- The FCC said new foreign-produced routers will no longer receive equipment authorization required for import and sale in the U.S., citing “unacceptable risks” to national security.
- The decision does not affect routers already authorized or currently in use and follows similar restrictions on certain foreign-produced drones last year.
- Overseas suppliers control roughly 60% of the U.S. home-router market, and the move could eventually give a competitive edge to domestic vendors like Netgear.
Shares of Netgear, Inc. (NTGR) shares surged nearly 20% in overnight trading late Monday after U.S. regulators moved to block approval of new foreign-made consumer routers over cybersecurity risks in a market long dominated by Chinese manufacturers.
NTGR stock jumped nearly 6% on Monday to $22.06 , logging its best session in over a month.
FCC Blocks New Foreign Routers Over Security Risks
The Federal Communications Commission (FCC) said on Monday that newly developed foreign-produced consumer routers will no longer be eligible for equipment authorization required before they can be imported, marketed or sold in the U.S.
Executive-branch national security agencies determined the devices pose “unacceptable risks to the national security of the United States or the safety and security of United States persons,” the FCC said.
However, routers already authorized and those currently in use are not affected by the decision. The move follows similar steps taken last year restricting imports of certain foreign-produced drones.
Domestic Router Makers Gain Tailwind
The move comes in a market where overseas manufacturers are estimated to control roughly 60% of U.S. home-router sales and could eventually give domestic vendors such as Netgear a competitive edge.
The decision also comes amid broader scrutiny of overseas communications hardware. Last month, Ken Paxton, attorney general of Texas, sued TP-Link Systems, alleging that the company marketed its networking devices deceptively and allowed Beijing access to American consumers’ devices, saying the products had been used by China’s state-sponsored hacking entities in cyber-attack operations against the U.S.
Paxton said the alleged misrepresentations posed “a national security threat,” while TP-Link said it would “vigorously defend” its reputation and that the Chinese government has no ownership or control over the company, its products, or user data.
Netgear Q4 Beat Supports Stock Rally
The rally also follows improving financial performance at Netgear, which reported fourth-quarter (Q4) revenue of $182.5 million versus estimates of $177.26 million and non-GAAP earnings per share of $0.26 compared with estimates of $0.05.
CEO CJ Prober said the results marked the company’s first year of revenue growth in five years and reflected a record quarterly non-GAAP gross margin of 41.2%, supported by strength in its enterprise segment and improvements in product mix. For the first quarter, Netgear expects revenue between $145 million and $160 million.
Separately, Stifel last month lowered its price target on the stock to $36 from $40 while maintaining a 'Buy' rating, saying the company delivered a “nice” Q4 earnings beat even as its longer-term turnaround remains the key focus for investors.
How Did Stocktwits Users React?
On Stocktwits, retail sentiment for NTGR jumped to ‘extremely bullish’ from ‘bearish’ levels over the past day amid ‘extremely high’ message volume.
NTGR stock has declined 7% over the past year.
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