Feb 9, 2010
Executives
Joseph Vitalta - IR, The Ruth Group Patrick Lo - Chairman and CEO Christine Gorjanc - CFO
Analysts
Jeff Kvaal - Barclays Capital Samuel Wilson - JMP Securities Hamed Khorsand - BWS Financial Woo Jin Ho - Bank of America-Merrill Lynch Maynard Um - UBS Min Park - Goldman Sachs Group Rohit Chopra - Wedbush Morgan Securities Jeff Kvaal - Barclays Capital
Operator
Greetings and welcome to the NETGEAR Inc. fourth quarter 2009 results conference call.
At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation.
(Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Joseph Vitalta of The Ruth Group.
Thank you, Mr. Vitalta.
You may begin.
Joseph Vitalta
Thank you, Operator. Good afternoon and welcome to NETGEAR's fourth quarter and full year 2009 financial results conference call.
Joining us from the company are Mr. Patrick Lo, Chairman and Chief Executive Officer; and Ms.
Christine Gorjanc, Chief Financial Officer. The format of the call will be a brief business review by Patrick, followed by Christine providing detail on the financials.
We'll then have time for any questions. If you have not yet received a copy of today's earnings release please call The Ruth Group at 646-536-7003 or you could go to NETGEAR's corporate website at www.netgear.com.
Before we begin the formal remarks, the company's attorneys advise us that today's conference call contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.
The words anticipate, expect, believe, will, may, should, estimate, project, outlook, forecast or other similar words are used to identify such forward-looking statements. However, the absence of these words should not mean that statements are not forward-looking.
The forward-looking statements represent NETGEAR Inc.' s expectations or beliefs concerning future events based on information available at the same time, such statements were made and include statements among others regarding NETGEAR's expected revenue, earnings, gross and operating income, margin and tax rate on both a GAAP and non-GAAP basis.
The effect of the global economic environment on the company's business, our position in the market relative to our competition, the long-term future of NETGEAR's business, our ability to innovate anticipated new product offerings, current and future demand for the company's existing and anticipated new products, willingness of consumers to purchase and use the company's products and the ability to increase distribution and market share for the company's products domestically and worldwide. These statements are based on management's current expectations and are subject to certain risks and uncertainties, including without limitation the following.
Future demand for the company's products may be lower than anticipated. Consumers may choose not to adopt the company's new product offerings or adopt competing products.
Product performance may be adversely affected by real world operating conditions. The company may be unsuccessful or experience delays in manufacturing and distributing its new and existing products.
Telecommunication service providers may choose to fill their deployment of the company's products or utilize competing products. The company may be unable to collect receivables as they become due, the company may fail to manage costs including the cost of developing new products, and manufacturing and distribution of its existing offerings.
Channel inventory information reported is estimated based on average number of weeks of inventory on-hand on the last Saturday of the quarter as reported by certain of NETGEAR's customers, changes in the level of NETGEAR's cash resources and the company planned usage of such resources, changes in the company's stock price, developments in the business that could increase the company's cash needs and fluctuations in foreign exchange rates. Further, certain forward-looking statements are based on assumptions as to future events that may not prove to be accurate.
Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Further information on potential risk factors are detailed in the company's periodic filings with the Securities and Exchange Commission, including but not limited to those risks and uncertainties listed in the section entitled, Part 2, Item 1A, risk factors, pages 36 through 50 in the company's quarterly report on Form 10-Q for the quarter ending September 27, 2009, filed with the Securities and Exchange Commission on November 6, 2009.
NETGEAR undertakes no obligation to release publicly any revisions to any forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. In addition, several non-GAAP financial measures will be mentioned on this call.
Information relating to the corresponding GAAP measures and reconciliation of the non-GAAP and GAAP measures can be found in our press release on the Investor Relation site at netgear.com. At this time, I would now like to turn the call over to Mr.
Patrick Lo. Please go ahead sir.
Patrick Lo
Thank you, Joseph and thank you everyone for joining today's call. We are extremely pleased with our fourth quarter business performance.
We exceeded expectations and recorded net revenue of $218.8 million in the fourth quarter of 2009, a new record of net revenue during any quarter since NETGEAR's inception. Revenue upside was driven by better than expected market share gains in the U.S.
year-over-year growth in the European market and higher than expected revenue contribution from new products. During the fourth quarter, we increased our non-GAAP operating margin to 11.2%, thus we are pleased to be making significant progress in our business during the improving macroeconomic environment.
