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Netgear is spinning off its Arlo security camera business into its own standalone business. The networking firm’s board took the unanimous decision to approve the plans to split Arlo from its parent company during the second half of the year.
An IPO is being lined up as part of the split, with less than 20 per cent of common stock set to be listed with Netgear retaining the remaining 80 per cent. Netgear’s CEO and chairman Patrick Lo said the split had become necessary because ‘both Netgear and Arlo have reached the point where they can succeed by being independent of one another’.
“We have determined that separation will provide a strategic focus, agility and financial resources needed to position each for accelerated success in their respective marketplaces,” he said. “It is my intention to lead NETGEAR forward with a greater focus on margin expansion via recurring service revenue and top line growth via accretive acquisitions,” Lo said. “The strategy needed to continue to win and create value at NETGEAR will be very different from the strategy needed for Arlo to succeed, as Arlo will focus on organic product introductions and rapid user base expansion."
Once all the regulatory procedures are completed, Netgear’s current SVP Matthew McRae will step in as the CEO of the newly formed company. Considering McRaw only joined the company four months ago, it is not a bad promotion.
Despite being a relatively recent addition, the Arlo family has been essential to Netgear’s recent financial success. In fact, recent earings reports show that while the majority of Netgear’s profits remained flat, Arlo’s profits jumped significantly.
