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Logitech Announces Restructuring, Workforce Reductions

4/26/2012 09:53:39 AM Eastern

Newark, Calif. - Logitech International attempted to right its year of financial woes, announcing that the company has eliminated two executive management positions as part of its transformation strategy, which includes workforce reductions.

The company also reported that its sales for the fiscal fourth quarter were down 3 percent.

Junien Labrousse will no longer hold the positions of executive VP of the products group and president of Logitech Europe. He will instead become senior VP of the business group responsible for PCs, Macs and tablets, and his former positions will be eliminated. 

Those who previously reported to Labrousse will now report to Logitech president Bracken Darrell. Darrell became Logitech's president just a few weeks ago, and is in line to eventually succeed chairman and CEO Guerrino De Luca.

According a form 8-K filed with the Securities & Exchange Commission (SEC), Labrousse's annual base salary will be reduced from approximately $775,000 to approximately $680,000, and his bonus target as a percentage of base salary will be reduced from 75 percent to 65 percent.

Werner Heid, previously senior VP of worldwide sales and marketing, will be leaving the company May 15. His position has been eliminated. Those who reported to Heid will now report to Darrel as well.

 Darrell said in a conference call: "I believe that Logitech's size got ahead of its business over the last several years. It's clear to me that to reignite growth, we need to be faster, simpler and more consumer centric ... These changes enable me to work more closely with our product and sales teams Together, we can become more responsive to the changing needs of today's consumers as we address new opportunities with greater speed and flexibility."

Logitech's Form 8-K also details changes in its executive management, stating that it has "approved a restructuring expected to result in a reduction of approximately $80 million in annual operating expenses."

The restructuring, Logitech said, "includes the elimination of a layer of executive management, a realignment of reporting assignments for the sales regions, product groups and marketing groups, and a workforce reduction."

There are no further details on the workforce reduction, and requests to Logitech for more information were unanswered at press time.

Logitech's fourth-quarter sales for the fiscal year were $532 million, which is down 3 percent from $548 million in the prior-year period. When the unfavorable impact of exchange rates is considered, sales decreased by 2 percent.

 Operating income was $24 million, compared with $4 million in prior-year period, and net income was $28 million compared with $3 million. Gross margin for the quarter was 36.4 percent, compared with 32.8 percent in prior-year period.

Retail sales also decreased a total of 2 percent year over year. Sales were up 13 percent in EMEA and 12 percent in Asia, but down 17 percent in the Americas. OEM sales decreased 9 percent, and sales for the LifeSize division decreased 10 percent.

The declines in sales in the Americas were mainly attributable to "pronounced weakness in the digital home and webcam categories. Sales of our discontinued offerings for GoogleTV were down by roughly $5 million compared to the prior year. Sales of remotes, which were negatively impacted by gaps in our product refresh cycle, declined by over 50 percent while consumer webcam sales fell by 40 percent," Logitech said.

For the full fiscal year, sales were relatively flat at $2.32 billion, compared with $2.36 billion in the prior-year period.

Operating income for the fiscal year was $72 million, down 50 percent from 2011's $143 million. Net income was $71 million, down 44 percent from $128 million, and gross margin was 33.5 percent, compared with 35.4 percent in the 2011 fiscal year.

Darrel said he expects most of the restructuring to be completed by the end of the current quarter.

De Luca said in a statement: "I believe the organizational streamlining that Bracken is driving is a decisive step for Logitech's future. Looking ahead, I am also excited about what I believe is a strong lineup of new products with a much clearer value proposition to consumers. We expect that increasingly differentiated products will provide strong up-sell opportunities across all of our businesses. The majority of these new products will launch in Q2."

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