CHALLENGES AND OPPORTUNITIES
2010 was another challenging year as markets around the world continued to grapple with economic recovery. Although the second half of 2010 saw improvements overall, the beginning of the year included obstacles such as the shortage of factory workers in China and the scarcity  of microchips and other critical materials. Multiple disruptive factors such as the debt crisis, currency volatility, and climate anomalies all served to deepen marketplace uncertainty. Economies in Europe, North America, and other major markets continued to struggle  with  high  unemployment  rates  and  weak consumer spending. Fortunately, the cloud of economic turmoil in many emerging markets  has  lifted.  D-Link's rigorous infrastructure, accountable scal policies, and reliable brand image has allowed us to take full advantage of the favorable conditions in these regions. These factors, coupled with ongoing technical innovation, consistent product quality, and excellent operational eciency helped D-Link to maintain stable revenue growth. Subsequently, prot rebounded strongly over last year.

FINANCIAL PERFORMANCE
In 2010, D-Link's consolidated revenue totaled NT$33.86 billion, up 9.2% over the previous year. Operating income grew to NT$975 million, up 147% over the previous year. Net profit after tax was NT$1.22 billion, compared to the previous year's NT$511  million, a signicant growth of 139%. Profit status has outshined the shadow cast by the prevailing nancial turmoil abroad. Global consolidated revenue in US dollars came in at US$1.069 billion compared with US$938 million in 2009, a stable growth of 13.8%. A combined gross margin of 31.2% was seen in 2010, similar to the 31% from 2009. Still, operating profit margin was up to 2.9% from 1.3% last year due to economies of scale, a 1.6% improvement. Annual earnings per share showed an increase from 0.79 to 1.89. Overall operating performance was in line with expectations.

MARKET SHARE
D-Link's annual switch shipments totaled approximately 62.7 million ports, a growth of 10.6% over 2009. According to Gartner, D-Link retained its number one ranking in the small business market based on enterprise Ethernet switch ports shipped with a worldwide market share of 38.5% in 2010. In the midsize and large enterprise market for 2010, D-Link's market share based on ports shipped reached 13.2%, for a ranking of third place worldwide (1). Wireless devices totaled approximately 1,784 million units shipped. This is a growth of 42.2% over the previous year. According to Gartner, within the small business and midsize and large enterprise markets for WLAN stand-alone access points, D-Link had worldwide market shares of 30.4% and 25.4% respectively in 2010 (2). Additionally, the broadband telecom product line achieved annual shipments of 1,791 million units, growing 64.5% over last year. Based on product line, wireless products accounted for 41.5% of annual turnover, followed by 28.3% for switches, 20.4%  for broadband telecom, and 7.6% for digital home.

INNOVATION
D-Link remains a leading brand of global consumer networking products for the digital home. The design community has acknowledged D-Link's innovation with multiple awards and distinctions. Perhaps most notably, the acclaimed and groundbreaking Boxee Box won over 15 awards, including Best in Show at CES 2010. The DIR-685 Xtreme N Storage Router also won coveted awards including the "red dot" Design Award as well as the Good Design Award. D-Link is also a formidable pioneer within the enterprise segment. Powerful new features such as Auto Surveillance VLAN demonstrate D-Link's dedication to easing the strain on network administrators and systems integrators. Similarly, the ZoneDefense feature of D-Linkrewalls was awarded a patent in the UK for the proactive manner by which it secures networks from potential threats.

GREEN TECHNOLOGY
One of the greatest advantages that D-Link products have over the competition is their exemplication of green technology. D-Link continues to maintain its commitment to reducing the impact on the environment, a pledge that the company has kept since rst designing high-performance energy-saving products in 1994. Green practices have reduced energy consumption and waste to promote others to recycle and re-use. This year we launched two desktop switches, the 5-port (DGS-1005D) and 8-port (DGS-1008D), both of which were awarded ISO / CD 14067-1:20101 and PAS 2050:20082 certifications. This puts them among thefirst products whose first carbon footprint is in line with the latest international CNC standards. Moving forward, we intend to pursue additional R&D capabilities and supply chain controls to improve environmental stewardship and reduce carbon emissions.

THINKING GLOBALLY, ACTING LOCALLY
After nearly 25 years of hard work and perseverance, we have amassed a powerful global distribution system. D-Link is now comprised of over 2,700 employees in 71 countries, with 160 sales offices throughout the world. D-Link has some of the most comprehensive global market coverage among international networking companies. Our physical proximity to each region gives us a deeper awareness of the subtle definitions among each local customer's requirements, culture, and values. From this insight, we are able to develop a unique brand of service, grounded in sustainability and respect. In particular, D-Link's roots in Asia Pacific, Latin America, and emerging markets have allowed us to contribute to and benefit from the recovery and development there. In 2010, those areas contributed to 56% of consolidated revenues. As these areas gain increased political and economic power, we will continue to strengthen our foothold, since these opportunities will provide a good platform for stable growth.

OUTLOOK
As we look to the future, overall economic conditions are forecasted to improve. In particular, consumption via digital content delivery, reliance on online applications, and the demand for broadband are all expected to grow considerably. This increasing consumer dependence on the "cloud" affects the way families and friends interact, while driving the demand for networking equipment that can empower this new form of connectivity. D-Link will meet these demands through continued investment in  D-Link's core technologies, research and development, and strategic global alliances. As always, ongoing improvements to logistics, operational eciency, and inventory management are a top priority. These factors assist D-Link in reaching the market with new products and technologies early on and subsequently dominating the competition. Although the market for networking products has become more competitive, continuous innovation has sustained D-Link's brand leadership within the industry. Looking ahead, we anticipate stable growth momentum comparable to what was experienced prior to the recent global economic turmoil. We would like to extend our gratitude to the shareholders for their enduring trust and support. The executive team and staff pledge their continued dedication to responsible management, sustainable development, and corporate social responsibility. We maintain our determination to reach performance goals, strengthen growth, and enhance protability. Finally, we would like to wish everyone at D-Link, including all shareholders and staff, continued good health and good fortune. As we look forward to the following year, D-Link's talented and committed employees, innovative technologies, strategic partners, and global branding position us well for continued success.

Sincerely,

Roger Kao

Chairman and CEO 
D-Link Group

 

 

 

 

The Gartner Report(s) described herein, (the "Gartner Report(s)") represent(s) data, research opinion or viewpoints published, as part of a syndicated subscription service, by Gartner, Inc. ("Gartner"), and are not representations of fact. Each Gartner Report speaks as of its original publication date (and not as of the date of this Annual Report) and the opinions expressed in the Gartner Report(s) are subject to change without notice.

1 Source: Gartner,"Market Share: Enterprise Ethernet Switches, Worldwide, 2010" by Severine Real and Katsuo Hori, 11 March 2011

2 Source: Gartner, "Market Share: Enterprise WLAN Equipment, Worldwide, 2010" by Christian Canales, 3 March 2011