0001122904 2010-10-03 0001122904 2009-12-31 0001122904 2011-10-02 0001122904 2010-12-31 0001122904 2011-07-04 2011-10-02 0001122904 2010-06-28 2010-10-03 0001122904 2010-01-01 2010-10-03 0001122904 2011-11-04 0001122904 2011-01-01 2011-10-02 iso4217:USD xbrli:shares iso4217:USD xbrli:shares false --12-31 Q3 2011 2011-10-02 10-Q 0001122904 37560904 Accelerated Filer NETGEAR, INC 9. Balance Sheet Components Accounts receivable, net (in thousands):   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="75%" align="center"> <tr><td width="80%"> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 2, 2011</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">December 31, 2010</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Gross accounts receivable</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">235,395</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">241,632</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top"> Less: Allowance for doubtful accounts</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(1,480</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(1,481</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Allowance for sales returns</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(11,484</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(10,273</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr><td valign="top"> Allowance for price protection</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(3,778</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(3,147</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Total allowances</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(16,742</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(14,901</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top"> Accounts receivable, net</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">218,653</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">226,731</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table> Inventories (in thousands):   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="75%" align="center"> <tr><td width="80%"> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 2, 2011</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">December 31, 2010</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Raw materials</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,225</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,591</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Finished goods</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">133,738</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">125,803</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Total</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">135,963</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">127,394</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table> The Company records provisions for excess and obsolete inventory based on forecasts of future demand. While management believes the estimates and assumptions underlying its current forecasts are reasonable, there is risk that additional charges may be necessary if current forecasts are greater than actual demand.   Property and equipment, net (in thousands):   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="75%" align="center"> <tr><td width="80%"> </td> <td valign="bottom" width="5%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="5%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 2, 2011</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">December 31, 2010</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Computer equipment</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">7,036</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">6,057</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Furniture, fixtures and leasehold improvements</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">9,663</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">9,450</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Software</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">19,839</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">18,553</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Machinery and equipment</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">20,028</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">17,465</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Construction in progress</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">360</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">30</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">56,926</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">51,555</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Less: accumulated depreciation and amortization</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(40,847</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(34,052</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top"> Property and equipment, net</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">16,079</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">17,503</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table> Goodwill (in thousands):   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="75%" align="center"> <tr><td width="70%"> </td> <td valign="bottom" width="5%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="5%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="5%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Goodwill at December 31, 2010</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Westell Acquisition</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Goodwill at October 2, 2011</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Goodwill</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">74,198</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">11,746</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">85,944</td> <td valign="bottom" nowrap="nowrap">  </td></tr></table> Goodwill increased $11.7 million during the nine months ended October 2, 2011 due to the acquisition of the Customer Networking Solutions division of Westell Technologies, Inc. ("Westell"). For additional discussion of the Westell acquisition, please refer to Note 3 of the Notes to Unaudited Condensed Consolidated Financial Statements. In the fourth quarter of 2010, the Company completed its annual goodwill impairment test based on the Company operating in one segment. The Company determined that goodwill was not impaired at December 31, 2010 since the estimated fair value of the Company exceeded its carrying value. In the three months ended July 3, 2011, the Company reorganized its reporting structure which resulted in changes to its segment reporting from one reporting segment, which comprised the development, marketing and sale of networking products for the commercial business and home markets, to three reporting segments: retail, commercial and service provider. Refer to Note 12 of the Notes to Unaudited Condensed Consolidated Financial Statements for additional information regarding the change in segment reporting. On the first day of the second fiscal quarter of 2011, the Company performed a goodwill impairment assessment as a result of the change in reportable segments. The Company initially determined the fair value of the new business units and allocated goodwill to each segment based on their relative fair values. The Company compared the fair value of the new reporting units to the reporting unit's carrying value and determined that goodwill was not impaired at July 3, 2011 since the estimated fair values of each of the Company's reporting units exceeded the carrying values. As the Company has not been aware of any changed conditions or situations since the last impairment testing performed that might call into question whether the current balances are fairly recorded, no impairment testing was performed in the three months ended October 2, 2011. In the fourth quarter of 2011, the Company will perform its annual goodwill impairment test based on the Company operating in three segments. The fair value of the new business units was determined using an income approach and a market approach, which were weighted equally. Under the income approach, the fair value of an asset is based on the value of the estimated cash flows that the asset can be expected to generate in the future. These estimated future cash flows were discounted at rates ranging from 13 to 15 percent to arrive at their respective fair values. Under the market approach, the fair value of the unit is based on an analysis of financial data for publicly traded companies engaged in the same or similar lines of business.   The following table presents the changes in carrying amount of goodwill in each of the Company's recast reportable segments at October 2, 2011 (in thousands):   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr><td width="65%"> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom" colspan="2"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="10" align="center">New Segments</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom" colspan="2"> </td> <td valign="bottom"> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Old Segment</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Retail</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Commercial</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Service Provider</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Total</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Goodwill at December 31, 2010</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">74,198</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">74,198</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Relative fair value approach</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(74,198</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">33,546</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">32,043</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">8,609</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Goodwill at April 4, 2011</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">33,546</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">32,043</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">8,609</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">74,198</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Westell acquisition goodwill</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">11,746</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">11,746</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Goodwill at October 2, 2011</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">33,546</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">32,043</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">20,355</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">85,944</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table> Other accrued liabilities (in thousands):   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="76%" align="center"> <tr><td width="74%"> </td> <td valign="bottom" width="6%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="6%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 2, 2011</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">December 31, 2010</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Sales and marketing programs</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">36,232</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">37,020</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Warranty obligation</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">40,576</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">40,513</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Freight</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">6,683</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">7,174</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Other</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">24,335</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">25,706</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Other accrued liabilities</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">107,826</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">110,413</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td></tr></table> -76000 -8000 2094000 6. Shipping and Handling Fees and Costs The Company includes shipping and handling fees billed to customers in net revenue. Shipping and handling costs associated with inbound freight are included in cost of revenue and ending inventory. Shipping and handling costs associated with outbound freight are included in sales and marketing expenses and totaled $3.5 million and $10.3 million for the three and nine months ended October 2, 2011, respectively, and $3.0 million and $8.3 million for the three and nine months ended October 3, 2010, respectively.

89155000

75672000

226731000

218653000

-90000

-467000

3487000

19719000

18685000

110413000

107826000

281000

-14000

316108000

358162000

780321000

864288000

668044000

726614000

3. Business Acquisitions Leaf Networks, LLC On January 15, 2010, the Company completed the acquisition of certain intellectual property and other assets of Leaf Networks, LLC ("Leaf"), a developer of virtual networking software. The acquisition qualified as a business acquisition and was accounted for using the purchase method of accounting. The Company believes the acquisition will accelerate the Company's continuing networking technology research and development initiatives. The aggregate purchase price was $2.1 million, of which $2.0 million was paid in cash in the three months ended March 28, 2010 and $100,000 was paid in the three months ended April 3, 2011. Additionally, the acquisition agreement specified that Leaf shareholders may receive a total additional payout of up to $900,000 in cash over the three years following the closing of the acquisition if developed products pass certain acceptance criteria. During the three months ended March 28, 2010, the Company determined that the present value of the $900,000 potential additional payout was approximately $800,000. For each subsequent quarter, the Company will measure at fair value for each reporting period and record a liability. The Company paid $400,000 for the first portion of this additional payout in the three months ended April 3, 2011. As of October 2, 2011, the Company had determined the remaining acceptance criteria for the final $500,000 portion of the eligible additional payout were nearing completion, and is carrying a liability for the entire $500,000. The results of Leaf's operations have been included in the consolidated financial statements since the date of acquisition. The historical results of operations of Leaf prior to the acquisition were not material to the Company's results of operations. In accordance with the acquisition method of accounting for business combinations, the Company allocated the total purchase price to identifiable intangible assets based on each element's estimated fair value. Acquisition costs were expensed as incurred, and were immaterial for this transaction. Purchased intangibles, representing the existing technology acquired from Leaf, will be amortized on a straight-line basis over their respective estimated useful lives. Goodwill was recorded based on the residual purchase price after allocating the purchase price to the fair market value of intangible assets acquired. Goodwill arose as a result of the $800,000 present valuation of the $900,000 potential additional payout, plus $100,000 in additional payment consideration. The allocation of the purchase price was as follows (in thousands):   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="68%" align="center"> <tr><td width="89%"> </td> <td valign="bottom" width="6%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Intangibles, net</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,000</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Goodwill</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">900</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Total purchase price allocation</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,900</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table>   Of the $900,000 of goodwill recorded on the acquisition of Leaf, approximately $471,000 was deductible for federal and state income tax purposes. The $2.0 million in acquired intangible assets was designated as existing technology. The value was calculated based on the present value of the future estimated cash flows derived from projections of future revenue attributable to existing technology. This $2.0 million will be amortized over its estimated useful life of seven years. Westell Technologies, Inc. On April 15, 2011, the Company completed the acquisition of certain intellectual property and other assets of the Customer Networking Solutions division of Westell Technologies, Inc. ("Westell") at a purchase price of $37.0 million in cash. The acquisition included inventories, property and equipment, intangible assets, and liabilities that existed at the closing date, including employee bonuses and product warranties. The acquisition qualifies as a business combination and was accounted for using the acquisition method of accounting. The Company believes the acquisition will bolster its service provider revenue growth and strengthen its market position among U.S. telecommunications operators. The results of Westell's operations have been included in the consolidated financial statements since the date of acquisition. The historical results of operations of Westell prior to the acquisition were not material to the Company's results of operations. In accordance with the acquisition method of accounting for business combinations, the Company allocated the total purchase price to identifiable intangible assets based on each element's estimated fair value. Acquisition costs were expensed as incurred, and were immaterial for this transaction. Purchased intangibles will be amortized on a straight-line basis over their respective estimated useful lives. Goodwill was recorded based on the residual purchase price after allocating the purchase price to the fair market value of assets acquired and liabilities assumed. Goodwill arises as a result of, among other factors, future unidentified new products and new technologies as well as the implicit value of future cost savings as a result of the combining of entities. The Company may adjust the preliminary purchase price allocation after obtaining more information regarding, among other things, liabilities assumed, and revisions of preliminary estimates. The following table summarizes the estimated fair values of the assets and liabilities assumed at the acquisition date (in thousands):   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="68%" align="center"> <tr><td width="88%"> </td> <td valign="bottom" width="6%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Inventories</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">6,290</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Property and equipment, net</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">119</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Intangibles, net</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">19,500</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Current liabilities</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(646</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Goodwill</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">11,746</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top"> Total consideration</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">37,009</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table> Of the $11.7 million of goodwill recorded on the acquisition of Westell, approximately $9.3 million is deductible for U.S. federal and state income tax purposes. A total of $15.7 million of the $19.5 million in acquired intangible assets was designated as customer contracts and related relationships. The value was calculated based on the present value of the future estimated cash flows derived from projections of future operations attributable to existing customer contracts and related relationships and discounted at 19.0%. This $15.7 million is being amortized over its estimated useful life of eight years. A total of $3.7 million of the $19.5 million in acquired intangible assets was designated as core technology. The value was calculated based on the present value of the future estimated cash flows derived from estimated savings attributable to the core technology and discounted at 16.0%. This $3.7 million is being amortized over its estimated useful life of four years.   A total of $100,000 of the $19.5 million in acquired intangible assets was designated as order backlog. The value was calculated based on an estimate of order backlog using the expected cash flow for the orders and discounted at 3.3%. This $100,000 has been fully amortized as of October 2, 2011.

