NTGR
#(inaudible).
So first and foremost, we welcome new entrants into the market, especially at an even higher ESP.
So that's good.
So that, again, as you say, it validates our strategy.
Nothing is better from a flattery standpoint on somebody copying your model.
We do believe that providing whole home Wi-Fi coverage eliminating dead spots is the way to go.
And this mesh network concept, we introduced it last year with our Dead Spot Terminator SKU under the joint branding of Best Buy Geek Squad and NETGEAR.
And it has been very successful.
I guess that prompted our competition to copycat it.
And we will welcome any copycat because that validates our strategy.
So we will continue to do on a single router expanded coverage with the Nighthawk series.
And then, of course, we will continue to develop our mesh network along the line of the Dead Spot Terminator where you have multiple units to cover the house.
So as far as competition is concerned, we actually saw our market share ticked up in Q1 both in North America as well as in Europe.
So I think the new entrants hurt our comp---+ the old competitors more than us.
I'll let <UNK>tine talk about foreign exchange first, because I don't know much about it.
And for Asia-Pacific, as you can see, the percentage of revenue derived from Asia-Pacific market is perking up year after year.
And we're very pleased that in Q1 in Q---+ [comments] to 17%.
I remember many years ago I talked about that eventually Asia will represent 20% or 25% of our total sales.
And we clearly are marching towards that goal.
Clearly, if you look at the pure economy, Asia is the biggest.
If you combine Japan and China and India, it's definitely bigger than Europe, bigger than the US.
And population is not even comparable.
So naturally that should be a very lucrative market.
And also, unlike Europe and the US, while the economy is kind of growing at a very snail pace, Asia-Pacific economy, if you look at China and India, they're still growing at 6%, 7%.
We talk about recession but for 6% and 7%, we'll take it any day.
So and also, I ---+ the most important thing both in these market of China, India is that the middle class is growing rapidly.
And more and more affluent people are servicing.
As a matter of fact, the last report I read is that there are more billionaires in China than in the US now.
So that all bodes well for us because we're not selling cheap stuff.
We're selling the most expensive high-end aspirational products.
So all those elements benefit us and we believe that our Nighthawk routers, our Dead Spot Terminators, our Arlo security cameras will play really well into the Asian market.
And we expect that we'll continue to take share away from our competitors both from the US as well as from the local Asian vendors.
Yes.
For the service provider, definitely if you have a fixed cost structure and on your existing product line especially on the leading-edge product line, all of a sudden, you get a bluebird order.
That's very, very highly leveraged because you have no additional costs.
But it's at the front end of the margin and you get extra revenue.
I mean, we'll take it any day.
Now, but those opportunities are far and few in between.
The reason that we could take care of it is because our competitors just do not have that kind of logistic excellence that we could do.
Absolutely, if there's such a bluebird coming in every quarter, we'll be more than happy to take it.
But on the other hand, I'm not going to lower our margin to try to catch this type of business.
But the good thing is, the products that we're shipping are at the leading edge.
So the margin is good.
But you're right, definitely our objective is now after we pare down the product line for service provider and really leave it just to the high value-add, differentiated high margin products, we absolutely will look for opportunities everywhere.
And if we could grow that business, of course we will do that.
All right.
And then in terms of Arlo, yes, clearly Arlo fits right into our channel.
The strength of our channel.
We're very strong in retail, we have a fantastic brand around the world.
We have a very strong VAR base.
So that's why when we create Arlo Wire-Free and then Arlo Q, we just inject them into the channel and the channel would take it from there.
As long as our products are differentiated, are leading edge, and provide real value to our customers, our channel will be able to take it as far as we can.
We'll use that same experience to develop our next category or products in the smart home or in the smart office.
As I said in the prior two earnings call, we're really focused on a product category that we see already growing.
But we would be able to provide a highly differentiated product that would add significant value and fulfill a significant unmet need from our customers in that category that we could command a premium and is a high ASP.
So we're scanning many, many of the categories and there are a few that we're putting our eyes on.
And we would come out with new products but we cannot disclose what it is until it's out.
<UNK>, I can answer DSO quickly.
Two things on that.
The lower the service provider, usually the better the DSO.
And secondly, when we look at our retail quarter, we do give holiday payment terms to some of the large retailers.
And most of that money then comes in in Q1.
So they get extended terms once a year.
So our range is still 65 to 75 and you can see that if you look over history, we happen to be at the low end of the range this quarter.
Yes.
As far as LTE, clearly, our expertise is actually in wireless, be it in the licensed band for LTE Advanced or the unlicensed band for Wi-Fi.
And 5G is being talked about and the standards is not really finalized and the format is not finalized.
But no matter what, we believe that we'll be at the leading edge because frankly, there is not a single competitor in our space who knows more about both the licensed and the unlicensed band wireless as much as we do.
And we have very close relationship with all the chip vendors that provide wireless technology in these areas.
And namely Broadcom and Qualcomm.
And we believe that we'll be at the forefront of the technology.
And you bet, and we will be very focused on making sure we are a leader in the 5G technology.
And you're right, the LTE gateway in the developed market did not pan out as what we would have liked.
And in the emerging market, it's still pretty much mirrored in the old 3G technology which is very low margin, which we're not be open for us to go in.
But you're here running ahead with the new LTE technology not only in 5G but even in 4G.
I mean, the LTE Advanced continue to progress.
I mean, the next milestone is the gigabit Cat-15.
And then also, there is this Cat M, M1 and M2 coming along pretty soon which will open up tremendous opportunity in what we call the mobile IOT area.
Again, nobody could compete with us.
If you look at some of the low power wireless technology, we had it all.
We've been doing years in the mobile hotspot.
And now with Arlo Wire-Free all these are very tricky.
<UNK>w power wireless technology, I don't think any of our competitors have any parallel to our expertise over there.
So we look at LTE as a tremendous opportunity in all three areas.
The existing LTE Advanced, the incoming LTE 4G and Cat-M, and then the upcoming 5G.
So it's a tremendous opportunity for us to branch out and capitalize on all these new-found opportunities in the future.
Sure.
Yes, thank you everyone today.
And I think we're all very excited about our Q1 performance.
As well as more importantly the strength of our channel and the strength of our new products which validate our strategy in really focusing on what we do the best.
Which is wireless and switching in the leading edge category.
And use that opportunity to branch out into new product category but utilizing our existing strength in both brand and channel.
Which we're happy to see that is not only resonating in our traditional market in North America and Europe, but is clearly now resonating in Asia as well and in the emerging markets.
So we're very pleased and we'll continue to follow this path.
And in the next earnings call, we'll talk more about in more new exciting, new products and expansion of channels.
Thank you very much and look forward to talking to you again in July.
