Corporate Governance
Chairman Message | Board of Directors
 
 

Letters to Shareholders, Customers, Partners and Employees

 

Challenges and Opportunities

In 2015, macroeconomic factors continued to take their toll on the global economy. Despite this, there were notable achievements for D-Link. The number of mydlink Cloud registered users surpassed 4 million; the Ultra Wi-Fi DIR-890L was recognized as the “Best Router of 2015” by PC Mag; the Wi-Fi Water Sensor DCH-S160 was named WireCutter’s "Best Smart Leak Detector"; and the Ultra-Wide 180-degree Wide Eye Series IP camera became the widest consumer IP camera on the market. Meanwhile, Apple, IFTTT and Amazon partnerships forged in the Connected Home range of products, together with the innovative Smart Alarm Detector, increased the usability of our range, provided customers with better connections and gave D-Link even greater currency in 2016. 

Still, D-Link did not escape the impact of global forces: China's economic growth slowed; emerging markets went into recession on the back of currency devaluation; and Europe began quantitative easing to resist economic recession and deflation. In the Middle East, increasing political tensions and military conflict led to crashing oil prices and global commodity slumps. The domino effect of these setbacks rebounded around the world. 

In addition, D-Link continued to experience intense competition in the networking industry. Moreover, Beijing reacted to worsening conditions by initiating a major government-sponsored program, the so-called “Red Supply Chain,” to promote Chinese makers as international brands. 

Faced with the onset of these challenges, D-Link’s Board of Directors mobilized a new management team and began the task of restructuring the organization, reconfiguring company strategy, and establishing a new corporate vision and direction. 

Financial Performance

D-Link’s global consolidated revenue totaled NT$26.61bn in 2015, which was a 12% drop from NT$30.31bn in 2014. In US dollars, consolidated revenue was US$834m, or 16% less than the US$1bn of previous years. However, this was mainly due to the euro’s currency devaluation and emerging market recessions, which led to weaker market demand. 

Meanwhile, operating income fell to NT$6,433m, 22% down from NT$8,273m last year. This was a consequence of the appreciating US dollar leading to higher operating costs and reduced gross profit. Sales performance was not as good as hoped in Q4, and the company could not substantially adjust prices. 

In response to market slowdown, the new management team proposed an inventory impairment loss scheme. At the same time, it sped up plans for corporate transformation and optimized the organizational structure to reduce operating costs. With an eye to the future, it increased R&D investment, boosting investment by 25.5% from the previous year. 

D-Link went on to report increased operating losses of NT$1.59bn, with the operating profit margin falling between 1% and 6% compared with the previous year. Net loss after tax was NT$1.87bn, with an annual earnings per share of NT$-2.9. 

Market Share

In 2015, according to technology research and advisory firm Gartner(1), D-Link ranked first in the Enterprise WLAN market for standalone access points. D-Link shipped 834,100 units, which was an increase of 9.4% on 2014 and its shipment market share was 50.5 %, up from 50.4% the year before. D-Link also topped worldwide vendor revenue for standalone access points at $73.9 million. While market share of revenue was down 12.7% on 2014 at 37.4%, D-Link's share still doubled that of the second-place vendor at 15.9%. 

In the Enterprise Ethernet Switch market, D-Link ranked third based on total port shipments (61.056 million ports) for a worldwide market share of 13.4%. Of this, D-Link topped shipments of 100 Mbps switches worldwide with 34.028 million units shipped, or 29.9% of the market. The second-place vendor held a 21.5% share of the shipments market. 

Based on revenue share by product category (2), wireless products accounted for 37% of annual turnover, followed by 27% for switches, 15% for broadband telecom, and 21% for digital home and others. 

(1) Source: Gartner, Market Share: Enterprise WLAN Equipment, Worldwide, 2014-2015 

(2) Source: D-Link 2015 Financial Report. 

A Strong Vision for the Future

Innovation, integration, and brand recognition. These are three of D-Link’s core strengths and the assets that we build on as we go forward into an ever more connected world and an increasingly fast, cut-throat industry. Our success over the past 30 years in developing high-performance hardware—such as our IP cameras, routers and switches—is a direct result of playing to these strengths. And yet looking to the future, with our transition into a ‘solutions provider’, the mission must be expanded into the need to transform into a ‘software developer,’ as the only way to differentiate ourselves from the competition and remain ahead of the game. 

To this end, we continue to build on the powerful mobile management capabilities delivered by our easy-to-use mydlink Cloud services, as well as developing ways to make this user experience excel among the competition. In April 2016, the number of mydlink subscribers surpassed 4 million registered users, as recognition of the trust and support that we have built among our customers globally. At the same time we have plans to establish an inaugural D-Link software lab in Hsinchu, to nurture exceptional software and programming talent, and recruit the country’s best minds and technicians. 

This new direction, taken together with the existing heritage of our household brand and our longstanding innovation and hard-won expertise, will enable D-Link to grab a greater share of the global networking and technology market, returning us to our position as industry leader. 

The Connected Home

The world is realizing, household by household, the potential of the Internet of Things (IoT) to change lives. From switching on the lights when the temperature plunges, to watering the plants from your smartphone while on holiday, IoT can create a world that removes human intervention when we wish it, at the same time as giving humans greater control and therefore peace of mind. 

