Logitech Guidance Gloomy,
But CEO Sees Light Ahead
By John Laposky On Oct 3 2011 - 3:01am
FREMONT, CALIF. —
Logitech International’s recent
financial slide appears to be ongoing as the
company revised its outlook downward for fiscal
2012 in advance of the release of its second-quarter
results this month.
The company said in a statement it expects an
operating income of $90 million, for the year ending
March 31, 2012, down from its original target of
$143 million. Sales were expected to come in $100
million below the company’s $2.5 billion target.
Logitech blamed the dimmer outlook on the current
economic environment in mature western markets,
which has caused its gross margins to climb
from 26.1 percent in Q1 to 33 percent, with margins
in both Q3 and Q4 expected to be well above the
full-year average, though shrinking.
Much of the margin squeeze is a lingering result of
the company’s $200 retail price reduction last year
of its flagship Revue with Google TV device, which
has underperformed expectations.
Logitech’s previous outlook did not include gross
margin. The company had previously cut estimates
in July, and again back in March.
The company’s stock price is down more than
61 percent year over year, but chairman and acting
CEO Guerrino De Luca told analysts that he believes
the company has turned the corner in light of
the company’s $45 million loss in the first quarter,
which prompted previous CEO Gerard Quindlen to
“The situation will improve going forward,” De-
Luca said. “I am disappointed that our revised fiscal
2012 outlook is not higher, but we now have a thorough
understanding of what needs to be fixed. Our
strategy remains unchanged. I expect the initiatives
we have put in place to result in reinvigorated product
offerings and improved execution in our sales
and marketing organization as we progress through
2012 and into 2013. The $90 million guidance for
the year is impacted by a $45 million operating loss
in the last quarter, so we are talking about more than
$130 million in Q2, Q3.”
The company is undergoing a reorganization of
its European sales unit, where sales have sagged.
“Strengthening our product portfolio is our No. 1 priority
and solution of the European channel issue is No.
2,” De Luca said. “A combination of these will help us
to face a difficult economy in a better situation.”
Logitech’s core business of keyboards and input
devices has taken a hit as the tablet category has
grown. Logitech has responded, marketing its first
iPad accessories this summer, and adding a Harmony
remote device and app for Apple and Android devices
earlier this month. The company has also invested
heavily in the video conferencing category with it
LifeSize operation, aimed at the enterprise channel.
Operated as a separate division, De Luca cited the
growth of the business as another positive development.
“LifeSize is one of the good things the company
is doing,” he told analysts. “We expect to see sequential
growth in each of the next two quarters.”
In addition, De Luca referenced the company’s
strong balance sheet, pointing out the company’s significant
cash reserves and lack of debt. “From a cash
and balance sheet perspective, we have the cash
and the flexibility to address every area that needs addressing,”