CRN Interview:Patrick Lo, Netgear

NetGear, a wired/wireless networking vendor based in Santa Clara, Calif.,

finished its first full quarter as a public company, having completed its IPO

in July. The company reported a 24 percent increase in revenue for the second quarter of 2003, fueled by an increased demand for broadband and wireless products. Patrick Lo, president and CEO, recently spoke with CRN Section Editor Marie Lingblom about NetGear's position in the market and strategy moving

forward in a crowded, competitive SMB networking space.

CRN: What's your take on the progress of Netgear, and how is the company's business split?

LO: We're pleased with the progress we've made. We put a balanced emphasis into selling to the small-business market through the value-added reseller channels, and then onto the home businesses and consumers through the retail channel. Today, 55 percent of our revenue is derived from small businesses, and 45 percent is derived from the retail channel, which includes brick-and-mortar stores as well as online stores.

CRN: Which Netgear products are hot right now?

LO: If you define hot in terms of just sheer unit volume, then there's no doubt our bread-and-butter [products] are unmanaged switches,all the way from 10/100 to 10/100/1000,that are still the hottest among VARs. If you talk about the most sought-after with the most services provided, today it is security-related products, whether it's routers or wireless security products. All of those are hot items sought after by our VARs.

CRN: What are some of the new products solution providers can expect from Netgear?

LO: We just announced a new turbo [802.11a/g] wireless router switch, which is useful for our VARs because there are two issues involved when installing [them at] small businesses: The first is security, and the second is range. With this turbo [802.11a/g] router, we solve two problems. First by providing WPA [Wi-Fi Protected Access], which is a very secure way of transmitting between the client and the server. Second, because of the turbo nature of the router, it provides a 108-Mbps maximum speed. Speed is indirectly proportional to range, so let's say if you have a 54-Mbps [router], when you go 100 feet, the speed would drop off 1 megabit, and if you go beyond 100 feet, it drops to nothing. With 108 Mbps, the range naturally gets much bigger and that solves a lot of the issues in installing a wireless network in a small-business environment.

Certainly, going forward you would expect us to continue to provide more wireless products that address those two issues. We'll also certainly introduce more Layer 3 switches. Today we have one Layer 3 switch, which is a 24-port, Gigabit, Layer 3 switch. You can expect us to continue to build out that lineup to 12-port as well as 10/100 versions of Layer 3 switches.

CRN: What are Netgear's new channel programs?

LO: Over the last year, we have made significant progress in beefing up our PowerShift Partner Program. For the first time in the United States, we built a VAR sales team out in the field in six cities. We have our own sales team on the ground dedicated to servicing our VAR partners, and they are supported by a center based here in Santa Clara. So we are pleased with that setup, and we are seeing good response from our resellers.

CRN: How's the competition out there?

LO: The competition has always been fierce. I mean, it has never stopped since we entered the market seven years ago. The players have changed a little bit over time, but the basic tenet is the same. We all race to provide the most advanced, reliable, lowest-cost solution to our customers. So whoever would be able to serve that aim better wins. We have been able to eat up some market share by going from zero seven years ago to about 30 percent right now, depending on which research firm is reporting.

CRN: What is Netgear's overriding channel philosophy moving forward?

LO: The most valuable contribution of VARs is the service to their customers.

I would say 65 percent of the time customers ask them to install something and basically specify the products they want. The other 35 percent of the time, customers don't care. They just want a solution. So that's 35 percent of the time VARs are truly the influencers because they tell the customers what to install. So they are the influencers, but, more importantly, they are the service providers to our customers. And it's the combination of reliable and technologically advanced products [and] the service of our VARs that makes our customers happy.