172202000

98548000

126173000

174278000

-73654000

48105000

13. Commitments and Contingencies Litigation and Other Legal Matters Wi-Lan Inc. v. NETGEAR In October 2007, a lawsuit was filed against the Company by Wi-Lan Inc. ("Wi-Lan"), a patent-holding company existing under the laws of Canada, in the U.S. District Court, Eastern District of Texas. Wi-Lan alleged that the Company infringed U.S. Patent Nos. 5,282,222, RE37,802 and 5,956,323. Wi-Lan accused the Company of infringement with respect to its wireless networking products compliant with the IEEE 802.11 standards and ADSL products compliant with the ITUG.992 standards. Wi-Lan also sued 21 other technology companies alleging similar claims of patent infringement. The Company filed its answer to the lawsuit in the first quarter of 2008. A claim construction hearing took place for the '222 and '802 Patents on March 11, 2010, and on May 11, 2010, the Court issued its order interpreting the claims of these patents (claim construction order). The claim construction hearing on the '323 patent occurred on September 1, 2010, and the Court subsequently issued its claim construction order for this patent. The Court ordered that infringement of the RE37,802 and 5,282,222 (Wi-Fi) patents would be tried first, as to all defendants, and infringement of the 5,956,323 (DSL) patent would be addressed in a second trial. Shortly before the beginning of the first trial, the Company and Wi-Lan entered into settlement discussions. Without admitting any wrongdoing or violation of law and to avoid the distraction and expense of continued litigation and the uncertainty of a jury verdict on the merits, the Company and Wi-Lan signed a binding release agreement in which the Company agreed to make a one-time lump sum payment to be paid by May 15, 2011 in consideration for mutual general releases. In the agreement, each party agreed to release the other party from all claims, known or unknown, under any of the '222, '802 and '323 Patents with respect to the manufacture, use, sale, etc. of products by the Company. Each party agreed to bear its own costs and attorneys' fees. The Company made the required one-time lump sum payment that was due by May 15, 2011. This arrangement is not expected to have a material impact on the Company's consolidated financial position, results of operations, or cash flows. The Court has dismissed all claims between Wi-Lan and the Company, including all claims presented by Wi-Lan's complaint and all of the Company's counterclaims, and neither of the scheduled trials between Wi-Lan and the Company will occur. This litigation matter is now concluded. Fujitsu et. al v. NETGEAR In December 2007, a lawsuit was filed against the Company by Fujitsu Limited, LG Electronics, Inc. and U.S. Philips Corporation in the U.S. District Court, Western District of Wisconsin. The plaintiffs allege that the Company infringes U.S. Patent Nos. 6,018,642, 6,469,993 and 4,975,952. The plaintiffs accuse the Company's wireless networking products compliant with the IEEE 802.11 standards of infringement. The Company filed its answer to the lawsuit in the first quarter of 2008. The District Court held a claim construction hearing on August 15, 2008. On September 10, 2008, the District Court issued a claim construction order. In February 2009, the parties filed numerous motions for summary judgment concerning, among other things, non-infringement, invalidity, and other affirmative defenses. In September 2009, the District Court granted the Company's motion for summary judgment of non-infringement of the three patents-in-suit. The District Court determined that the Company's compliance with the 802.11 standard did not necessarily infringe the patents-in-suit and that the plaintiffs did not provide adequate evidence regarding the function of the Company's products to put the issue of infringement before a jury. In light of the District Court's determination that the patents-in-suit were not infringed, the District Court declined to address the Company's summary judgment claims of the invalidity of the patents in question. On December 23, 2009, the Plaintiffs filed two briefs with the Federal Circuit appealing the District Court's summary judgment rulings. On December 30, 2009, the District Court ordered litigation costs in the amount $175,000 to be reimbursed to the Company, which were never collected or recognized. The Company's opposition brief to the Plaintiff's appeal was submitted on February 18, 2010. The Federal Circuit heard oral arguments on the Plaintiffs' appeal on June 7, 2010. On September 20, 2010, the Federal Circuit issued a unanimous ruling that made three separate findings. It affirmed a summary judgment ruling from the District Court that the Company did not infringe the claims of a Fujitsu patent related to wireless communications technology. In addition, the Court affirmed a summary judgment ruling that the Company did not infringe the claims of an LG Electronics Inc. patent also related to wireless communications technology. Further, the court affirmed the lower court's ruling that the Company did not infringe a Philips patent for a method of transmitting data messages in a communications network, except for four products. For those four products, the Court ruled that Philips produced sufficient evidence of direct infringement, so that an infringement trial for these four products could proceed. On October 19, 2010, plaintiff LG Electronics submitted a petition for rehearing to the Federal Circuit requesting that the Federal Circuit's decision be set aside with respect to LG Electronics' asserted patent and that a rehearing be granted. The Federal Circuit denied LG Electronics' petition for a rehearing on November 2, 2010, letting stand its September 20, 2010 order affirming the District Court's decision to grant the Company summary judgment of noninfringement on the patent asserted by LG Electronics. Subsequent to the Federal Circuit ruling, the parties began settlement discussions with respect to the four remaining products accused of infringing the Philips patent. On March 8, 2011, the District Court approved the settlement agreement between Philips and the Company. This arrangement is not expected to have a material impact on the Company's consolidated financial position, results of operations or cash flows. This litigation matter is now concluded.   OptimumPath, L.L.C. v. NETGEAR In January 2008, a lawsuit was filed against the Company by OptimumPath, L.L.C ("OptimumPath"), a patent-holding company existing under the laws of the State of South Carolina, in the U.S. District Court, District of South Carolina. OptimumPath claims that certain of the Company's wireless networking products infringe on OptimumPath's U.S. Patent No. 7,035,281. OptimumPath also sued six other technology companies alleging similar claims of patent infringement. The Company filed its answer to the lawsuit in the second quarter of 2008. Several defendants, including the Company, jointly filed a request for inter partes reexamination of the OptimumPath patent with the United States Patent and Trademark Office (the "USPTO") on October 13, 2008. On January 12, 2009, a reexamination was ordered with respect to claims 1-3 and 8-10 of the patent, but denied with respect to claims 4-7 and 11-32 of the patent. On February 4, 2009, the defendants jointly filed a petition to challenge the denial of reexamination of claims 4-7 and 11-32. In March 2009, the District Court granted defendants' motion to transfer the case to the U.S. District Court, Northern District of California. In July 2009, the petition to challenge the denial of reexamination of claims 4-7 and 11-32 was denied. The Company and OptimumPath attended a Court-ordered mediation on September 22, 2009 but were unable to make progress towards settlement. The Company and other defendants filed a combined claim construction/summary judgment brief on December 23, 2010. OptimumPath responded on January 20, 2011, and the defendants replied on February 3, 2011. The oral arguments on claim construction and the summary judgment motion were made on February 17, 2011. On April 12, 2011, the District Court granted defendants' motion for summary judgment on OptimumPath's claim for literal infringement and defendants' motion to preclude OptimumPath's infringement claims based on the doctrine of equivalents. The Court also found that the accused devices did not infringe under the doctrine of equivalents. The Court also granted defendants' motion for summary judgment that asserted claims 1, 2, 6, and 9 through 13 of the '281 patent were invalidated by various prior art. The pretrial conference and trial dates were vacated. OptimumPath filed its notice of appeal to the Federal Circuit of the District Court's rulings on May 18, 2011. On May 23, 2011, the District Court entered the defendants' joint request for costs in the amount of $102,554.00, which have not yet been collected or recognized. On June 29, 2011, the Federal Circuit docketed the appeal. OptimumPath submitted its opening brief in its appeal to the Federal Circuit on October 21, 2011, and the Company's answering brief is due on December 2, 2011. OptimumPath reply brief will then be due on December 16, 2011. Ruckus Wireless v. NETGEAR In May 2008, a lawsuit was filed against the Company by Ruckus Wireless ("Ruckus"), a developer of Wi-Fi technology, in the U.S. District Court, Northern District of California. Ruckus alleges that the Company infringes U.S. Patent Nos. 7,358,912 ('912 Patent) and 7,193,562 ('562 Patent) in the course of deploying Wi-Fi antenna array technology in its WPN824 RangeMax wireless router. Ruckus also sued Rayspan Corporation alleging similar claims of patent infringement. The Company filed its answer to the lawsuit in the third quarter of 2008. The Company and Rayspan Corporation jointly filed a request for inter partes reexamination of the Ruckus patents with the USPTO on September 4, 2008. The Court issued a stay of the litigation while the reexaminations proceeded in the USPTO. On November 28, 2008, a reexamination was ordered with respect to claims 11-17 of the '562 Patent, but denied with respect to claims 1-10 and 18-36. On December 17, 2008, the defendants jointly filed a petition to challenge the denial of reexamination of claims 1-10 and 18-36 of the '562 Patent. In July 2009, the petition was denied, and the remaining claims 11-17 were confirmed. The Company is appealing the confirmation of claims 11-17. On December 2, 2008, reexamination was granted with regard to the '912 Patent. In early October 2009, the Company received an Action Closing Prosecution in the reexamination of the '912 Patent. All the claims of the '912 Patent, with the exception of the unchallenged claims 7 and 8, were finally rejected by the USPTO. On October 30, 2009, Ruckus submitted an "after-final" amendment in the '912 Patent reexamination proceeding. The Company's comments to Ruckus' "after-final" amendment were submitted on November 30, 2009. On December 1, 2009, the Court found that bifurcating the '562 Patent from the '912 Patent and commencing litigation on the '562 Patent while the USPTO reexamination process and appeals are still pending would be an inefficient use of the Court's resources. Accordingly, the Court ruled that the litigation stay should remain in effect. On September 12, 2010, the Company filed the rebuttal brief in its appeals of the USPTO's rulings during the reexamination of the '562 Patent, and the Company requested an oral hearing with the Board of Appeals at the USPTO to discuss this brief. On September 13, 2010, Ruckus filed a notice of appeal of the '912 Patent to appeal the adverse rulings it received from the USPTO in the reexamination of this patent. The Company filed a respondent's brief in the '912 Patent case on January 24, 2011. An oral hearing in the '562 case was set for February 1, 2011, but the Company decided to cancel it and let the USPTO decide the '562 case based solely on the previously submitted papers. On May 13, 2011, the USPTO indicated that the Company was successful in its appeal of the examiner's previous decision to allow claims 11-17 in the '562 reexamination, and the USPTO Board of Appeals reversed the examiner's decision and declared those claims invalid. On June 13, 2011, Ruckus submitted a request for rehearing by the Board of Appeals of its decision to reject claims 11-17 of the '562 Patent. On September 28, 2011, the Board of Patent Appeals and Interferences denied Ruckus's request for a rehearing in the '562 Patent reexamination case. The next step for Ruckus would be to file a notice of appeal to the Court of Appeals for the Federal Circuit. Ruckus has 60 days from September 28, 2011 until November 27, 2011in which to file such a notice.   On November 4, 2009, Ruckus filed a new complaint in the U.S. District Court, Northern District of California alleging the Company and Rayspan Corporation infringe a patent that is related to the patents previously asserted against the Company and Rayspan Corporation by Ruckus, as discussed above. This newly asserted patent is U.S. Patent No. 7,525,486 entitled "Increased wireless coverage patterns." As with the previous Ruckus action, the WPN824 RangeMax wireless router is the alleged infringing device. The Company challenged the sufficiency of Ruckus's complaint in this new action and moved to dismiss the complaint. Ruckus opposed this motion. The Court partially agreed with the Company's motion and ordered Ruckus to submit a new complaint, which Ruckus did. The initial case management conference occurred on February 11, 2010. On March 25, 2010, the Court ordered a stay until the completion of the '562 Patent's reexamination proceedings in the first Ruckus lawsuit against the Company and Rayspan. The Court instructed the parties to submit status reports to the Court every six months, apprising the Court of the status of the pending reexamination proceedings in the USPTO. Upon final exhaustion of all pending reexamination proceedings of the '562 Patent, including any appeals, the Court ordered the parties to jointly submit to the Court a letter indicating that all appeals have been exhausted and requesting a further case management conference. On November 19, 2010, the Company filed suit against Ruckus in the U.S. District Court, District of Delaware for infringement of four of the Company's patents. The Company alleges that Ruckus's manufacture, use, sale or offers for sale within the United States or importation into the United States of products, including wireless communication products, infringe United States Patent Nos. 5,812,531, 6,621,454, 7,263,143, and 5,507,035, all owned by the Company. The Company granted Ruckus an extension to file its answer to the Company's suit, and on January 11, 2011, Ruckus filed a motion to dismiss the Company's suit based on insufficient pleadings. The Company filed its response to Ruckus's motion on January 31, 2011. In addition, on May 6, 2011, Ruckus filed a motion to transfer venue to the Northern District of California. The Court denied Ruckus' motion to transfer the case to the Northern District of California and granted the Company leave to file an amended complaint rather than address the Ruckus motion to dismiss based on insufficient pleadings. The Company filed the proposed amended complaint. Nevertheless, Ruckus filed a second motion to dismiss based on insufficient pleadings by the Company. The Company has filed its opposition to Ruckus's motion, and the Court has not yet ruled on the motion. Northpeak Wireless, LLC v. NETGEAR In October 2008, a lawsuit was filed against the Company and 30 other companies by Northpeak Wireless, LLC ("Northpeak") in the U.S. District Court, Northern District of Alabama. Northpeak alleges that the Company's 802.11b compatible products infringe certain claims of U.S. Patent Nos. 4,977,577 and 5,987,058. The Company filed its answer to the lawsuit in the fourth quarter of 2008. On January 21, 2009, the District Court granted a motion to transfer the case to the U.S. District Court, Northern District of California. In August 2009, the parties stipulated to a litigation stay pending a reexamination request to the USPTO on the asserted patents. The reexaminations of the patents are proceeding. In March 2011, the USPTO confirmed the validity of the asserted claims of the '577 patent over certain prior art references. In April 2011, the USPTO issued a final office action rejecting both asserted claims of the '058 patent as being obvious in light of the prior art. The case remains stayed by stipulation, and no trial date has been set. WIAV Networks, LLC v. NETGEAR In July 2009, a lawsuit was filed against the Company and over 50 other companies by WIAV Networks, LLC ("WIAV") in the U.S. District Court, Eastern District of Texas. WIAV alleges that the Company and the other defendants infringe U.S. Patent Nos. 6,480,497 and 5,400,338. WIAV alleges that