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Logitech Reports Lower Results, Layoffs

1/20/2009 11:56:00 AM Eastern

Fremont, Calif. — Logitech International reported lower sales and profits in its fiscal third quarter and announced a worldwide layoff of up to 600 employees due to the weakening economy.

Sales for the quarter were $627 million, a decrease of 16 percent compared with $744 million in the same quarter last year.

Operating income was $43 million, a decrease of 63 percent compared with $116 million in the same quarter a year ago. Net income was $40 million compared with the previous year’s third quarter net income of $134 million, which included a net realized gain on sales of short-term investments of $27.8 million and an impairment loss of $5.5 million on the value of short-term investments, the company said.

Gross margin for the third quarter was 29.9 percent, compared with 36.9 percent in the previous year’s third quarter.

Logitech’s retail sales for the quarter declined 16 percent year over year, with sales down 21 percent in the Americas.

“The deepening global recession had a significant impact on our operating performance as our customers continued to reduce inventory levels in the face of weaker consumer demand,” said Gerald P. Quindlen, Logitech president/CEO. “Primarily contributed to the decline in our gross margin from last year’s record high – the negative impact of a significantly stronger dollar and a retail environment that was highly promotional, particularly in the Americas. We believe these factors are tied to the current economic conditions and are not permanent.”

He added, “All indications point to an even weaker retail environment in the coming months. Consequently, our plans assume that in Q4 we will see year-over-year declines in sales, operating income before restructuring charges and gross margin that are similar to or worse than the year-over-year declines we experienced in Q3.”

Logitech’s global salaried workforce will be cut by between 550 and 600 employees. This plan is expected to generate annual cost savings beginning in fiscal year 2010 of approximately $50 million. As a result of the restructuring, Logitech expects to incur a total charge of approximately $20 million to 24 million over the next 12 months, of which approximately $16 million to 18 million is expected to be incurred during the fourth quarter of fiscal year 2009.

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