While economies and budgets around the world are shrinking, Netgear is pushing ahead with its expansion plans to take it from SMB to a full-scale networking vendor.
Its latest range of products take it into head-on competition with Cisco, HP, 3Com and WatchGuard, said Patrick Lo, co-founder, chairman and CEO.
Lo said prospects for success relied upon the vendor's ability to rally the channel.
Netgear targeted the edge of large networks by selling unmanaged switches and firewalls in the 1990s. The company's success encouraged it to push further into the data centre with layer two and three switches.
Lo said the company moved "into the closet" with these later switches thanks to a web-based GUI that was
easier to use compared to the command-line interface standard on HP and
Cisco products.
"That turned out to be very successful," said Lo, who added that the company is now targeting the data centre. "We want to move from smart switches to being a full network solutions vendor."
Lo said the move was prompted in part by resellers looking for more opportunities to sell into the heart of the data centre. "Partners say they need more than switches - they need Wi-Fi, security, storage, WAN optimisation and NOC," said Lo. "We said let's pick the battles that one, have high demand and two, that we can win."
Netgear has made a series of acquisitions in storage and security that gave it platforms to launch its first wave of products in its bid to become a fully fledged networking vendor.
After the purchase of Infrant Technologies, Netgear introduced its ReadyNAS series, which has recently been updated to include a Pro line with iSCSI and Time Machine support and up to 12TB capacity. Lo said ReadyNAS had taken market share from Dell and HP because compared to NAS, file servers were "expensive, finicky, power hungry and can't scale".
The CP Secure acquisition gave Netgear the technology to launch its content threat management product to take on Cisco, WatchGuard and other security heavyweights. A universal threat management product is due in thesecond half of 2009, said Lo.
The obvious question is: how will Netgear respond to its competitors' claims that it is a consumer-grade vendor unfit for the SME market?
"It is very important to have strong channel program," said Lo, who listed the steps Netgear had taken to ready itself for the highly competitive networking market. Netgear now had a complete product range and no longer had to give up accounts as its SMB customers expanded.
"Our partners will fight for their customers," said Lo. The vendor has also shifted to upfront discounts over rebates, which cuts down administration and improves cashflow. He claimed that Netgear was very loyal to its partners. "We will never, never go direct," said Lo.
The vendor had also delivered to resellers when it came to feedback on its products, said Lo, and said this would continue. He pointed to the addition of iSCSI to its ReadyNAS range and the matching of HP's lifetime warranty
on switches.
Netgear was also building a recurring revenue model with its security and cloud storage subscription services. "The bigger the installed base, the bigger the revenue you will have," said Lo.
And then there is price. Lo said resellers would find it easier to win an account because Netgear "will beat everybody, anytime".
Lo said half of Netgear's customers had never had NAS or CTM products before but were buying them because it was simple and affordable. "It helps the industry to expand the pie. Our channel partners are very excited because now they have more to sell."
With their strong sales forces, Cisco and HP are too well-established in the enterprise to be unseated, said Lo. Netgear's strategy in the US has been to target 3Com accounts, and Netgear's rise mirrors 3Com's decline.
3Com once had 35 percent of the US market, but that was now in the late teens, said Lo.
Netgear would also expand with its traditional SMB customers rather than take on the enterprise head-on, said Lo. "Our customers tend to be very loyal," he said. "They tend to grow with us. They will expand Netgear's presence in their installations."
Netgear's second wave will cover the missing elements of its networking assault - IP telephony, video conferencing and IP traffic management. Lo said Netgear would probably follow the same model of acquiring technology rather than developing it in-house. However, the vendor was going to wait until the market had matured.
"Today a lot of SMB telephony companies are funded by venture capitalists and are still not very profitable," such as Shoretel, said Lo. "We will jump into the fray when we see the market is there."
The NAS and security appliance markets are worth $1 billion a year each, said Lo, by way of comparison.
Whenever the second wave of Netgear products does arrive, Australia will be the first market to see it.
Australia is Netgear's fastest-growing market, and its market share is higher here than in the US because Cisco is relatively less established. The Asia Pacific region contributes 10 percent to Netgear's revenue, and most of that is Australia, said Lo.
"Anything new we always bring to Australia," Lo added.
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