the Company's wireless networking devices, including various routers and gateways, infringe upon WIAV's patents. The Company filed its answer to the lawsuit in October 2009 and asserted that WIAV's patents were both invalid and not infringed upon by the Company. In March 2010, the Company and its co-defendants filed a motion to transfer the case to the U.S. District Court, Northern District of California. WIAV opposed the motion. On June 3, 2010, the Court heard the defendants' motion to transfer the case from the Eastern District of Texas to the Northern District of California. The Court took the motion under consideration, and on July 15, 2010, the Court ruled that it would transfer the case to the U.S. District Court, Northern District of California. Discovery has not commenced. On August 31, 2010, the U.S. District Court, Northern District of California ordered WIAV to demonstrate why the Court should not dismiss all but the first named defendant from the lawsuit. The parties briefed and argued this issue before the Court. In response, the Court dismissed without prejudice all the defendants from the case except Hewlett-Packard Company. PACid Group, LLC v. NETGEAR In July 2009, a lawsuit was filed against the Company and 30 other companies by The PACid Group, LLC ("PACid") in the U.S. District Court, Eastern District of Texas. PACid alleges that the Company and the other defendants infringe U.S. Patent Nos. 5,963,646 ('646 Patent) and 6,049,612 ('612 Patent). PACid alleges that certain unnamed NETGEAR products that use encryption methods infringe upon PACid's patents. The Company filed its answer to the lawsuit in September 2009 and asserted that PACid's patents were both invalid and not infringed by the Company. Discovery has not yet commenced. Most of the Company's chipset suppliers have settled out of the lawsuit and obtained a license to the plaintiff's asserted patents. Because most of the accused infringement occurred in the chipset, this settlement by the chipset suppliers limits the claims the plaintiff has against the Company. On March 7, 2011, the Company attended a status conference. On May 17, 2011, the Court held another status conference. At this conference, the Company indicated to the Court that a small percentage of the relevant products have non-licensed chip sets. The Court ordered that within 21 days of the status conference PACid shall produce all license agreements it has entered into; within 30 days of the status conference, all defendants shall produce a declaration on sales data; and within 14 days from that defendant production, PACid shall dismiss without prejudice the appropriate defendants. The parties complied with the order, and PACid did not dismiss the Company. On August 23, 2011, at mediation between the Company and PACid, a settlement of this lawsuit was reached. Without admitting any wrongdoing or violation of law and to avoid the distraction and expense of continued litigation and the uncertainty of a jury verdict on the merits, the Company and PACid signed a binding release agreement in which the Company agreed to make a one-time lump sum payment in consideration for mutual general releases. In the agreement, each party agreed to release the other party from all claims, known or unknown, under any of the '646 and '612 Patents with respect to the manufacture, use, sale, etc. of products by the Company. Each party agreed to bear its own costs and attorneys' fees. The Company has made the required one-time lump sum payment. This arrangement is not expected to have a material impact on the Company's consolidated financial position, results of operations or cash flows. The Court has dismissed all claims between PACid and the Company, including all claims presented by PACid's complaint and all of the Company's counterclaims, and the trial in this matter will not occur. This litigation matter is now concluded. MPH Technologies Oy v. NETGEAR On February 4, 2010, the Company was sued by MPH Technologies Oy ("MPH") for infringement of U.S. patent 7,346,926 entitled "Method for Sending Messages Over Secure Mobile Communication Links." MPH alleges that the Company's VPN Client Software, Dual WAN gigabit SSL VPN Firewall, ProSafe Dual WAN VPN Firewall with 8-port 10/100 Switch, ProSafe VPN Firewall with 8-port 10/100 Switch, ProSafe VPN Firewall 8 with 8-Port 10/100 Switch, ProSafe VPN Firewall 8 with 4-Port 10/100 Mbps Switch, ProSafe 802 11 g Wireless ADSL Modem VPN Firewall Router, ProSafe Wireless-N VPN Firewall, and ProSafe 802 11 wireless VPN Firewall 8 with 8-port 10/100 Mbps Switch infringe claims of the '926 Patent. On May 17, 2010, the defendants jointly filed a motion to transfer the case to the U.S. District Court, Northern District of California. In addition, the Company filed its answer, affirmative defenses, and counterclaims on that day. On June 9, 2010, the plaintiff filed its answer to the Company's invalidity counterclaim and its response to the defendants' motion to transfer. On June 23, 2010, the defendants filed their joint reply to plaintiff's response to the defendants' motion to transfer venue. On July 16, 2010, the Court issued an order transferring the case to the Northern District of California. On September 10, 2010, the Company amended its answer to the complaint. The initial scheduling conference occurred on December 2, 2010. In response to this conference, the Court ordered that the Plaintiff must file its opening claim construction brief no later than May 17, 2011 and that defendants must file their responsive claim construction briefs no later than May 31, 2011. The Court also ordered that a claim construction hearing take place on June 22, 2011. The Company and plaintiff signed a settlement agreement on May 15, 2011. In the agreement, the Company agreed to pay a one-time lump sum payment and grant MPH certain other patent rights in return for each party agreeing to release the other party from all claims, known or unknown, under the patent in suit and related patents with respect to the manufacture, use, sale, etc. of products by the Company. The Company received a fully paid, worldwide, perpetual license to the patent in suit and all foreign counterparts and related patents. Each party agreed to bear its own costs and attorneys' fees. The Company has subsequently made the required one-time lump sum payment. This arrangement is not expected to have a material impact on the Company's consolidated financial position, results of operations, or cash flows. On May 16, 2011, the Court dismissed the case with prejudice, with each party to bear its own attorneys' fees and costs. The Company has since made the lump sum payment to MPH, and this litigation matter is now concluded. Ericsson v. NETGEAR On September 14, 2010, Ericsson Inc. and Telefonaktiebolaget LM Ericsson filed a patent infringement lawsuit against the Company and defendants D-Link Corporation, D-Link Systems, Inc., Acer, Inc., Acer America Corporation, and Gateway, Inc. in the U.S. District Court, Eastern District of Texas alleging that the defendants infringe certain Ericsson patents. The Company has been accused of infringing eight U.S. patents: 5,790,516; 6,330,435; 6,424,625; 6,519,223; 6,772,215; 5,987,019; 6,466,568; and 5,771,468. Ericsson generally alleges that the Company and the other defendants have infringed and continue to infringe the Ericsson patents through the defendants' IEEE 802.11-compliant products. In addition, Ericsson alleges that the Company has infringed, and continues to infringe, the claimed methods and apparatuses of the '468 Patent through the Company's PCMCIA routers. The Company filed its answer to the Ericsson complaint on December 17, 2010 where it asserted the affirmative defenses of noninfringement and invalidity of the asserted patents. On March 1, 2011, the defendants filed a motion to transfer venue to the District Court for the Northern District of California and their memorandum of law in support thereof. On March 21, 2011, Ericsson filed is opposition to the motion, and on April 1, 2011, defendants filed their reply to Ericsson's opposition to the motion to transfer. On June 8, 2011, Ericsson filed an amended complaint that added Dell, Toshiba and Belkin as defendants. At the status conference held on Jun 9, 2011, the Court set a Markman hearing for June 28, 2012 and trial for June 3, 2013. On June 14, 2011, Ericsson submitted its infringement contentions against the Company. On September 29, 2011, the Court denied the defendants motion to transfer venue to the Northern District of California. Discovery is ongoing. Fujitsu v. NETGEAR On September 3, 2010, Fujitsu filed a complaint against the Company, Belkin International, Inc., Belkin, Inc., D–Link Corporation, D–Link Systems, Inc., ZyXEL Communications Corporation, and Zyxel Communications, Inc in the U.S. District Court, Northern District of California alleging that certain of the Company's products infringe upon Fujitsu's U.S. patent Re. 36,769 patent ('769 Patent) through various cards and interface devices within the Company's products. The Company answered the complaint denying the allegations of infringement and claiming that the asserted patent is invalid. In addition, the Company filed a motion to disqualify counsel for Fujitsu. The Company's disqualification motion was argued before the Court on December 16, 2010, and on December 22, 2010, the Court granted the Company's motion and disqualified counsel for Fujitsu. In response, Fujitsu requested a stipulation from all parties to reset the case management conference and scheduled hearing dates for the motions to dismiss. The initial case management conference was held on March 18, 2011. A claim construction hearing was held on October 14, 2011. The parties are currently participating in the discovery process. Data Network Storage, LLC v. NETGEAR In April 2009, a lawsuit was filed against the Company and 14 other companies by Data Network Storage, LLC ("DNS") in the U.S. District Court for the Southern District of California. DNS alleges that the Company and the other third parties infringe U.S. Patent No. 6,098,128. In particular, DNS is alleging that several of the Company's ReadyNAS products infringe upon DNS's patents. The Company filed its answer to the lawsuit in July 2009 and asserted that DNS's patents were both invalid and had not been infringed upon by the Company. In September 2009, at a Court-sanctioned early neutral evaluation, the parties were unable to reach an agreement on a settlement, and discovery continued. On January 27, 2010, the Court denied co-defendant Fujitsu America, Inc.'s motion to stay the litigation, and the Company submitted its invalidity contentions on February 1, 2010. The Company and the plaintiff entered into settlement discussions in early March. Without admitting any wrongdoing or violation of law and to avoid the distraction and expense of continued litigation and the uncertainty of a jury verdict on the merits, the Company agreed to make a one-time lump sum payment in consideration for a fully paid and perpetual license to, and a covenant not to sue on, the '128 patent and the plaintiff's entire portfolio of U.S. patents, related patents, and foreign counterparts. The Company has made the required one-time lump sum payment, and the lawsuit by DNS against the Company was dismissed with prejudice on April 23, 2010. This arrangement did not have a material impact on the Company's consolidated financial position, results of operations, or cash flows for the year ended December 31, 2010. NETGEAR v. CSIRO In May 2005, the Company filed a complaint for declaratory relief against the Commonwealth Scientific and Industrial Research Organization ("CSIRO"), in the San Jose division of the United States District Court, Northern District of California. The complaint alleged that the claims of CSIRO's U.S. Patent No. 5,487,069 are invalid and not infringed by any of Company's products. CSIRO had asserted that the Company's wireless networking products implementing the IEEE 802.11a, 802.11g, and 802.11n wireless LAN standards infringe this patent. In July 2006, the United States Court of Appeals for the Federal Circuit affirmed the District Court's decision to deny CSIRO's motion to dismiss the action under the Foreign Sovereign Immunities Act. In September 2006, the Federal Circuit denied CSIRO's request for a rehearing en banc. CSIRO filed a response to the complaint in September 2006. In December 2006, the District Court granted CSIRO's motion to transfer the case to the Eastern District of Texas, where CSIRO had brought and won a similar lawsuit against Buffalo Technology (USA), Inc., which Buffalo appealed and which was partially remanded to the District Court. The District Court consolidated this action with three related actions involving other companies (such as Buffalo) accused of infringing CSIRO's patent. The Company attended a Court-mandated mediation in November 2007 but failed to resolve the litigation. The District Court held a June 26, 2008 claim construction hearing. On August 14, 2008, the District Court issued a claim construction order and denied a motion for summary judgment of invalidity. In December 2008, the parties filed numerous motions for summary judgment concerning, among other things, infringement, validity, and other affirmative defenses. The District Court commenced a jury trial on April 13, 2009 regarding all liability issues for the four consolidated cases. On April 20, 2009, the Company and CSIRO executed a Memorandum of Understanding ("MOU") setting forth the terms of a settlement and license agreement between the Company and CSIRO. Without admitting any wrongdoing or violation of law and to avoid the distraction and expense of continued litigation and the uncertainty of a jury verdict on the merits, the Company agreed to make a one-time lump sum payment in consideration for a fully paid perpetual license and a covenant not to sue with respect to the '069 patent and all foreign counterparts and related patents. Based on the historical and estimated projected future unit sales of the Company's products that were alleged to infringe the asserted patent, the Company allocated a portion of the settlement cost towards product shipments prior to the settlement, which the Company recorded as a litigation settlement expense of $2.4 million, which was primarily recognized in the three months ended March 29, 2009. Additionally, the Company allocated $2.6 million of the settlement cost to prepaid royalties which will be recognized as a component of cost of revenue as the related products are sold. Of this $2.6 million, $413,000 and $551,000 were amortized and expensed in the year ended December 31, 2009 and December 31, 2010, respectively. Additionally, $413,000 was amortized and expensed in the nine months ended October 2, 2011. Finoc, LLC v. NETGEAR In February 2009, a lawsuit was filed against the Company and 14 other companies by Finoc Design Consulting OY ("Finoc") in the U.S. District Court for the Eastern District of Texas. Finoc alleged that the Company's wireless DSL gateway products infringe U.S. Patent No. 6,850,560. In June 2009, without admitting any patent infringement, wrongdoing or violation of law and to avoid the distraction and expense of continued litigation, the Company agreed to make a one-time lump sum payment of $82,500 in consideration for a fully paid perpetual license to the patent in suit as well as a dismissal with prejudice by Finoc. Based on the historical and estimated projected future unit sales of the Company's products that were alleged to infringe the asserted patents, the Company allocated a portion of the settlement cost towards product shipments prior to the settlement, which the Company recorded as a litigation settlement expense in the three months ended June 28, 2009. Additionally, the Company allocated the balance of the settlement cost to prepaid royalties which will be recognized as a component of cost of revenue as the related products are sold. Network-1 Security Solutions, Inc. v. NETGEAR In February 2008, a lawsuit was filed against the Company by Network-1 Security Solutions, Inc. ("Network-1"), a patent-holding company existing under the laws of the State of Delaware, in the U.S. District Court for the Eastern District of Texas. Network-1 alleged that the Company's power over Ethernet ("PoE") products infringed its U.S. Patent No. 6,218,930. Network-1 also sued six other companies alleging similar claims of patent infringement. The Company filed its answer in the second quarter of 2008. In May 2009, without admitting any patent infringement, wrongdoing or violation of law and to avoid the distraction and expense of continued litigation, the Company agreed to make a one-time lump sum payment of $350,000, which the Company recorded as a litigation settlement in fiscal 2009, in consideration for a license to the patent in suit as well as a dismissal with prejudice of the lawsuit. Under the license, the Company will pay future running royalties on certain of its PoE products which will be recognized as a component of cost of revenue as the related products are sold. Chalumeau Power Systems v. NETGEAR. On June 28, 2011, Chalumeau Power Systems LLC ("Chalumeau") filed a complaint against several technology companies — including the Company, Cisco Systems Inc., Hewlett-Packard Co., D-Link, and Avaya Inc. — in Delaware alleging infringement of a patent for a remote device detection method. The patent number is U.S. Patent No. 5,991,885 ('885 Patent) and is entitled "Method and apparatus for detecting the presence of a remote device and providing power thereto." Chalumeau claims that the defendants have all made or sold devices that make use of infringing PoE technology, which allows electrical power and data to pass safely on Ethernet cabling. The Company is reviewing the complaint and is in the process of retaining outside legal counsel to defend it. The Company answered Chalumeau's complaint on September 1, 2011, and asserted various defenses and counterclaims, including those of noninfringement and invalidity of the '885 Patent. In October 2011, a settlement of this lawsuit was reached between Chalumeau and the Company through non-party RPX Corporation. Without admitting any wrongdoing or violation of law and to avoid the distraction and expense of continued litigation and the uncertainty of a jury verdict on the merits, the Company and Chalumeau signed a binding release agreement in which a payment was made to Chalumeau by RPX Corporation in consideration for mutual general releases from all claims, known or unknown, under the '885 Patent and its foreign counterparts with respect to the manufacture, use, sale, etc. of products by the Company. The Court has since dismissed Chalumeau's claims for relief against the Company and the Company's counterclaims for relief against Chalumeau, with prejudice and with all attorneys' fees, costs and expenses levied against the party incurring the same.   