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The History of Netgear, the Networking Giant

by Maria Caballero
Netgear Company History

Launched in 1996, the American company Netgear Inc. has manufactured some of the most popular routers, modems, and switches of today. Its founder, current Chairman, and CEO is Patrick Lo, who saw a gap in the industry for networking equipment. Lo established the company with the vision of filling this market need. In 2003, Netgear debuted publicly and now employs over 1,000 workers worldwide, with their own departments managing home security systems, smart hubs, networking cameras, and other security solutions. This networking giant owes its success to its many ups and downs, and today we’re going to cover its journey, starting with the owner.

‘Lo and Behold, Netgear’s Founder and Owner

Before Netgear became a public company, it operated under Patrick Lo’s ownership. Lo began as an electrical engineering student at Brown University. Before completing his degree, he took a job at the Hewlett-Packard Company (HP). Lo worked at HP for 12 years, occupying management positions in different departments, including technical support, software sales, marketing, and product network management.

With the experience under his belt, Lo left HP in 1995 and went to Bay Networks, Inc. in Billerica, Massachusetts, to lead their wireless division.

In the Lo household, Patrick observed each member racing to their computers to be the first to connect to the single dial-up internet connection. Assuming other families held the same problem, Patrick began thinking of a solution and transferred the idea to his stakeholders at Bay Networks.

Bay Networks loved his pitch and greenlit his projects. After building up and renaming the division, Lo later bought Netgear to run it as his own company. He admitted he didn’t take the easy route but noted it was worth it all in the end.

First Products That Pushed It Further and Beyond

The company’s initial merchandise came out in 1996 in Japan. This SOHO (Small Office/Home Office) product line featured ten devices, including five 10BaseT hubs, two Fast Ethernet switches, two Fast Ethernet hubs, and one ISDN router. This first line confirmed Lo’s assumption of a market need in the home networking sector. Netgear’s products became popular when high-speed broadband internet connections and wireless internet technology evolved.

However, the business found it hard to compete for volume sales. One of its Fast Ethernet hubs was at the higher end of the price range (at $1,650). Meanwhile, its competitors sold consumer devices for $99 and office products for $299. Lo strictly monitored Netgear’s inventory and costs while focusing on new product introductions to gain new customers. The brand marketed off-the-shelf wares from other companies, like Broadcom, Atheros Communications, and Marvell. It also contracted Taiwanese manufacturers so the brand could focus on providing system integration.

Over the years, Netgear has operated under different owners – first Bay Networks, then Nortel. Lo served as its CEO from its foundation until he bought the brand from Nortel. It released products such as the Nighthawk Wi-Fi routers and the newer Orbi mesh Wi-Fi line to keep up with the growing networking market.

Conversion From Private to Public Company

When Netgear spun off from Nortel, Pequot Capital Management Inc. provided $15 million in equity financing. This financial backing pushed the brand to plan an initial public offering (IPO) of stock. The official filing for an IPO with the Securities and Exchange Commission (SEC) didn’t occur until 2003.

The reason behind the late filing was out of Netgear’s hands. In the first four months of 2000, 158 companies became public, keeping the SEC busy. In 2002, 24 companies lined up for public ownership. Finally, Lo announced the company’s debut as a publicly owned company in April 2003, during the slowest period of IPO activity.

In the time leading to its conversion to a public company, Netgear began offering various wired and wireless networking gear. It included switches, adapters, print servers, access points, routers, and hubs. The business provided new hope for the market investors recovering from the dot-com debacle. Even the investors that withdrew from the 2000 IPO returned to bid on the networking company, raising $98 million in IPO in 2003.

Currently, Netgear uses the ticker symbol NTGR on NASDAQ and is an S&P 600 component.

(Net)Gearing Up for the Future With New Acquisitions

Netgear acquired several companies to bolster its market growth and tech development. Its first purchase as a public company was in 2006, when it bought SkipJam Corp. a home entertainment software company, for $9 million.

Its subsequent notable acquisition occurred in May 2007, when it paid $60 million to buy Infrant Technologies, the creator of the ReadyNAS line of network-attached storage devices. It marked the brand’s entry into the storage market.

Over a year later, it acquired China-based integrated security solutions provider, CP Secure Inc., for $18 million. CP Secure’s security and network protection complemented Netgear offerings, like the ProSafe Wired and Wireless VPN firewalls and SSL VPN concentrator.

The networking equipment provider Avaak became a Netgear acquisition in July 2012, taking the company from Trinity Ventures, InterWest Partners, and Leapfrog Ventures. The networking giant didn’t disclose the amount, but it reached $24 million in cash. Avaak provided wireless video networking technology, like remote video surveillance equipment, helping Netgear expand its business into offering online services like the VueZone cloud monitoring service.

One of the most recent and significant Netgear acquisitions is Meural, the producer of gesture-controlled Wi-Fi-connected digital frames showcasing photos or classic artworks. Netgear used Meural’s technology to expand into the digital home lifestyle market.

Netgear and Its Scandals

Netgear’s models became at risk in January 2017, leading to the 2017 Netgear bug. This exploitation allowed third parties to access the brand’s routers and internal networks. Hackers used this chance to turn the routers into botnets, leaving over a million users vulnerable to remote attacks.

Another major problem popped up in 2020. The Netgear Vulnerability issue affected the brand’s SOHO devices. Several of its home Wi-Fi routers had a security flaw that enabled hackers to assault the devices remotely. These routers had firmware with a built-in web server. Users had to enter their password into an unprotected firmware whenever they launched the administration interference. The bug impacted 79 Netgear router models.

The Company During the Pandemic

Like many companies, Netgear adopted a work-from-home style in the first quarter of 2020. It retained critical on-site work, like engineering, by implementing extra safety measures.

The company financially soared through during the pandemic with the launch of Orbi and Nighthawk models. As a known networking hardware and software brand, Netgear’s Wi-Fi routers were in demand in many households, but the temporary shutdown of offices slowed the sales of its business products. The brand adapted by shifting its focus on providing home-based consumer devices, but it didn’t stop supply shortages.

Despite generating $230 million in net revenue in Q1 of 2020, Netgear’s shares declined for a short while when it withdrew its 2020 financial guidance. The brand bounced back in Q3 and Q4 of 2020. However, because of the pandemic’s Omicron variant, even if there’s growth in the demand for its products, Netgear faced supply issues from factories closing down. It also experienced higher costs for sea freight transportation, materials, and product components in 2021.

Netgear Today

Today, Netgear doesn’t manufacture anything on its own. The brand outsources a big chunk of its manufacturing to other electronics companies but does system integration of its components on-site. These other companies include Delta Networks, Foxconn, Pegatron Corporation, Delta Networks, Shenzhen-based USI Electronics, and more.

The networking giant began with a 10-product line that included hubs, switches, and a router. Since its first product release, the company has also expanded to providing DSL/cable gateways. The technology it gained from its acquisitions has also led it into the markets for surveillance IP cameras and network-attached storage. In 2021, Netgear also released smart home products and pro gaming routers featuring Wi-Fi 6E technology.

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