Netgear has decided to separate its Arlo security camera operations from the main business, probably through an IPO. Matthew McRae will lead the new company. He recently joined Netgear as SVP of Strategy, coming from Vizio, where he was CTO and head of marketing.
Netgear also reported its results for the fourth quarter, saying revenues rose almost 8 percent from the year before to USD 397.1 million, topping expectations and setting an all-time record for quarterly revenues. The net result went to a loss of USD 31.9 million or USD 1.02 per diluted share, from a gain of 22.1 million or 0.65 per share, on the back of a one-off charge of USD 48.3 million for the recent US tax reform. The adjusted net profit per diluted share slipped to USD 0.71 from 0.88 year-on-year. The operating margin went to 4.9 percent, down from 9 percent the year earlier.
CEO Patrick Lo said the holiday season was stronger than expected, with both Arlo and Orbi product lines proving successful. Lo noted that Netgear expanded its Nighthawk line into the gaming category and released new products for the SMB segment.
The CEO said separating the Arlo business made sense as it will be taking a different growth path than Netgear. Arlo will have to aggressively acquire new users, while Netgear will continue to deepen engagement with its vast installed base.
For the IPO, Netgear will likely issue less than 20 percent of its common stock, keeping the remaining shares. A draft registration statement will be filed with the US Securities and Exchange Commission (SEC) in the first half, with the IPO expected to complete in the second half.
Looking ahead to the first quarter, Netgear is guiding for sequentially lower revenues at USD 330-345 million, an operating margin of 0.8-1.8 percent and an adjusted operating margin of 6.5-7.5 percent.