Powerline Innovations, LLC v. NETGEAR On August 6, 2011 the Company, along with 16 other companies, was sued in the U.S. District Court, Eastern District of Texas, Tyler Division for patent infringement by a non-practicing entity called Powerline Innovations, LLC ("Powerline Innovations"). This is a single patent case, involving U.S. Patent No. 5,471,190, entitled "Method and Apparatus for Resource Allocation in a Communication Network System." On the same day that it filed suit against the Company and 16 other companies, Powerline Innovations sued 14 additional companies in a separate suit in U.S. District Court, Eastern District of Texas for infringement of the same patent. The complaint against the Company alleges that it infringes the 5,471,190 patent based on the Company's use of methods for establishing control relationships between plural devices and names the Company's Powerline AV Ethernet Adapter, Model XAV101, as an accused infringing product. The Company is currently investigating the allegations. Summit Data Systems LLC v. NETGEAR. On September 1, 2010, a non-practicing entity, Summit Data Systems LLC ("Summit Data Systems"), sued the Company and seven other companies alleging infringement of two patents — U.S. Patent No. 7,392,291 ('291 Patent), entitled Architecture for Providing Block-Level Access over a Computer Network and U.S. Patent No. 7,428,581 ('581 Patent), entitled Architecture for Providing Block-Level Access over a Computer Network. The '581 Patent is a continuation of the '291 Patent. The Company's ReadyNAS and NVX products were listed by the plaintiff in the complaint as accused infringing products. The Company answered the complaint on November 1, 2010, asserting that the patents are not infringed and invalid. Subsequently, the Company participated in discovery, and trial for this matter was scheduled for March 2013. In October 2011, a settlement of this lawsuit was reached between Summit Data Systems and the Company through non-party RPX Corporation. Without admitting any wrongdoing or violation of law and to avoid the distraction and expense of continued litigation and the uncertainty of a jury verdict on the merits, the Company and Summit Data Systems signed a binding release agreement in which a payment was made to Summit Data Systems by RPX Corporation in consideration for mutual general releases from all claims, known or unknown, under the '291 Patent and '581 Patents and certain other patents and applications assigned to Summit Data Systems with respect to the manufacture, use, sale, etc. of products by the Company. The Court has since dismissed Summit Data Systems's claims for relief against the Company and the Company's counterclaims for relief against Summit Data Systems, with prejudice and with all attorneys' fees, costs and expenses levied against the party incurring the same. IP Indemnification Claims In its sales agreements, the Company typically agrees to indemnify its direct customers, distributors and resellers (the "Indemnified Parties") for any expenses or liability resulting from claimed infringements of patents, trademarks or copyrights of third parties that are asserted against the Indemnified Parties, subject to customary carve outs. The terms of these indemnification agreements are generally perpetual after execution of the agreement. The maximum amount of potential future indemnification is generally unlimited. From time to time, the Company receives requests for indemnity and may choose to assume the defense of such litigation asserted against the Indemnified Parties. In June 2006, the Company received a request for indemnification from Charter and Charter Communications Operating, LLC, related to a lawsuit filed in the U.S. District Court, Eastern District of Texas, by Rembrandt Technologies, L.P. ("Rembrandt"), a patent-holding company. Rembrandt also filed a similar lawsuit in the same jurisdiction against Comcast Corporation, Comcast Cable Communications, LLC and Comcast of Plano, LP. Rembrandt alleged that products implementing the DOCSIS standard, which are supplied to Charter, Comcast Corporation, Comcast Cable Communications, LLC and Comcast of Plano, LP by, among others, the Company, infringe various patents held by Rembrandt. In June 2007, the Judicial Panel on Multidistrict Litigation ordered these and other similar patent cases brought by Rembrandt consolidated and transferred to the U.S. District Court for the District of Delaware. In November 2007, the Company along with Motorola, Inc., Cisco Systems, Inc., Scientific-Atlanta, Inc., ARRIS Group, Inc., Thomson, Inc. and Ambit Microsystems, Inc. filed a complaint for declaratory judgment in the U.S. District Court for the District of Delaware against Rembrandt, seeking a declaration that eight asserted Rembrandt patents asserted in the transferred cases are either invalid or not infringed. The District Court held a claim construction hearing on August 5, 2008. On November 29, 2008, the District Court issued its claim construction order. After the District Court's order, Rembrandt agreed to drop three patents from the case, leaving five patents at issue. The District Court held a mediation on March 3-4, 2009 but the parties were unable to reach a resolution. On July 21, 2009, Rembrandt delivered to the Company and other parties an executed covenant not to sue on any of the eight patents originally in the suit, contending that the execution of the covenant divests the District Court of jurisdiction or renders moot the remaining claims and counterclaims in the action. On July 31, 2009, Rembrandt filed a motion to dismiss the litigation. While Rembrandt's motion was pending, the defendants filed motions for summary judgment, motions for sanctions, and responses to Rembrandt's motion to dismiss. In early October 2009, the District Court suspended all further dates for the case while it reviewed the pending motions and case status. On October 23, 2009, the Court ordered Rembrandt to supplement the covenant not to sue to include any products or services that comply with DOCSIS 1.0, 1.1, 2.0 or 3 and dismissed Rembrandt's various infringement claims on the eight patents with prejudice. The Court gave Rembrandt five days to withdraw its motion to dismiss the litigation if it found the Court's conditions on dismissal to be unacceptable. Rembrandt did not withdraw its motion to dismiss the litigation, and on October 30, 2009, Rembrandt executed a covenant not to sue on any of the eight patents in the case and any products or services that comply with DOCSIS 1.0, 1.1, 2.0 or 3. The Company and its co-defendants moved for attorneys' fees to be paid by Rembrandt. Rembrandt opposed the motion. On July 8, 2011, the Court denied the defendant's unopposed motion for summary judgment of noninfringement of the one patent remaining in the case, the '627 Patent. This ruling did not affect the Company since that patent was not asserted against the Company, other than postponing the Company's possible recovery of attorneys' fees. On July 13, 2011, the Court dismissed without prejudice the defendants' joint motion for fees because the motion is now not ripe given the Court's denial of the motion for summary judgment of noninfringement of the '627 Patent. The Company is now reviewing its options for recovering attorneys' fees. All of the above described claims against the Company, or filed by the Company, whether meritorious or not, could be time-consuming, result in costly litigation, require significant amounts of management time, and result in the diversion of significant operational resources. Were an unfavorable outcome to occur, there exists the possibility it would have a material adverse impact on the Company's financial position and results of operations for the period in which the unfavorable outcome occurs or becomes probable. In addition, the Company is subject to legal proceedings, claims and litigation arising in the ordinary course of business, including litigation related to intellectual property and employment matters. Based on currently available information, the Company does not believe that the ultimate outcomes of any unresolved matters, individually and in the aggregate, are likely to have a material adverse effect on the Company's financial position, liquidity or results of operations within the next 12 months. However, litigation is subject to inherent uncertainties, and the Company's view of these matters may change in the future. Were an unfavorable outcome to occur, there exists the possibility of a material adverse impact on the Company's financial position and results of operations or liquidity for the period in which the unfavorable outcome occurs or becomes probable, and potentially in future periods. Environmental Regulation The European Union ("EU") has enacted the Waste Electrical and Electronic Equipment Directive, which makes producers of electrical goods, including home and commercial business networking products, financially responsible for specified collection, recycling, treatment and disposal of past and future covered products. The deadline for the individual member states of the EU to transpose the directive into law in their respective countries was August 13, 2004 (such legislation, together with the directive, the "WEEE Legislation"). Producers participating in the market were financially responsible for implementing these responsibilities under the WEEE Legislation beginning in August 13, 2005. Similar WEEE Legislation has been or may be enacted in other jurisdictions, including in the United States, Canada, Mexico, China, India, Australia and Japan. The Company adopted the authoritative guidance for asset retirement and environmental obligations in the third quarter of fiscal 2005 and has determined that its effect did not have a material impact on the Company's consolidated results of operations and financial position for the three months ended October 2, 2011. The Company is continuing to evaluate the impact of the WEEE Legislation and similar legislation in other jurisdictions as individual countries issue their implementation guidance. Additionally, the EU has enacted the Restriction of Hazardous Substances Directive ("RoHS Legislation"), the REACH Directive and the Battery Directive. EU RoHS Legislation, along with similar legislation in China, requires manufacturers to ensure certain substances, including polybrominated biphenyls ("PBD"), polybrominated diphenyl ethers ("PBDE"), mercury, cadmium, hexavalent chromium and lead (except for allowed exempted materials and applications), are below specified maximum concentration values in certain products put on the market after July 1, 2006. The REACH Directive similarly requires manufacturers to ensure the published list of substances of very high concern in certain products are below specified maximum concentration values. The Battery Directive prohibits use of certain types of battery technology in certain products. The Company believes it has met the requirements of the RoHS Legislation, the REACH Directive and the Battery Directive. Additionally, the EU has enacted the Energy Using Product ("EuP") Directive, which requires manufacturers of certain products to meet minimum energy efficiency limits. These limits are documented in EuP implementing measures issued for specific types of equipment and document minimum power supply efficiencies and may include required equipment standby modes which also reduce energy consumption. The Company believes it has met the requirements of the applicable EuP implementing measures.   Employment Agreements The Company has signed various employment agreements with key executives pursuant to which, if their employment is terminated without cause, such employees are entitled to receive their base salary (and commission or bonus, as applicable) for 52 weeks (for the Chief Executive Officer), 39 weeks (for the Senior Vice President of Worldwide Operations and Support) and up to 26 weeks (for other key executives). Such employees will also continue to have stock options vest for up to a one-year period following such termination without cause. If a termination without cause or resignation for good reason occurs within one year of a change in control, such employees are entitled to full acceleration (for the Chief Executive Officer) and up to two years acceleration (for other key executives) of any unvested portion of his or her stock options. Leases The Company leases office space, cars and equipment under operating leases, some of which are non-cancelable, with various expiration dates through December 2026. The terms of some of the Company's office leases provide for rental payments on a graduated scale. The Company recognizes rent expense on a straight-line basis over the lease period, and has accrued for rent expense incurred but not paid. Guarantees and Indemnifications The Company has entered into various inventory-related purchase agreements with suppliers. Generally, under these agreements, 50% of orders are cancelable by giving notice 46 to 60 days prior to the expected shipment date and 25% of orders are cancelable by giving notice 31 to 45 days prior to the expected shipment date. Orders are non-cancelable within 30 days prior to the expected shipment date. At October 2, 2011, the Company had $161.7 million in non-cancelable purchase commitments with suppliers. The Company establishes a loss liability for all products it does not expect to sell for which it has committed purchases from suppliers. Such losses have not been material to date. The Company, as permitted under Delaware law and in accordance with its Bylaws, indemnifies its officers and directors for certain events or occurrences, subject to certain limits, while the officer or director is or was serving at the Company's request in such capacity. The term of the indemnification period is for the officer's or director's lifetime. The maximum amount of potential future indemnification is unlimited; however, the Company has a Director and Officer Insurance Policy that enables it to recover a portion of any future amounts paid. As a result of its insurance policy coverage, the Company believes the fair value of these indemnification agreements is minimal. Accordingly, the Company has no liabilities recorded for these agreements as of October 2, 2011. In its sales agreements, the Company typically agrees to indemnify its direct customers, distributors and resellers for any expenses or liability resulting from claimed infringements of patents, trademarks or copyrights of third parties. The terms of these indemnification agreements are generally perpetual any time after execution of the agreement. The maximum amount of potential future infringement indemnification is generally unlimited. The Company believes the estimated fair value of these agreements is minimal. Accordingly, the Company has no liabilities recorded for these agreements as of October 2, 2011.