During the fourth quarter, we had very strong shipments increasing 41% on a unit basis over the prior quarter, which resulted in market share gains globally. We're pleased to be selected to fulfill a one-time $18 million order from a service provider customer.
During the quarter, we generated significant cash from our operations, increasing our cash, cash equivalent and short-term investments by about $13 million resulting in a quarter end balance of $247.1 million. Most importantly, we introduced the record 23 new products during the quarter and further strengthened our leadership in all markets.
Our North America net revenue was $104.3 million in Q4, while Europe, the Middle East and Africa or EMEA, revenue was $91.2 million. In our Asia Pacific or APAC region net revenue was $23.3 million.
Compared to Q4 of 2008, our North America net revenue increased approximately 52%; EMEA net revenue increased 19%, while APAC net revenue increased 47%. From a product perspective, as mentioned earlier, we introduced 23 new products in the fourth quarter.
Our investment in R&D has resulted in a number of notable product introductions, including the exclusive Push2TV adapter with Intel, enabling PC viewing of any Internet multimedia content onto an HDTV wireless. Other notable new products include a set of next generation High Definition Audio Video grade Powerline network adapters, the 24 TB Rackmount ReadyNAS networked storage for growing businesses, and another new line of DOCSIS 3.0 cable data WiFi gateways.
Our leadership in products at home and small medium business continues to be recognized by the industry and our customers. In January, at the Consumer Electronics Show in Las Vegas, NETGEAR was the recipient of two Innovation Honoree awards for our home media server, for NETGEAR Stora and our 3G/4G modem router.
We remained focus on product development and intend to introduce another 18 to 20 new products in Q1, further positioning us for revenue growth and market share gain worldwide. In the fourth quarter our net revenue from service providers accounted for approximately 28% of total net revenue, compared to 18% of total net revenue in the fourth quarter of 2008, and 25% in the third quarter of 2009.
We continued to add channels throughout 2009 despite the continued challenging economic environment by the end of 2009 our products were sold in close to 28,000 retail outlets around the world and our value-added reseller count has increased to over 39,000. In the coming year we expect to continue to gain share in all markets worldwide.
We are confident that our exciting new product pipeline we allow us to do just that. We believe that we will return to double-digit year-on-year revenue growth and we will remain focused on investing in innovation, ramping our sales and marketing efforts, operating efficiently, tightly managing our inventory levels and focusing on generating cash.
Let me now turn the call over to Christine for details on our financials.
Christine Gorjanc
Thank you, Patrick. Let me now provide you with a summary of the financials for the fourth quarter and 2009 fiscal year.
As Patrick noted, net revenue for the fourth quarter ended December 31, 2009, were $218.8 million, compared to $161.4 million for the fourth quarter ended December 31, 2008, and $171.1 million in the third quarter ended September 27th, 2009. We shipped a total of about 5.5 million units in the fourth quarter, including 4.6 million nodes of wireless products, both are historic records for next year.
Shipments of our wired and wireless routers and gateways combined in the fourth quarter were about 3.4 million units, another record. Moving to the product category basis, fourth quarter net revenue split between wireless and wired was about 64% and 36% respectively.
The fourth quarter net revenue split between homes and small business products, was about 68% and 32% respectively. Products introduced in the last 15 months constituted about 30% of our fourth quarter shipment, while products introduced in the last 12 months constituted about 26% of our fourth quarter shipment.
Non-GAAP gross margin in the fourth quarter of 2009 was 31.1%, compared to 31.2% in the year ago comparable quarter and 33.5% in the third quarter of 2009. Moving to non-GAAP operating expenses, total non-GAAP operating expenses increased by 5% compared to the prior year's same quarter, reflecting our increased shipment level.
Total non-GAAP operating expenses came in at $43.5 million for the fourth quarter of 2009. This compares to non-GAAP operating expense of $41.4 million in the fourth quarter of 2008 and $39.1 million in the third quarter of 2009.
We controlled cost as planned in the first three quarters of 2009. However, we made the strategic decision to prudently invest in key areas during the fourth quarter of 2009, in order to support the rapid growth and demand we experienced.
As a result, our annual cost reductions were approximately $6.7 million as compared to our earlier projection of $10 million of operating expense reduction, which was based on our annualized fourth quarter 2008 run rate. On a GAAP basis, the company recorded net income of $7.9 million or $0.22 per diluted share for the fourth quarter of 2009, compared to a net loss of $7.3 million or $0.21 per diluted share for the fourth quarter of 2008, and a net income of $8.5 million or $0.24 per diluted share in the third quarter of 2009.
