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Netgear cuts Q4 outlook amid supply chain woes, weak consumer demand

Oct, 27, 2021 Hi-network.com

Netgear is seeing stronger demand from small businesses, but consumer demand has slowed, and supply chain woes will hit fourth quarter sales.

The networking company reported third quarter revenue of$290.2 million, down 23.3% from a year ago when workers upgraded remote office and Wi-Fi infrastructure en masse. The company reported third quarter earnings of 31 cents a share and non-GAAP earnings of 50 cents a share.

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Wall Street was expecting Netgear to report third quarter revenue of$294.96 million with non-GAAP earnings of 42 cents a share. 

Netgear CEO Patrick Lo highlighted numerous moving parts.

  • SMB demand was strong, but products for that market remain "significantly supply constrained." SMB revenue was up 33% from a year ago.
  • "We continue to see meaningful growth in our$1,000 and above high-end Wi-Fi mesh systems." Netgear Orbi Quad-Band Mesh WiFi 6E System (RBKE963): Fast but expensive wireless mesh networking
  • The company had 552,000 paid subscriptions at the end of the third quarter.

Netgear added that it has authorized plans to buy an incremental 3 million shares of its company stock, or 10% of its outstanding shares.

As for the outlook, Netgear said it has numerous disruptions on the logistics front with costs rising for ocean freight as long as longer shipping times. The fourth quarter will see lower consumer Wi-Fi demand with supply constraints hampering SMB demand.

The company said fourth quarter revenue will be between$250 million to$265 million. That guidance was well below Wall Street estimates of$328.6 million in revenue. Netgear added that "considerable uncertainty remains in the market due to the COVID-19 pandemic and deteriorating supply chain condition." Netgear also flagged supply chain constraints last quarter. 

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