36000

38000

15. Comprehensive Income and Cumulative Other Comprehensive Income, Net The following table sets forth the activity for each component of other comprehensive income, net of related taxes, for the three and nine months ended October 2, 2011 and October 3, 2010 (in thousands):   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="85%" align="center"> <tr><td width="68%"> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center">Three Months Ended</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center">Nine Months Ended</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 2, 2011</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 3, 2010</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 2, 2011</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 3, 2010</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Net income</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">26,747</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">13,095</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">68,533</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">37,287</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top" nowrap="nowrap"> Unrealized gains (losses) on derivative instruments</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(70</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(40</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(317</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">164</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Unrealized gains (losses) on available-for-sale securities</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(7</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(5</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">22</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">13</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top"> Comprehensive income</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">26,670</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">13,050</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">68,238</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">37,464</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table> The following table sets forth the components of cumulative other comprehensive income, net of related taxes, as of October 2, 2011 and December 31, 2010 (in thousands):   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="75%" align="center"> <tr><td width="79%"> </td> <td valign="bottom" width="8%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="8%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 2, 2011</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">December 31, 2010</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Net unrealized gains (losses) on derivative instruments</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(44</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">273</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Net unrealized gains on available-for-sale securities</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">30</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">8</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Total cumulative other comprehensive income (loss), net of taxes</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(14</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">281</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table>

425428000

160310000

597390000

205490000

-6356000

-1516000

27538000

23934000

19332000

21020000

9826000

11068000

4. Stock-based Compensation The Company grants options and restricted stock units from the Amended and Restated 2006 Long-Term Incentive Plan, under which awards may be granted to all employees. In addition, the Company's stock option program includes the 2003 Stock Plan, from which the Company does not currently grant awards, but may choose to do so. Award vesting periods for these plans are generally four years. As of October 2, 2011, a total of 790,067 shares were reserved for future grants under these plans. Additionally, the Company sponsors an Employee Stock Purchase Plan (the "ESPP"), pursuant to which eligible employees may contribute up to 10% of base compensation, subject to certain income limits, to purchase shares of the Company's common stock. Employees may purchase stock semi-annually at a price equal to 85% of the fair market value on the purchase date. The following table sets forth the total stock-based compensation expense resulting from stock options, restricted stock awards and the ESPP included in the Company's Unaudited Condensed Consolidated Statements of Operations (in thousands):   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="75%" align="center"> <tr><td width="67%"> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center">Three Months Ended</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center">Nine Months Ended</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 2, 2011</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 3, 2010</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 2, 2011</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 3, 2010</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Cost of revenue</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">259</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">202</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">737</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">708</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Research and development</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">606</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">556</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,873</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,709</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Sales and marketing</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,264</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,134</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">3,949</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">3,539</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> General and administrative</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,325</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,055</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">3,775</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">3,255</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,454</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,947</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">10,334</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">9,211</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table> The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option valuation model and the weighted average assumptions in the following table. The expected term of options granted is derived from historical data on employee exercise and post-vesting employment termination behavior. The risk free interest rate is based on the implied yield currently available on U.S. Treasury securities with an equivalent remaining term. Expected volatility is based on the historical volatility of the Company's stock for the three and nine months ended October 2, 2011 and October 3, 2010:   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="75%" align="center"> <tr><td width="64%"> </td> <td valign="bottom" width="7%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="7%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="7%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="7%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center">Stock Options</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center">Stock Options</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center">Three Months Ended</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center">Nine Months Ended</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 2, 2011</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 3, 2010</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 2, 2011</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 3, 2010</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Expected life (in years)</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">4.3</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">4.4</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">4.4</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">4.5</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Risk-free interest rate</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1.09</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1.49</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1.73</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">2.15</td> <td valign="bottom" nowrap="nowrap">% </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Expected volatility</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">51</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">50</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">50</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">50</td> <td valign="bottom" nowrap="nowrap">% </td></tr> <tr><td valign="top"> Dividend yield</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td></tr></table> As of October 2, 2011, $23.4 million of total unrecognized compensation cost related to stock options, adjusted for estimated forfeitures, is expected to be recognized over a weighted-average period of 1.51 years. Additionally, $3.2 million of total unrecognized compensation cost related to non-vested restricted stock awards, adjusted for estimated forfeitures, is expected to be recognized over a weighted-average period of 1.14 years.

1.06

0.37

1.85

0.71

1.04

0.36

1.81

0.70

10. Net Income Per Share Basic net income per share is computed by dividing the net income for the period by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by dividing the net income for the period by the weighted average number of shares of common stock and potentially dilutive common stock outstanding during the period. Potentially dilutive common shares include outstanding stock options and unvested restricted stock awards, which are reflected in diluted net income per share by application of the treasury stock method. Under the treasury stock method, the amount that the employee must pay for exercising stock options, the amount of stock-based compensation cost for future services that the Company has not yet recognized, and the amount of tax benefit that would be recorded in additional paid-in capital upon exercise are assumed to be used to repurchase shares. Net income per share for the three and nine months ended October 2, 2011 and October 3, 2010 are as follows (in thousands, except per share data):   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="85%" align="center"> <tr><td width="68%"> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center">Three Months Ended</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center">Nine Months Ended</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 2, 2011</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 3, 2010</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 2, 2011</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 3, 2010</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Net income</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">26,747</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">13,095</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">68,533</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">37,287</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top"> Weighted average shares outstanding:</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Basic</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">37,483</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">35,441</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">36,967</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">35,218</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Dilutive potential common shares</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">597</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">568</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">845</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">673</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Total diluted</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">38,080</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">36,009</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">37,812</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">35,891</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top"> Basic net income per share</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.71</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.37</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1.85</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1.06</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Diluted net income per share</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.70</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.36</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1.81</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1.04</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table> Weighted average stock options and unvested restricted stock awards to purchase 1,860,645 and 1,897,788 shares of the Company's stock for the three and nine months ended October 2, 2011, respectively, and 2,728,227 and 2,808,503 shares for the three and nine months ended October 3, 2010, respectively, were excluded from the computation of diluted net income per share because their effect would have been anti-dilutive.