On a non-GAAP basis, the company recorded net income of $11.8 million for the fourth quarter of 2009 as compared to non-GAAP net loss of $2.5 million for the fourth quarter of 2008, and the non-GAAP net income of $11 million for the third quarter of 2009. Non-GAAP net income was $0.34 per diluted share in the fourth quarter of 2009, compared to a net loss of $0.07 per diluted share in the fourth quarter of 2008 and a net income of $0.31 per diluted share in the third quarter of 2009.
In Q4 2009, we recorded a net foreign currency loss of $466,000 compared to a net $6.6 million loss in the fourth quarter of 2008, and a net $266,000 loss in the prior quarter. GAAP tax expense was $9.6 million in the fourth quarter of 2009, compared to $2.8 in Q4 ‘08 and $5.8 million in Q3 ‘09.
Non-GAAP tax expense was $12.3 million in the fourth quarter of 2009, compared to $5.8 million in the fourth quarter of 2008 and $6.9 million in the third quarter of 2009. The reconciliation of GAAP to non-GAAP is detailed in our financial statements released earlier today.
We continue to maintain a strong balance sheet ending the fourth quarter with $247.1 million in cash, cash equivalents and short-term investments. DSOs for the fourth quarter were 71 days compared to 81 days in the fourth quarter of 2008 and 66 days in the third quarter of 2009.
Our net inventory ended at $90.6 million compared to $112.2 million at the end of the fourth quarter 2008 and $73.9 million at the end of the third quarter 2009. Ending inventory turns were 6.7 and increased as compare to 4 in the fourth quarter of 2008 and 6.2 turns in the prior quarter.
We continue to benefit from our unwavering commitment to research and development during the recession, resulting in unprecedented new product introductions in the last two quarters with more to come. We entered 2010 with a strong new product lineup and we remain focused on continually driving growth through new products, leading to gains in our global market share.
We expect that this strategy will allow us to stay ahead of our competition. Specifically, for the first quarter in 2010, we expect net revenue in the range of approximately $195 million to $205 million and non-GAAP operating margin to be in the range of 10% to 11%.
We expect our non-GAAP tax expense for the first quarter of 2010 to be in the range of $9 million to $11 million. Operator, that concludes our comments and we can now take questions.
Operator
(Operator Instructions) Your first question comes from Jeff Kvaal, Barclays Capital.
Jeff Kvaal - Barclays Capital
Obviously, better because you seen much higher revenues than we had thought, should we attribute that to market strength do you think, or is it primarily a function of market share gain?
Patrick Lo
I think it's both, I mean there is absolutely market strength and demand in all three regions and we're very happy that on top of that we're gaining shares in all three regions.
Jeff Kvaal - Barclays Capital
Have you seen any challenges in Europe, I know obviously that's a very tough question these days?
Patrick Lo
Certainly, I mean in Europe there have been challenges all around until fourth quarter, I think (inaudible) wonders.
Jeff Kvaal - Barclays Capital
Well, you might be taking it away at least in Southern Europe anyway at the moment. Then secondly, can you talk a little bit about your channel inventory, and that's obviously very low, I'm wondering should we expect it to stay there, should we expect it to recover, does the guidance include replenishment of the channel or how should we think about that?
Christine Gorjanc
Sure, we actually have been restocking the channel during Q4 and we will be doing that in Q1. We believe it is a bit low and we don't want to leave anything on the table, so we are busy restocking that in Q1 and we believe by the end of Q1 it will back to the normal levels, which is probably that 10 weeks in retail, 4 to 5 in 50.
Jeff Kvaal - Barclays Capital
So then if you are including some channel inventory in the replenishment in the guidance and there is the one-time service provider order, it sounds as though you're organically and demand sell through guidance is a modest decline than sequentially in the first quarter, is that the right way to think of it?
Patrick Lo
Remember Jeff there is a one-time $18 million order that we fulfilled in Q4. We don't expect that to be repeated in Q1.
Jeff Kvaal - Barclays Capital
Right so taking that out and the effective channel replenishments then it sounds that the guidance you are trying so set there is obviously on the conservative side.
Patrick Lo
Yeah, I mean clearly because there are two reasons; one, generally Q1 seasonally in flat to slightly down from Q4 and two as you just mentioned, (inaudible) may take it away from Southern Europe. Thirdly, there are a few (inaudible) supply.