D-Link has long been defined by customer-centric thinking, which means IoT is this company’s arena to thrive in. While the first phase of IoT focused on the technology—the smart home products and a safe, intuitive cloud platform—the next phase will refocus on the humans. In other words, in meeting people’s growing expectations. D-Link understands people don’t necessarily want all their products from one vendor; they want to integrate their favorite devices with the best new devices across a range of manufacturers. To succeed in this new smart home landscape, vendors will need to empower customers to pick and choose seamlessly. Put another way, IoT’s second wave is about ecosystems: their extent, openness and interoperability. 

Prior to 2010, D-Link was one of the first brands to start creating its range of IoT devices, built upon a secure cloud platform over which to collect and share data. In April 2016, we reached 4 million cloud subscribers. D-Link made its products high-performing and easy-touse, covering Wi-Fi cameras; motion, water and door sensors; and smart plugs. In 2015, we began pursuing a series of carefully selected, strategic integrations with IFTTT, Amazon, Yale, Nest, Apple, and now, Google. 

That’s in the home. But at work and beyond, extending out to cities and regions—areas that D-Link has invested significantly in— IoT can, and will, have even greater impact. D-Link knows by doing more; aggressively targeting key partnerships and technological innovation, it can do better than its competitors. While the first phase of the IoT was characterized by fragmentation and relative isolation; the second phase will be owned by partnerships, compatibility and integration. The winners of IoT’s second wave will embrace and drive this change. 

Innovation Today and Tomorrow

In 2015, D-Link spent a record NT$1.4 billion on R&D, up more than 25% on the NT$1.1 billion spent in 2014. We understand that in order to stay on top, we must continue to innovate. Remaining not just relevant, but the preferred brand on the cutting edge of Internet technology is no easy task, and D-Link knows what it must do to regain that position. We certainly have what it takes. We were and remain the first company to offer a consumer IP camera with a 180-degree wide view, stretching the 130-degree view offered by competitors by a further 38%. 

We will be one of the first manufacturers to make an Apple Home-Kit-enabled camera and one of the few brands integrated with IFTTT with a complete Smart Home range that includes not only sensors, siren and plugs, but also cameras. We are also one of the first brands that has natively integrated with the Amazon Alexa Voice Service under its Smart Home category. And with future plans to open an exciting, new software hothouse in Taiwan, we are continuing our aggressive pursuit of technological advances that will deliver the solutions our customers want and need in the years to come. 

Global Service, Local Touch

Much of D-Link’s success over past decades has benefited from and also fed into our international brand recognition. Both synergies are a result of our potent globalization strategy. With offices in more than 60 countries around the world, D-Link is already widely recognized as a phenomenal brand able to leverage powerful global and local knowledge, expertise and relationships. By developing localized applications, D-Link can be highly responsive to local customer needs, giving it a critical advantage across markets and product segments. Looking ahead, a renewed focus on expanding and improving our relationships with sales channels in all countries and at all levels (retailers, distributors, ITSPs and SIs) will ensure that more of our products and services are able to reach the customers who can benefit from them the most, while reducing risk and cutting costs. 

Outlook

In the midst of challenging economic conditions and continued technological advances, D-Link continues to be responsive and to adjust our global strategy accordingly. This means seizing new opportunities for joint-ventures and improved sales channel relationships in countries where we have the potential to make huge gains such as in Emerging Markets, while keeping the foot on the pedal in our large markets like the United States and capitalizing on our market dominance in countries such as India.

But it also means mitigating risk in times of worldwide economic instability. For example, we are restructuring our global operations to extract out as much efficiency as possible. We continue to renegotiate business contracts within at-risk nations to more accurately reflect the relative strength of local currencies, in order to better shield ourselves from the negative effects of unstable foreign currencies and thus improve our bottom-line performance. 

IoT presents a unique opportunity for D-Link to respond to consumer hopes and expectations and to be part of a revolution that is changing our daily lives as we know it. Now we are seizing on strategic integrations with other brands that will make these products and the solutions we offer our customers truly connected to their lives and really able to enhance people’s lifestyles. 

In fact, this trend runs through everything D-Link does. We have a very strong hardware base across a full range of products from switches and cameras to routers and network video recorders. Now the opportunity is to excel with software and integrations that enhance our solutions and provide an unrivalled User Experience. 

Notwithstanding overall negative growth, D-Link continues to rise in prominence and improve its market penetration in its regions, with growth anticipated beyond the current dip. Looking forward, D-Link’s business strategy will focus on doing everything to return to profitability. This includes reducing operating costs, organizational restructuring, product positioning, and the investment of high value-added cloud applications and services. 

In addition, recentering the company’s focus while using partners and vendors to service the non-core market, customization of marketing strategies, and aggressively avoiding wastage will all combine to ensure D-Link’s road to recovery is swift and steady. 

We extend our gratitude for the long-term trust and support of our shareholders, as well as that of the management team and staff who have continued to uphold the spirit of sound management, sustainable development, and corporate social responsibility. Through collaborative efforts, D-Link will achieve its performance targets and return to continued growth and prosperity for our valued shareholders. 

 

Sincerely,


Roger Kao
Chairman and Brand Director

Anny Wei

President


 
 

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