24130000

23190000

2112000

3426000

2112000

3426000

14. Fair Value of Financial Instruments The Company measures certain financial assets and liabilities at fair value on a recurring basis. The following tables summarize the valuation of the Company's financial instruments as of October 2, 2011 (in thousands):   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr><td width="66%"> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="14" align="center">As of October 2, 2011</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Total</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Quoted market prices in active markets (Level 1)</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Significant other observable inputs (Level 2)</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Significant unobservable inputs (Level 3)</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Cash equivalents—money-market funds</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">24,624</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">24,624</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Available-for-sale securities—U.S. Treasuries (1)</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">145,192</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">145,192</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Available-for-sale securities—Certificates of Deposit (1)</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,589</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,589</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Foreign currency forward contracts (2)</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,970</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,970</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Total</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">173,375</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">171,405</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,970</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table>   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td valign="top" width="3%" align="left">(1)</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">Included in short-term investments on the Company's unaudited condensed consolidated balance sheet. </td></tr></table> <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td valign="top" width="3%" align="left">(2)</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">Included in prepaid expenses and other current assets on the Company's unaudited condensed consolidated balance sheet. </td></tr></table>   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr><td width="66%"> </td> <td valign="bottom" width="6%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="6%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="6%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="6%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="14" align="center">As of October 2, 2011</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">    Total    </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Quoted market prices in active markets (Level 1)</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Significant other observable inputs (Level 2)</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Significant unobservable inputs (Level 3)</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Foreign currency forward contracts (3)</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(573</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(573</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top"> Total</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(573</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(573</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table>   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td valign="top" width="3%" align="left">(3)</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">Included in other accrued liabilities on the Company's unaudited condensed consolidated balance sheet. </td></tr></table> The following tables summarize the valuation of the Company's financial instruments as of December 31, 2010 (in thousands):   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr><td width="66%"> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="14" align="center">As of December 31, 2010</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Total</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Quoted market prices in active markets (Level 1)</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Significant other observable inputs (Level 2)</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Significant unobservable inputs (Level 3)</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Cash equivalents—money-market funds </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">77,795</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">77,795</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Available-for-sale securities—Treasuries (1)</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">144,564</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">144,564</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Foreign currency forward contracts (2)</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,389</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,389</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top"> Total</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">223,748</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">222,359</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,389</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table>   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td valign="top" width="3%" align="left">(1)</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">Included in short-term investments on the Company's unaudited condensed consolidated balance sheet. </td></tr></table> <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td valign="top" width="3%" align="left">(2)</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">Included in prepaid expenses and other current assets on the Company's unaudited condensed consolidated balance sheet. </td></tr></table>   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr><td width="70%"> </td> <td valign="bottom" width="5%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="5%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="5%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="5%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="14" align="center">As of December 31, 2010</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Total</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Quoted market prices in active markets (Level 1)</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Significant other observable inputs (Level 2)</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Significant unobservable inputs (Level 3)</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Foreign currency forward contracts (3)</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(789</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(789</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top"> Total</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(789</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(789</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table>   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td valign="top" width="3%" align="left">(3)</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">Included in other accrued liabilities on the Company's unaudited condensed consolidated balance sheet. </td></tr></table> The Company's investments in cash equivalents and available-for-sale securities are classified within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets. The Company enters into foreign currency forward contracts with only those counterparties that have long-term credit ratings of A+/A1 or higher. The Company's foreign currency forward contracts are classified within Level 2 of the fair value hierarchy as they are valued using pricing models that take into account the contract terms as well as currency rates and counterparty credit rates. The Company verifies the reasonableness of these pricing models using observable market data for related inputs into such models. Additionally, the Company includes an adjustment for non-performance risk in the recognized measure of fair value of derivative instruments. At October 2, 2011 and December 31, 2010, the adjustment for non-performance risk did not have a material impact on the fair value of the Company's foreign currency forward contracts. The carrying value of non-financial assets and liabilities measured at fair value in the financial statements on a recurring basis, including accounts receivable and accounts payable, approximate fair value due to their short maturities.

-211000

234000

-44000

26697000

9358000

31044000

10851000

74198000

85944000

218093000

75707000

274473000

96310000

66145000

21530000

90595000

32925000

11. Income Taxes The income tax provision for the three and nine months ended October 2, 2011 was $6.2 million, or an effective tax rate of 18.8 percent, and $22.1 million, or an effective tax rate of 24.4 percent, respectively. The tax provision for the three and nine months ended October 3, 2010 was $8.4 million or an effective tax rate of 39.2 percent and $28.9 million or an effective tax rate of 43.6 percent, respectively. The decrease in income tax expense and effective tax rate for the three and nine month period ended October 2, 2011 compared to the same periods in the prior year was primarily caused by higher forecasted pre-tax earnings in foreign jurisdictions with tax rates lower than the U.S. federal rate and the tax benefit from the reversal of tax accruals for uncertain tax positions from various tax jurisdictions where the statutes of limitation have closed. Additionally, the tax provision for the nine months ended October 2, 2011 was further reduced by discrete tax benefits recorded for the exercise of employee stock options during the period. The higher tax expense and effective tax rate for the three months and nine months ended October 3, 2010, was caused by a loss incurred in a country where such loss provided no tax benefit. Accordingly, tax was accrued ratably on the profitable operations based on the income earned during that period while no tax benefit was accrued on the loss. The Company is subject to income taxes in the U.S. and numerous foreign jurisdictions. The Company's future foreign tax rate could be affected by changes in the composition in earnings in countries with tax rates differing from the U.S. federal rate. The Company has recorded its liability for uncertain tax positions as part of its long-term liability as payments are not anticipated over the next 12 months. The existing tax positions of the Company continue to generate an increase in the liability for uncertain tax positions. The liability for uncertain tax positions may be reduced for liabilities that are settled with taxing authorities or on which the statute of limitations could expire without assessment from tax authorities. The possible reduction in liabilities for uncertain tax positions in multiple jurisdictions in the next 12 months is approximately $0.7 million, excluding the interest, penalties and the effect of any related deferred tax assets or liabilities.

28858000

8435000

22062000

6178000

-29179000

-13484000

12746000

-8078000

450000

-4521000

-1149000

-3604000

8506000

-940000

19804000

2279000

13253000

-3013000

-30000

5813000

6241000

22034000

127394000

135963000

302000

132000

350000

115000

279885000

254457000

780321000

864288000

254723000

230622000

9525000

30926000

-92482000

-45974000

9303000

63153000

37287000

13095000

68533000

26747000

151862000

53983000

183290000

63233000

66231000

21724000

91183000

33077000

14335000

13617000

5443000

5150000

-388000

-326000

-938000

-267000

3030000

656000

899000

12000000

37509000

1270000

6049000

5816000

170133000

188329000

23850000

29919000

1202000

1752000

100000000

185680000

6867000

26647000

5. Product Warranties The Company provides for estimated future warranty obligations at the time revenue is recognized. The Company's standard warranty obligation to its direct customers generally provides for a right of return of any product for a full refund in the event that such product is not merchantable or is found to be damaged or defective. At the time revenue is recognized, an estimate of future warranty returns is recorded to reduce revenue in the amount of the expected credit or refund to be provided to its direct customers. At the time the Company records the reduction to revenue related to warranty returns, the Company includes within cost of revenue a write-down to reduce the carrying value of such products to net realizable value. The Company's standard warranty obligation to its end-users provides for replacement of a defective product for one or more years. Factors that affect the warranty obligation include product failure rates, material usage and service delivery costs incurred in correcting product failures. The estimated cost associated with fulfilling the Company's warranty obligation to end-users is recorded in cost of revenue. Because the Company's products are manufactured by third party manufacturers, in certain cases the Company has recourse to the third party manufacturer for replacement or credit for the defective products. The Company gives consideration to amounts recoverable from its third party manufacturers in determining its warranty liability. Changes in the Company's warranty liability, which is included as a component of "Other accrued liabilities" in the unaudited condensed consolidated balance sheets, are as follows (in thousands):   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="75%" align="center"> <tr><td width="82%"> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center">Nine Months Ended</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 2, 2011</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 3, 2010</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Balance as of beginning of the period</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">40,513</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">30,610</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Provision for warranty liability made during the period</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">42,961</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">48,805</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Settlements made during the period</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(42,898</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(39,954</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top"> Balance at end of period</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">40,576</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">39,461</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table>

17503000

16079000

29814000

10564000

35102000

12738000

7. Restructuring and Other Charges In April 2011, the Company incurred $1.6 million in restructuring costs for employee severance related to the reorganization into three specific business units. Refer to Note 12, "Segment Information, Operations by Geographic Area and Significant Customers" of the Notes to Unaudited Condensed Consolidated Financial Statements for additional information regarding the reorganization into business units. In addition, the Company incurred $464,000 in transition services in connection with the acquisition of the Customer Networking Solutions division of Westell Technologies, Inc. Refer to Note 3, "Business Acquisitions" of the Notes to Unaudited Condensed Consolidated Financial Statements for additional information regarding the Westell acquisition. The Company presents expenses related to restructuring and other charges as a separate line item in its unaudited condensed consolidated statements of operations.   The following is a summary of the accrued restructuring charges:   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="75%" align="center"> <tr><td width="53%"> </td> <td valign="bottom" width="8%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="8%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="8%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="8%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Accrued Restructuring and Other Charges at December 31, 2010</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Additions</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Cash Payments</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Accrued Restructuring and Other Charges at October 2, 2011</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom" colspan="14" align="center">(In thousands)</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Reorganization in business units</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,630</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(1,630</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Westell acquisition transition costs</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">464</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(464</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Current portion</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,094</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(2,094</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td></tr></table>