I mean we were struggling with the chicken supplies in First quarter, now we struggling with component supplies in Q1, and you wouldn't believe it, now capacities, inductors, transformers all those are in short supply.
Operator
Thank you. Our next question comes from Samuel Wilson, JMP Securities.
Samuel Wilson - JMP Securities
Just a sort of four, five miscellaneous questions here. I'm sorry there is no big theme to any of them, so I'll start the first one, Patrick, can you talk a little bit about how many active service providers you have right now globally.
And can you gives us a little bit more detail on the $18 million whether wise and only one-time, I understand why it wouldn't repeat because it sort taken chunks, but the customers are they still a customer in the future
Patrick Lo
Well, on total of 42 access service provided customers from around the world and that particular $188 order is actually for a particular promotion to the customers install base is a one-time promotion the customer contain you to buy goods from us, it just not at that elevated one time level.
Samuel Wilson - JMP Securities
Got it, it makes little sense, but if there is still a customer and …
Patrick Lo
Absolutely yeah.
Samuel Wilson - JMP Securities
And then Christine can you give us cash flow from operations and CapEx?
Christine Gorjanc
Sure, casual from operations were about $16 million for Q4 CapEx, CapEx for Q4 was about $1.4 million.
Samuel Wilson - JMP Securities
Okay, and then Christine, help us understand the tax rate as we should think about it for 2010 and if you can even 2011 a little bit, are you still running sort of a AMT type that's accurate, we have to bare minimum have to pay, are you starting to accrue a percentage now that you are much more sustainably profitable. Can you give us some sense on how we should think about that for this year and then next year as you run off your previous changes to your tax structure?
Christine Gorjanc
All right, so we still what you would call Albanian sort of an AMT position this year that will end in 2010. What we expect at this point in time is all our regions to be profitable and that tax rate will be much more normalized this year, so in dollar we guided about 9 to 11 million per quarter.
We would anticipate that number to go down in 2011 barring any other legislative changes that could happen. So that should go down significantly next year, but we do anticipate at this point in 2010 to a relatively normal year for year for tax.
Operator
Your next question comes from Hamed Khorsand, BWS Financial.
Hamed Khorsand - BWS Financial
The integrated WiFi into set-top boxes for MSOs reduced your potential service provider revenue?
Patrick Lo
Actually, we see things going both in there are people who are interacting, I mean integrating WiFi into set-top box, but there are also some people going the other direction is splitting the WiFi from the set-top boxes. So net-net, we don't see any major changes in this foreseeable future plus there is also a plethora of technology adopted by various service providers for in-home distribution WiFi is just one of them.
There is power-line, there is MoCA so because of the proliferation and because of the technology steps that WiFi is taking. Actually, we see more and more that they are delineating the set-top box from the in-home distribution.
Hamed Khorsand - BWS Financial
With these new products introductions, are you seeing revenue ramp very quickly than you're expecting?
Patrick Lo
Yes, some of them are I mean for example like 12-Bay, ReadyNAS like our Ultimate Network Machine, like the DOCSIS 3.0 gateways those are ramping higher than what we expected.
Hamed Khorsand - BWS Financial
And then are you taking any special measures given the most circumstances in the last couple of quarters with the supply shortages?
Patrick Lo
We were starting to give longer forecast cycle to our suppliers. So they could prepare materials further ahead.
Hamed Khorsand - BWS Financial
Does that mean you have better visibility going into 2010?
Patrick Lo
In terms of supplies, yes.
Operator
Your next question comes from Woo Jin Ho, Bank of America-Merrill Lynch.
Woo Jin Ho - Bank of America-Merrill Lynch
Patrick, just the question on the service provider, prices this quarter you've been running around $40 million or $45 million a quarter. You have new DOCSIS 3.0 products coming up on service provider.
How should we think about the revenue run rate for the service provider going forward?
Patrick Lo
Of course, we would like to get it up every quarter to kind of growth together with the company. Our objective is to continue to grow above the market.
We think that 2010 the market at these growth in the low double-digits and we should be able to beat that. So that is the growth requirement both for our carrier and non-carrier.
Woo Jin Ho - Bank of America-Merrill Lynch
In terms of your foray into UTM, there was a nice sequential up-tick in deferred revenue in the quarter. How much of that was UTM subscription revenue and how should we think about the deferred revenue going forward as well?
Patrick Lo
Deferred revenue is a combination of the UTM subscription revenue as well as other shipments that left our warehouse, but did not arrive at the customer's warehouse. So we fluctuate from quarter-to-quarter, and certainly in this quarter there was contribution from UTM, but we do not split out our product specific revenue components.
