Segment Information, Operations By Geographic Area And Customer Concentration (Notes)

12 Months Ended

Dec. 31, 2013

Segment Reporting [Abstract]

Segment Information, Operations By Geographic Area And Customer Concentration

Segment Information, Operations by Geographic Area and Customer Concentration

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 operates 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, home video monitoring, storage and digital media products. The commercial business unit consists of business networking, storage and security solutions that bring enterprise class functionality down to the small and medium size business at an affordable price. The service provider business unit consists of made-to-order and retail proven, whole home networking hardware and software solutions as well as 4G LTE hotspots sold to service providers for sale to their subscribers. Each business unit is managed by a Senior Vice President/General Manager. The Company believes this structure enables it 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 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. 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 Company does not evaluate operating segments using discrete asset information.

Financial information for each reportable segment and a reconciliation of segment contribution income to income before income taxes is as follows (in thousands, except percentage data):

	Year Ended December 31,
	2013			2012			2011
Net revenues:
Retail	$	509,924		$	504,797		$	481,795
Commercial	311,261			307,945			331,439
Service provider	548,448			459,179			367,784
Total net revenues	$	1,369,633		$	1,271,921		$	1,181,018
Contribution income:
Retail	$	73,418		$	86,808		$	81,589
Retail contribution margin	14.4		%	17.2		%	16.9		%
Commercial	66,506			67,826			74,746
Commercial contribution margin	21.4		%	22.0		%	22.6		%
Service Provider	51,620			40,794			32,797
Service Provider contribution margin	9.4		%	8.9		%	8.9		%
Total segment contribution income	191,544			195,428			189,132
Corporate and unallocated costs	(51,629		)	(47,766		)	(43,301		)
Amortization of intangible assets (1)	(15,217		)	(4,763		)	(4,658		)
Stock-based compensation expense	(17,462		)	(14,372		)	(13,762		)
Restructuring and other charges	(5,335		)	(1,190		)	(2,094		)
Acquisition-related expense (2)	(940		)	(833		)	(40		)
Impact to cost of sales from acquisition accounting adjustments to inventory	(568		)	—			(609		)
Litigation reserves, net	(5,354		)	(390		)	201
Impairment of intangibles	(2,000		)	—			—
Interest income	400			498			477
Other income (expense), net	(457		)	2,670			(1,136		)
Income before income taxes	$	92,982		$	129,282		$	124,210

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(1) Amount excludes amortization expense related to patents within purchased intangible assets in costs of revenues.

(2) These acquisition-related charges were expensed in the period incurred and reported in the Company's consolidated statements of operations within cost of revenues and operating expense.

The Company conducts business across three geographic regions: Americas, Europe, Middle-East and Africa (“EMEA”) and Asia Pacific ("APAC'). 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):

	Year Ended December 31,
	2013		2012		2011
United States	$	769,357	$	660,998	$	570,143
Americas (excluding U.S.)	19,961		18,421		16,913
United Kingdom	142,729		184,404		165,522
EMEA (excluding U.K.)	269,959		273,320		312,191
APAC	167,627		134,778		116,249
Total net revenue	$	1,369,633	$	1,271,921	$	1,181,018

No single customer accounted for greater than 10% of net revenues in the years ended December 31, 2013 and 2012. For the year ended December 31, 2011, retailer, Best Buy Inc. and distributor, Ingram Micro, Inc. represented approximately 11% and 10% of net revenues respectively.

Property and equipment by geographic location are as follows (in thousands):

	December 31, 2013		December 31, 2012
United States	$	10,273	$	9,898
Americas (excluding U.S.)	2,160		36
EMEA	914		1,173
China	11,905		6,763
APAC (excluding China)	1,942		1,155
	$	27,194	$	19,025