184011000

251645000

643521000

236017000

871863000

301800000

8. Derivative Financial Instruments The Company's subsidiaries have had and will continue to have material future cash flows, including revenue and expenses, which are denominated in currencies other than the Company's functional currency. The Company and all its subsidiaries designate the U.S. dollar as the functional currency. Changes in exchange rates between the Company's functional currency and other currencies in which the Company transacts business will cause fluctuations in cash flow expectations and cash flow realized or settled. Accordingly, the Company uses derivatives to mitigate its business exposure to foreign exchange risk. The Company enters into foreign currency forward contracts in euros, British pounds, Australian dollars and Japanese yen to manage the exposures to foreign exchange risk related to expected future cash flows on certain forecasted revenue, costs of revenue, operating expenses and existing assets and liabilities. The Company does not enter into derivatives transactions for trading or speculative purposes.     Cash flow hedges To help manage the exposure of operating margins to fluctuations in foreign currency exchange rates, the Company hedges a portion of its anticipated foreign currency revenue, costs of revenue and certain operating expenses. These hedges are designated at the inception of the hedge relationship as cash flow hedges under the authoritative guidance for derivatives and hedging. Effectiveness is tested at least quarterly both prospectively and retrospectively using regression analysis to ensure that the hedge relationship has been effective and is likely to remain effective in the future. The Company typically hedges portions of its anticipated foreign currency exposure for three to five months. The Company enters into about six forward contracts per quarter with an average size of about $6 million USD equivalent related to its cash flow hedging program. The Company expects to reclassify to earnings all of the amounts recorded in other comprehensive income associated with its cash flow hedges over the next 12 months. Other comprehensive income associated with cash flow hedges of foreign currency revenue is recognized as a component of net revenue in the same period as the related revenue is recognized. Other comprehensive income associated with cash flow hedges of foreign currency costs of revenue and operating expenses are recognized as a component of cost of revenue and operating expense in the same period as the related costs of revenue and operating expenses are recognized. Derivative instruments designated as cash flow hedges must be de-designated as hedges when it is probable the forecasted hedged transaction will not occur within the designated hedge period or if not recognized within 60 days following the end of the hedge period. Deferred gains and losses in other comprehensive income associated with such derivative instruments are reclassified immediately into earnings through other income and expense. Any subsequent changes in fair value of such derivative instruments also are reflected in current earnings unless they are re-designated as hedges of other transactions. The Company did not recognize any material net gains or losses related to the loss of hedge designation on discontinued cash flow hedges during the three and nine months ended October 2, 2011 and October 3, 2010, respectively.       Non-designated hedges The Company enters into non-designated hedges under the authoritative guidance for derivatives and hedging to manage the exposure of non-functional currency monetary assets and liabilities held on its financial statements to fluctuations in foreign currency exchange rates, as well as to reduce volatility in other income and expense. The non-designated hedges are generally expected to offset the changes in value of its net non-functional currency asset and liability position resulting from foreign exchange rate fluctuations. Foreign currency denominated accounts receivable and payable are hedged with non-designated hedges when the related anticipated foreign revenue and expenses are recognized in the Company's financial statements. The Company also hedges certain non-functional currency monetary assets and liabilities that may not be incorporated into the cash flow hedge program. The Company adjusts its non-designated hedges monthly and enters into about 11 non-designated derivatives per quarter. The average size of its non-designated hedges is about $2 million USD equivalent and these hedges range from one to five months in duration. The Company may choose not to hedge certain foreign exchange exposures for a variety of reasons, including, but not limited to, immateriality, accounting considerations and the prohibitive economic cost of hedging particular exposures. There can be no assurance the hedges will offset more than a portion of the financial impact resulting from movements in foreign exchange rates. The Company's accounting policies for these instruments are based on whether the instruments are designated as hedge or non-hedge instruments in accordance with the authoritative guidance for derivatives and hedging. The Company records all derivatives on the balance sheet at fair value. The effective portions of cash flow hedges are recorded in other comprehensive income until the hedged item is recognized in earnings. Derivatives that are not designated as hedging instruments and the ineffective portions of its designated hedges are adjusted to fair value through earnings in "Other income (expense), net." The Company's foreign currency forward contracts do not contain any credit-risk-related contingent features. The Company is exposed to credit losses in the event of nonperformance by the counter-parties of its forward contracts. The Company enters into derivative contracts with high-quality financial institutions and limits the amount of credit exposure to any one counter-party. In addition, the derivative contracts are limited to a time period of less than six months and the Company continuously evaluates the credit standing of its counter-party financial institutions. The counter-parties to these arrangements are large highly rated financial institutions and the Company does not consider non-performance a material risk. The fair values of the Company's derivative instruments and the line items on the Unaudited Condensed Consolidated Balance Sheet to which they were recorded as of October 2, 2011 and December 31, 2010 are summarized as follows (in thousands):   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr><td width="46%"> </td> <td valign="bottom" width="3%"> </td> <td width="17%"> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="3%"> </td> <td width="17%"> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom" nowrap="nowrap"> Derivative Assets</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" align="center"> Balance Sheet Location</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Fair Value at October 2, 2011</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" align="center"> Balance Sheet Location</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Fair Value at December 31, 2010</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Derivative assets not designated as hedging instruments</td> <td valign="bottom">  </td> <td valign="bottom">Prepaid expenses and other current assets</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,970</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">Prepaid expenses and other current assets</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,381</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Derivative assets designated as hedging instruments</td> <td valign="bottom">  </td> <td valign="bottom">Prepaid expenses and other current assets</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">Prepaid expenses and other current assets</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">8</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Total</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,970</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,389</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table>   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr><td width="47%"> </td> <td valign="bottom" width="3%"> </td> <td width="17%"> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="3%"> </td> <td width="18%"> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom" nowrap="nowrap"> Derivative Liabilities</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" align="center"> Balance Sheet Location</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Fair Value at October 2, 2011</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" align="center"> Balance Sheet Location</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Fair Value at December 31, 2010</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Derivative liabilities not designated as hedging instruments</td> <td valign="bottom">  </td> <td valign="bottom">Other accrued liabilities</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(532</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">Other accrued liabilities</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(770</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr><td valign="top"> Derivative liabilities designated as hedging instruments</td> <td valign="bottom">  </td> <td valign="bottom">Other accrued liabilities</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(41</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">Other accrued liabilities</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(19</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Total</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(573</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(789</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table>   For details of the Company's fair value measurements, please see Note 14 of the Notes to Unaudited Condensed Consolidated Financial Statements. The effects of the Company's derivatives not designated as hedging instruments in other income (expense), net on the Statement of Operations for the three and nine months ended October 2, 2011 and October 3, 2010 is as follows (in thousands):   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr><td width="49%"> </td> <td valign="bottom" width="7%"> </td> <td width="22%"> </td> <td valign="bottom" width="7%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="7%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom" rowspan="2" nowrap="nowrap"> Derivatives Not Designated as Hedging Instruments</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" rowspan="2" align="center"> Location of Gains or (Losses) Recognized in Income on Derivative</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center">Amount of Gains or (Losses) Recognized in Income on Derivative</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom">  </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Three Months  Ended October 2, 2011</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Nine Months Ended October  2, 2011</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Foreign currency forward contracts</td> <td valign="bottom">  </td> <td valign="bottom">Other income (expense), net</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,602</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(1,294</td> <td valign="bottom" nowrap="nowrap">) </td></tr></table>   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr><td width="49%"> </td> <td valign="bottom" width="8%"> </td> <td width="22%"> </td> <td valign="bottom" width="8%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="8%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom" rowspan="2" nowrap="nowrap"> Derivatives Not Designated as Hedging Instruments</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" rowspan="2" align="center"> Location of Gains or (Losses) Recognized in Income on Derivative</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center">Amount of Gains or (Losses) Recognized in Income on Derivative</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom">  </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Three Months Ended October 3,2010</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Nine Months Ended October 3,2010</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Foreign currency forward contracts</td> <td valign="bottom">  </td> <td valign="bottom">Other income (expense), net</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(3,378</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">48</td> <td valign="bottom" nowrap="nowrap">  </td></tr></table> The effects of the Company's derivative instruments on other comprehensive income and the Unaudited Condensed Consolidated Statement of Operations for the three and nine months ended October 2, 2011 are summarized as follows (in thousands):   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr><td width="28%"> </td> <td valign="bottom" width="6%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="6%"> </td> <td width="14%"> </td> <td valign="bottom" width="6%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="6%"> </td> <td width="22%"> </td> <td valign="bottom" width="6%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom" rowspan="2" nowrap="nowrap"> Derivatives Designated as Hedging Instruments</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="14" align="center">Three Months Ended October 2, 2011</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Gain or (Loss) Recognized in OCI - Effective Portion (a)</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" align="center"> Location of Gain or (Loss) Reclassified from OCI into Income - Effective Portion</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Gain or (Loss) Reclassified from OCI into Income - Effective Portion (a)</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" align="center"> Location of Gain or (Loss) Recognized in Income and Excluded from Effectiveness Testing</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Amount of Gain or (Loss) Recognized in Income and Excluded from Effectiveness Testing</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Cash flow hedges:</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr><td valign="top"> Foreign currency forward contracts</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">190</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">Net revenue</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">280</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">Other income (expense), net</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(94</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Foreign currency forward contracts</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">Cost of revenue</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">Other income (expense), net</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Foreign currency forward contracts</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">Operating expenses</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(20</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">Other income (expense), net</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Total</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">190</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">260</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(94</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table>   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr><td width="32%"> </td> <td valign="bottom" width="5%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="5%"> </td> <td width="14%"> </td> <td valign="bottom" width="5%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="5%"> </td> <td width="22%"> </td> <td valign="bottom" width="5%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom" rowspan="2" nowrap="nowrap"> Derivatives Designated as Hedging Instruments </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="14" align="center">Nine Months Ended October 2, 2011</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Gain or (Loss) Recognized in OCI - Effective Portion (a)</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" nowrap="nowrap" align="center"> Location of Gain or (Loss) Reclassified from OCI into Income - Effective Portion</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Gain or (Loss) Reclassified from OCI into Income - Effective Portion (a)</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" align="center"> Location of Gain or (Loss) Recognized in Income and Excluded from Effectiveness Testing</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Amount of Gain  or (Loss) Recognized in Income and Excluded from Effectiveness Testing</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Cash flow hedges:</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" colspan="7"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr><td valign="top"> Foreign currency forward contracts</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">174</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">Net revenue</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">511</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">Other income (expense), net</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(222</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Foreign currency forward contracts</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">Cost of revenue</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(2</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">Other income (expense), net</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Foreign currency forward contracts</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">Operating expenses</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(18</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">Other income (expense), net</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Total</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">174</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">491</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(222</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table> The effects of the Company's derivative instruments on other comprehensive income and the Unaudited Condensed Consolidated Statement of Operations for the three and nine months ended October 3, 2010 are summarized as follows (in thousands):   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr><td width="32%"> </td> <td valign="bottom" width="5%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="5%"> </td> <td width="15%"> </td> <td valign="bottom" width="5%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="5%"> </td> <td width="22%"> </td> <td valign="bottom" width="5%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom" rowspan="2" nowrap="nowrap"> Derivatives Designated as Hedging Instruments</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="14" align="center">Three Months Ended October 3, 2010</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Gain or (Loss) Recognized in OCI - Effective Portion (a)</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" nowrap="nowrap" align="center"> Location of Gain or (Loss) Reclassified from OCI into Income - Effective Portion</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Gain or (Loss) Reclassified from OCI into Income - Effective Portion (a)</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" align="center"> Location of Gain or (Loss) Recognized in Income and Excluded from Effectiveness Testing</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Amount of Gain or (Loss) Recognized in Income and Excluded from Effectiveness Testing</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Cash flow hedges:</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" colspan="7"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr><td valign="top"> Foreign currency forward contracts</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(5</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">Net revenue</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">220</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">Other income (expense), net</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(66</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Foreign currency forward contracts</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">Cost of revenue</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(9</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">Other income (expense), net</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Foreign currency forward contracts</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">Operating expenses</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(176</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">Other income (expense), net</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Total</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(5</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">35</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(66</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table>   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr><td width="28%"> </td> <td valign="bottom" width="5%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="5%"> </td> <td width="14%"> </td> <td valign="bottom" width="5%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="5%"> </td> <td width="22%"> </td> <td valign="bottom" width="5%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom" rowspan="2" nowrap="nowrap"> Derivatives Designated as Hedging Instruments</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="14" align="center">Nine Months Ended October 3, 2010</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Gain or (Loss) Recognized in OCI - Effective Portion (a)</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" nowrap="nowrap" align="center"> Location of Gain or (Loss) Reclassified from OCI into Income - Effective Portion</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Gain or (Loss) Reclassified from OCI into Income - Effective Portion (a)</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" align="center"> Location of Gain or (Loss) Recognized in Income and Excluded from Effectiveness Testing</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Amount of Gain or (Loss) Recognized in Income and Excluded from Effectiveness Testing</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Cash flow hedges:</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" colspan="7"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr><td valign="top"> Foreign currency forward contracts</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,391</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">Net revenue</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,860</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">Other income (expense), net</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(160</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Foreign currency forward contracts</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">Cost of revenue</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(23</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">Other income (expense), net</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Foreign currency forward contracts</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">Operating expenses</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(610</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">Other income (expense), net</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Total</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,391</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,227</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(160</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table>   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td valign="top" width="3%" align="left">(a)</td> <td valign="top" width="1%"> </td> <td valign="top" align="left">Refer to Note 15, "Comprehensive Income and Cumulative Other Comprehensive Income, Net" of the Notes to Unaudited Condensed Consolidated Financial Statements, which summarizes the activity in other comprehensive income related to derivatives. </td></tr></table>   The Company did not recognize any net gain or loss related to the ineffective portion of cash flow hedges during the nine months ended October 2, 2011 and October 3, 2010.

2. Recent Accounting Pronouncements In December 2010, the FASB issued ASU 2010-29, "Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations." ASU 2010-29 specifies that, for material business combinations when comparative financial statements are presented, revenue and earnings of the combined entity should be disclosed as though the business combination had occurred as of the beginning of the comparable prior annual reporting period. ASU 2010-29 also expands the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. ASU 2010-29 is effective prospectively for the Company for business combinations with an acquisition date on or after January 1, 2011. Since the adoption of the update to the authoritative guidance for consolidation only requires additional disclosures, the adoption will not impact the Company's consolidated financial position, results of operations or cash flows.   In May 2011, the FASB issued ASU 2011-04, "Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements." ASU 2011-04 contains certain updates to the measurement guidance as well as enhanced disclosure requirements. The most significant change in disclosures is an expansion of the information required for "Level 3" measurements, including enhanced disclosure for: (1) the valuation processes used by the reporting entity; and (2) the sensitivity of the fair value measurement to changes in unobservable inputs and the interrelationships between those unobservable inputs, if any. ASU 2011-04 will only impact the Company's "Level 3" disclosures. ASU 2011-04 is effective prospectively for the Company in the first quarter of fiscal 2012. The adoption is not expected to have a material impact on the Company's consolidated financial position, results of operations or cash flows. In June 2011, the FASB issued ASU 2011-05, "Presentation of Comprehensive Income." ASU 2011-05 eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. ASU 2011-05 allows two presentation alternatives: present items of net income and other comprehensive income (1) in one continuous statement, referred to as the statement of comprehensive income or (2) in two separate, but consecutive, statements of net income and other comprehensive income. ASU 2011-05 is effective prospectively for the Company in the first quarter of fiscal 2012. The Company is currently evaluating which presentation alternative it will utilize. Since the adoption of the authoritative guidance only requires additional disclosures, the adoption will not impact the Company's consolidated financial position, results of operations or cash flows. In September 2011, the FASB issued ASU 2011-08, "Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment." ASU 2011-08 permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit's fair value is less than its carrying amount before applying the two-step goodwill impairment test. If an entity concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, it would not be required to perform the two-step impairment test for that reporting unit. The Company has elected to early adopt ASU 2011-08 in the fourth quarter of fiscal year 2011. The adoption is not expected to have a material impact on the Company's consolidated financial position, results of operations or cash flows.