But clearly, I mean, as time goes forward we are going to continue to build a defer revenue based on the UTM subscription, yes.
Woo Jin Ho - Bank of America-Merrill Lynch
Got it, and then one last one on the security channel. Could you just provide us an update on building up our security channel, I believe you are trying to recruit more (inaudible) for the UTM products?
Patrick Lo
Well, as a matter of fact, right now we are gradually gaining some of those competitors' security of ours. But what we have found in the first three months of running our UTM products is our existing channels.
Actually doing quite well and in selling our UTMs into our first installed base of switches and (inaudible) and then also into replacing our competitors date at UTMs.
Operator
Our next question comes from Maynard Um, UBS
Maynard Um - UBS
Can you talk a little bit more about the component constraints, I guess, specifically whether it's (inaudible) specific, industry specific and then when you expect the constraints to start to ease?
Patrick Lo
It is industry wide, and it's just not out. If you ask any network vendor they would tell you, I mean the little transformer sitting beyond the switches port, the inductors coming from Japan, they are in short supply.
Maynard Um - UBS
Okay when you think that those constraints might start to ease?
Patrick Lo
Beyond Q1, we believe.
Maynard Um - UBS
Okay, is there a way to quantify the margin impact, because presumably the component cost maybe are higher given the constraints as well as air freight?
Patrick Lo
Actually is not so much as component cost, it is more air freight than anything else, because we are one of the biggest consumer of all these inductors and transforms, because we probably ship the second most ports, even that ports in the world. So we have a pretty good steady pricing.
However, the lead time has gone way long, so in order to satisfy our end customers, we have to air freight, so we will expect that air freight cost continue to be at elevated levels for Q1.
Maynard Um - UBS
And then separately, as you talked about service provider growing low double digits in 2010 and I think you said that you expect overall revenue double digit growth in 2010, which implies closer to mid-teens growth for the non-service provider channel. Can you just kind a give us I guess your thoughts there on that market, sounds like we're kind of back to more reasonable economy, should we expect kind of normal seasonality now as go through the year?
Patrick Lo
Yes, absolutely we believe that normal seasonality should return and based on what we have seen so far this year and with the momentum coming in from Q4. We do believe that this year the market should grow at least at the low double-digit range worldwide and NETGEAR always beats the market.
So, we should strive to do better than that.
Maynard Um - UBS
The last question, now that you are sitting on a little north of $7 in net cash per share. Can you just talk about your uses of cash and more specifically the timeframe of when you might actually start to use that cash?
Christine Gorjanc
Again, we continue to review that looking for strategic acquisitions, be that, some product, a new channel or entry into a new country. So, I would expect to see us execute something on that early this year and then again we'll be buying some equipment and a few things for some of our new product introduction.
Operator
Your next question comes from Min Park, Goldman Sachs Group.
Min Park - Goldman Sachs Group
Just first, apart from the one-time contract or benefit you saw from the service providers, can you just talk about tell us possibly in rank order the key drivers of upside versus your expectations either by geography or by product?
Patrick Lo
I think the number one thing is that the market demand growth came back in all three regions that really helped the most. And then secondly, I think the share gain in the U.S.
was actually quite a bit higher that would be originally planned. And then thirdly, the ramp of those three products that we've described before the 12-Bay, ReadyNAS, the ultimate network machine and the DOCSIS 3.0, WiFi gateways.
So, those are ranked 1, 2, 3.
Min Park - Goldman Sachs Group
Patrick, I know NETGEAR has been introducing new products at a pretty fanatic rate lately. Are you at all concerned about the vast majority of revenues still coming from more of the older products?
Patrick Lo
Not really, there was something the halo effect. So, when Apple introduced the iPhone 3GS the bulk of the gold is still from the old iPhone and from iPod.
Min Park - Goldman Sachs Group
And then lastly, Christine, I was wondering if you could give us your thoughts about operating expense, I know you were very disciplined last year and this quarter they were up, but mostly on variable comp. How should we think about that in 2010 as revenues come back?
Christine Gorjanc
Yes, I mean I think we'll return to a normal operating expense, so I would anticipate that actual dollars will be up in Q1 and as we move into 2010 and yet still maintaining a double-digit bottom line margin. So, I think we will start to spending money on sales people, sales and marketing and R&D and continue doing that, because it worked well for us last year.
