote desktop operations.
Commercial-based service.
Allows us to begin operations in Budapest and Boston.

Break up the “Americas” segment.
Allowing a greater focus on specialized locations vs. a broad approach.
A Mexico City location already exists.
Mexico’s emerging tech market.
Could be the primary point for all initial Latin American operations.

Impact of Acquisition of Aircard:
NETGEAR’s net revenue jumped from $293 million (FY-2013Q1) to $358 million (FY-2013Q2)
Net Revenue




Financial Analysis
Latin American HQ - Financial Analysis
Goal: become a multi-billion dollar company

Total Assets: $1.093 billion in 2013 from $1.034 billion in 2012

Total Stockholder Equity: $773 million by December 2013 (improvement from 2012)
Business Segment
(FY 2013 Q3)

Regional
(FY 2013 Q3)

Service Provider $155 million
Americas’ Strong Regional Standing
In the Americas, there was a jump in net revenues from $201 million (FY-2013Q2) to $220 million (FY-2013Q3) in a single quarter
Mexico’s Information Technology Potential
“Mexico is quietly emerging as a capital of Latin America’s growing information technology (IT) outsourcing industry”
Already supports outsourcing for established technology brands such as Xerox, Softek, HP, IBM, and Intel

Retail $130 million
Commercial $77 million
NETGEAR’s weakening commercial segment
NETGEAR’s revenues for the company’s commercial segment fell from $88 million (FY-2013Q2) to $77 million (FY-2013Q3)
LogMeIn’s Unstable Financial Standing
At the end of 2013, LogMeIn closed with a negative change in cash and cash equivalents—including negative total cash flows from both investing and financing activities
Dramatic drop in net income from $3.566 million in 2012 to (-$7.682) million in 2013
Research & Development Expenses
Both NETGEAR and LogMeIn have increased their research and development expenses

Americas $155 million
APAC $44 million
EMEA $97 million
Strategy Timeline
2015
2016
2017
LogMeIn Acquisition
Acquire LogMeIn
Integrate talent and resources
CentriaTM
Develop marketing campaign
Creating marketing collateral and resources
Leverage LogMeIn for marketing campaign
Mexico Expansion
Transform office from solely sales into sales and R&D

LogMeIn Acquisition
Utilize Boston and Budapest space
CentriaTM
Evaluate current campaign
Strengthen campaign's performance capabilities
Mexico Expansion
Conduct research for Latin American markets
Develop and improve products and services
LogMeIn Acquisition
Optimize LogMeIn talent for upper management recruiting
CentriaTM
Continue evaluating and procede with campaign
Mexico Expansion
Evaluate previous research and employ strategies to enter new markets
Full transcript