Netgear Shares Plunged: What You Need to Know (NTGR)

Netgear Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Netgear (Nasdaq: NTGR ) dropped 17% in intraday trading today after an impressive earnings beat was overshadowed by margin deterioration.

So what: Non-GAAP EPS of $0.65 beat the consensus estimate by $0.08 and grew 71% year over year. Last quarter Netgear beat estimates by an even more impressive $0.11. Revenue grew 49% year over year to $291 million, helped by an acquisition and a one-time $10 million order from a service provider customer. GAAP EPS rose 86% year over year to $0.54.

Now what: Netgear is defying years of business school wisdom with its significant diseconomies of scale. Gross margin fell to 31% from 35.5% in the year-ago quarter. Operating margin fell to 9.5% from 10.6% in the year-ago quarter while non-GAAP operating margin fell to 11.9% from 13.1%. Management guided the third quarter to revenue of $290 million-$300 million, up about 25% year over year, with a non-GAAP operating margin of 11% to 12%.

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The Steve Jobs Betrayal
You may already know that in the final year of his life, Jobs revealed a stunning betrayal — and told his biographer, "I will spend my last dying breath... and every penny of Apple's $40 billion in the bank to right this wrong." What was it that made Jobs so irate — and why could it make a few in-the-know investors some major profits over the coming months and years?

Enter your email address below to find out what made Jobs so enraged!

Fool contributor Cindy Johnson does not own shares of any company named above. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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