So, I would anticipate them to grow slowly throughout 2010. Again, we will always be disciplined on what we spend and how much, but I would anticipate in absolute dollars it will increase.
Operator
Your next question comes from Rohit Chopra, Wedbush Morgan Securities.
Rohit Chopra - Wedbush Morgan Securities
Patrick, I want to ask you a question about N versus G when we talked, I guess when things were kind of rough in the economy, you said that people were still trading down to G. What did you see this quarter and/or N shipments greater than G shipments?
Patrick Lo
Well, I mean actually our N and G shipments are both doing very well. In this market, there is always people who would like save a dime and that's why we saw quite a bit of momentum on the G side, but we also see a lot of popularity on the N side especially of our high-end and our ultimate network machine, which is the best, probably the best if not the best wireless router on the market is doing fantastically well worldwide, everybody is looking for it and it is always short, always stock out and so I see both ends moving over.
Rohit Chopra - Wedbush Morgan Securities
And could you tell us whether N shipments are greater than G?
Patrick Lo
No, the two are pretty evenly split.
Rohit Chopra - Wedbush Morgan Securities
You talked about share gains in the U.S. and that's obviously a great thing, is that due to lack of promotions by a larger competitor or failure by the overseas competitor.
What do you think is happening there?
Patrick Lo
I think ultimately it is the product, the product is driving everything, the product attracts our customers to buy the NETGEAR brand and then attracts more traffic into our channels and as a result our channel gives us more shelf space, gives us more ad space, it all started with the products and undoubtedly if you look at order reviews out there, our store is getting rate review, our ultimate network machine is getting rate review, our ReadyNAS is getting rate review and if you look at the CES, we got two awards and actually at CES we introduced a push to DV technology jointly with Intel. Intel picked us as exclusive partners to introduce this technology; it all proves than our commitment to R&D, commitment to innovation is paying off.
Rohit Chopra - Wedbush Morgan Securities
And I had one other question just on the home media products, we had a conversation I think at the Analyst Day where you had said that home media products might take some time to ramp that only because its sold in a different part of the store that because salespeople to sort of push those products versus consumers who did walk into the networking department. Can you give us a sense of how the consumer media products are doing based on your expectations what you are seeing right now?
Patrick Lo
Rohit, exactly what we need is the store merchandising as to be willing to put the media products in other departments, other than networking in order to make it tick. For example, the Push2TV adapter that we introduced joint fleet with Intel, it's now pushed in the Best Buy stores very visibly and the laptop department and it is doing very well.
I encourage you strongly to visit the Best Buy stores and take a look at it is selling very, very well.
Rohit Chopra - Wedbush Morgan Securities
One quick follow-up just on end chipsets, are the prices coming down for you guys?
Patrick Lo
Of course, it's coming down every week.
Operator
Your next question comes from Jeff Kvaal, Barclays Capital.
Jeff Kvaal - Barclays Capital
I'm wondering your revenues are on a higher trajectory now and some share gains are you at a position where you might be able to change your operating margins targets over the long term?
Patrick Lo
No, we don't intend to we have always said that, it is always that balance of maximizing growth versus a normal operating margins. We believe that between 10%, 12% is includes reasonable comfortable operating margin model for us to maximize our growth we know I mean we can grow in the past, we have grown at best at about 13% anything above that would probably hurt our operating margin, but on the other hand we believe that growing, the lower than market as not what we've wanted, we always want to grow faster than market so I believe that the 10%-12% operating margin with about market growth is where we want to be.
Jeff Kvaal - Barclays Capital
Would there be periods where you might be above that range?
Patrick Lo
Certainly, I mean we've done that before and there might be periods where we have a superior situation that we might be able to do better on that and we have done 12.3%-12.4% before.
Christine Gorjanc
And we want to consistently invest back into the business for future growth and other regions and that too. So that's little bit of balancing act also.
Operator
Thank you. At this time, we have no further questions.
I'd like to turn the call back over to the speakers for any closing comments.
Patrick Lo
Thank you very much everyone once again and we look forward to talking to you again in two and half month's time. We are very excited about the product introductions, we really having very strong product pipelines both in switching side, one the storage side, on the security side, and one the wireless WiFi router side, DOCSIS 3.0 gateway and now with the Push2TV technology, we are feeling very, very positive about the media adaptor side as well.
So we are looking forward to a very good year of 2010 and we'll talk to you again in the next quarter's earnings call. Thank you.
Operator
Thank you. This does conclude today's teleconference.
You may disconnect you lines at this time. Thank you for your participation.