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Logitech Gives Gloomy Guidance, But CEO Sees Light

Fremont, Calif. –
Logitech International today revised its outlook downward for fiscal 2012 in
advance of the release of its second-quarter results next 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

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 took an
11 percent hit today and is down more than 61 percent year over year.

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

step down


“The situation
will improve going forward,” DeLuca 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
currently 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

iPad accessories

this summer, and adding a Harmony remote

and app

for Apple and Android devices this week.

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,” he said.