12. Segment Information, Operations by Geographic Area and Significant Customers Operating segments are components of an enterprise about which separate financial information is available and is regularly evaluated by management, namely the Chief Operating Decision Maker ("CODM") of an organization, in order to determine operating and resource allocation decisions. By this definition, the Company has through the first fiscal quarter of 2011 operated in one business segment, which comprises the development, marketing and sale of networking products for the commercial business and home markets. In the three months ended July 3, 2011, the Company made organizational changes that have resulted in changes to the way in which the CODM manages and evaluates the business. The Company's business is now managed in three specific business units: retail, commercial, and service provider. The retail business unit consists of high performance, dependable and easy-to-use home networking, storage and digital media products to connect people with the Internet and their content and devices. The commercial business unit consists of business networking, storage and security solutions without the cost and complexity of Big IT. The service provider business unit consists of products sold to service providers with retail proven, whole home networking solutions for their customers. Each business unit is managed by a Senior Vice President/General Manager. There is no change in the CODM before and after the reorganization of the segments. The Company believes this new structure enables the Company to better focus its efforts on the Company's core customer segments and allows it to be more nimble and opportunistic as a company overall. The business units are determined in accordance with how management views and evaluates the Company's business and based on the criteria as outlined in the authoritative guidance. As a result, beginning in the three months ended July 3, 2011, the Company changed its segment reporting accordingly, and revised its prior period presentation to conform to the new segments. The results of the reportable segments are derived directly from the Company's management reporting system. The results are based on the Company's method of internal reporting and are not necessarily in conformity with accounting principles generally accepted in the United States. Management measures the performance of each segment based on several metrics, including contribution income. Refer to the reconciliation of segment information to the Company's consolidated totals below to see the reconciliation of segment data to earnings prepared in conformity with accounting principles generally accepted in the United States.   Asset data is not reviewed by the Company's CODM at the segment level and therefore is not presented. Discrete financial information on individual products and services within the respective segments is not reviewed by the Company's CODM, and therefore a separate disclosure of similar classes of products and services below the segment level is not presented. Financial information for each reportable segment is as follows (in thousands, except percentage data):   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr><td width="48%"> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="22" align="center">Three Months Ended</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="10" align="center">October 2, 2011</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="10" align="center">October 3, 2010</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Net Revenue</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Contribution Income</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Contribution Margin</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Net Revenue</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Contribution Income</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Contribution Margin</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Retail</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">127,082</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">19,958</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">15.7</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">115,165</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">18,346</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">15.9</td> <td valign="bottom" nowrap="nowrap">% </td></tr> <tr><td valign="top"> Commercial</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">91,059</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">23,013</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">25.3</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">75,532</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">16,910</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">22.4</td> <td valign="bottom" nowrap="nowrap">% </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Service Provider</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">83,659</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">6,662</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">8.0</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">45,320</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">997</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">2.2</td> <td valign="bottom" nowrap="nowrap">% </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr><td valign="top"> Total</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">301,800</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">49,633</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">16.4</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">236,017</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">36,253</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">15.4</td> <td valign="bottom" nowrap="nowrap">% </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr><td height="16"> </td> <td height="16" colspan="24"> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="22" align="center">Nine Months Ended</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="10" align="center">October 2, 2011</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="10" align="center">October 3, 2010</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Net Revenue</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Contribution Income</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Contribution Margin</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Net Revenue</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Contribution Income</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Contribution Margin</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Retail</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">352,076</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">60,843</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">17.3</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">316,819</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">51,189</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">16.2</td> <td valign="bottom" nowrap="nowrap">% </td></tr> <tr><td valign="top"> Commercial</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">247,793</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">56,716</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">22.9</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">211,766</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">48,433</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">22.9</td> <td valign="bottom" nowrap="nowrap">% </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Service Provider</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">271,994</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">24,063</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">8.8</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">114,936</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">9,199</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">8.0</td> <td valign="bottom" nowrap="nowrap">% </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr><td valign="top"> Total</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">871,863</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">141,622</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">16.2</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">643,521</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">108,821</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">16.9</td> <td valign="bottom" nowrap="nowrap">% </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr></table> Segment contribution income includes all product line segment revenues less the related cost of sales, research and development and sales and marketing costs. Contribution income is used, in part, to evaluate the performance of, and allocate resources to, each of the segments. Certain operating expenses are not allocated to segments because they are separately managed at the corporate level. These unallocated indirect costs include corporate costs, such as corporate research and development, general and administrative costs, stock-based compensation expenses, amortization of intangibles, acquisition-related integration costs, restructuring costs, litigation reserves and interest and other income (expense), net.   The reconciliation of segment information to the Company's consolidated totals is as follows (in thousands):   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="85%" align="center"> <tr><td width="66%"> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center">Three Months Ended</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center">Nine Months Ended</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 2, 2011</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 3, 2010</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 2, 2011</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 3, 2010</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Segment contribution income</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">49,633</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">36,253</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">141,622</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">108,821</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Corporate and unallocated costs</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(11,994</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(10,226</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(33,986</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(28,608</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Amortization of intangible assets</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(1,064</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(1,344</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(3,610</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(3,970</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr><td valign="top"> Stock-based compensation expense</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(3,454</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(2,947</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(10,334</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(9,211</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Restructuring and other charges</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">8</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(2,094</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">76</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Acquisition related compensation</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(20</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(40</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(666</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Impact to cost of sales from acquisition accounting adjustments to inventory</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(609</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Litigation reserves, net</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(44</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">234</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(211</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Interest income</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">115</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">132</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">350</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">302</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Other income (expense), net</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(267</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(326</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(938</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(388</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Income before income taxes</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">32,925</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">21,530</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">90,595</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">66,145</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table> The Company's corporate headquarters and a significant portion of its operations are located in the United States. The Company also conducts sales, marketing, customer service activities and certain distribution center activities through several small sales offices in Europe, the Middle-East and Africa ("EMEA") and Asia as well as outsourced distribution centers. In the three months ended April 3, 2011, in order to achieve operational efficiencies, the Company combined its North American, Central American and South American sales forces to form the Americas territory. Previously, North America was its own geographic region and the Central American and South American territories were categorized within the Asia Pacific geographic region. Following this change, the Company is organized into the following three geographic territories: Americas, EMEA and Asia Pacific. The Company has reclassified the disclosure of net revenue by geography for prior periods to conform to the current period's presentation. The change did not result in material differences from what was previously reported. Net revenue by geography comprises gross revenue less such items as end-user customer rebates and other sales incentives deemed to be a reduction of net revenue per the authoritative guidance for revenue recognition, sales returns and price protection. For reporting purposes revenue is attributed to each geographic region based on the location of the customer. The following table shows net revenue by geography for the periods indicated (in thousands):   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="85%" align="center"> <tr><td width="68%"> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center">Three Months Ended</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center">Nine Months Ended</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 2, 2011</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 3, 2010</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 2, 2011</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 3, 2010</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> United States</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">144,969</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">120,063</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">419,460</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">323,774</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Americas (excluding U.S.)</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">4,040</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,345</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">11,022</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">8,487</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr bgcolor="#cceeff"><td valign="top"> United Kingdom</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">38,010</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">30,590</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">124,831</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">71,087</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> EMEA (excluding U.K.)</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">81,725</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">58,975</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">227,855</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">167,623</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Asia Pacific</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">33,056</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">25,044</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">88,695</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">72,550</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top"> Total net revenue</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">301,800</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">236,017</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">871,863</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">643,521</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table>   Long-lived assets, comprising fixed assets, are reported based on the location of the asset. Long-lived assets by geographic location are as follows (in thousands):   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="76%" align="center"> <tr><td width="76%"> </td> <td valign="bottom" width="6%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="6%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 2, 2011</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">December 31, 2010</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> United States</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">10,531</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">11,808</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Americas (excluding U.S.)</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">46</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">22</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr bgcolor="#cceeff"><td valign="top"> EMEA</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">321</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">205</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> China</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">4,411</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">4,848</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Asia Pacific (excluding China)</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">770</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">620</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">16,079</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">17,503</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table> Significant customers are as follows (as a percentage of net revenue):   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="85%" align="center"> <tr><td width="68%"> </td> <td valign="bottom" width="7%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="7%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="7%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="7%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center">Three Months Ended</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center">Nine Months Ended</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 2, 2011</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 3, 2010</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 2, 2011</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">October 3, 2010</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Best Buy Co., Inc. and Affiliates (Retailer)</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">11</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">16</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">11</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">16</td> <td valign="bottom" nowrap="nowrap">% </td></tr> <tr><td valign="top"> Ingram Micro, Inc. and Affiliates (Distributor)</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">10</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">11</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">10</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">12</td> <td valign="bottom" nowrap="nowrap">% </td></tr> <tr bgcolor="#cceeff"><td valign="top"> All others</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">79</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">73</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">79</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">72</td> <td valign="bottom" nowrap="nowrap">% </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">100</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">100</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">100</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">100</td> <td valign="bottom" nowrap="nowrap">% </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table>

95216000

34069000

115284000

39600000

9211000

10334000

144564000

146781000

Note 1. The Company and Summary of Significant Accounting Policies NETGEAR, Inc. ("NETGEAR" or the "Company") was incorporated in Delaware in January 1996. The Company is a global networking company that delivers innovative products to consumers, businesses and service providers. For consumers, the Company makes high performance, dependable and easy-to-use home networking, storage and digital media products to connect people with the Internet and their content and devices. For businesses, the Company provides networking, storage and security solutions without the cost and complexity of Big IT. The Company also supplies leading service providers with retail proven, whole home networking solutions for their customers. The Company's products are built on a variety of proven technologies such as wireless, Ethernet and powerline, with a focus on reliability and ease-of-use. The Company sells products primarily through a global sales channel network, which includes traditional retailers, online retailers, wholesale distributors, direct market resellers, or DMRs, value added resellers, or VARs, and broadband service providers. The accompanying unaudited condensed consolidated financial statements include the accounts of NETGEAR, Inc., and its wholly owned subsidiaries. They have been prepared in accordance with established guidelines for interim financial reporting and with the instructions of Form 10-Q and Article 10 of Regulation S-X. All significant intercompany balances and transactions have been eliminated in consolidation. The balance sheet dated December 31, 2010 has been derived from audited financial statements at such date. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments considered necessary (consisting only of normal recurring adjustments) to fairly state the Company's financial position, results of operations and cash flows for the periods indicated. These unaudited condensed consolidated financial statements should be read in conjunction with the notes to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010. The Company's fiscal year begins on January 1 of the year stated and ends on December 31 of the same year. The Company reports its interim results on a fiscal quarter basis rather than on a calendar quarter basis. Under the fiscal quarter basis, each of the first three fiscal quarters ends on the Sunday closest to the calendar quarter end, with the fourth quarter ending on December 31. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities at the date of the financial statements, and (iii) the reported amounts of revenues and expenses during the reported period. Actual results could differ materially from those estimates and operating results for the three months and nine months ended October 2, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011. The Company has made certain reclassifications to prior period net revenue by geography in order to conform to the current period presentation. For details of these reclassifications, please see Note 12 of the Notes to Unaudited Condensed Consolidated Financial Statements. The Company's significant accounting policies are disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2010. The Company's significant accounting policies have not materially changed during the three and nine months ended October 2, 2011.

500436000

609831000

1996000

3269000

35891000

36009000

37812000

38080000

35218000

35441000

36967000

37483000