Strong Demand for Harmony Remotes Give Logitech Q4 Lift

Harmony remotes again represented “the fastest growing retail product category” for Logitech, helping to drive improved overall revenue and profit for its Q4 ended March 31, CEO Gerald Quindlen said on a Thursday earnings call. But the company also saw strong demand for its mouse devices, audio, video and keyboards, while even its OEM business saw a “return to growth” following several “challenging” quarters, he said.

After recording a 45 percent increase in Q3 Harmony remote sales, dollar growth in that category “accelerated to 58 percent” in Q4 vs. Q4 last year, “resulting in significant market share gains,” Quindlen said. Unit sales of remotes increased 22 percent from Q4 2009. Logitech shipped three new Harmony remotes last month, all priced under $100, including the Harmony 300, its lowest-priced model to date, at $49, Quindlen said. The new models “have the potential to dramatically broaden the market,” he said. The company backed the introduction of its new models with promotional efforts including point-of-sale displays and regional ads that he said “clearly communicate the compelling value proposition” of the products. The initiative has been “one of our top priorities for the year,” he said.

Logitech also sees “opportunities for incremental growth from new peripherals in the living room,” Quindlen said. “As the traditional TV morphs into the connected TV, many new opportunities for accessing and interfacing with content will be created -- and that means huge opportunities for Logitech … in an even larger ecosystem, the connected living room,” he said. He declined to elaborate, saying only, “Expect to hear more from us on this subject in the not too distant future."

Q4 sales of Logitech’s pointing devices increased 32 percent in dollars and units vs. Q4 last year. Cordless-mouse revenue was up 46 percent and units up 57 percent, while corded-mouse revenue edged up only 4 percent, but unit sales climbed 16 percent.

Video revenue increased 21 percent, while units jumped 24 percent. Growth, however, was “restrained by the ongoing product transition in our digital video security family as we make way for the next generation offerings coming later this year,” said Chief Financial Officer Erik Bardman. Webcam revenue increased 26 percent, while units grew 24 percent from Q4 last year, he said. The company “delivered double digit video sales growth in all three of our regions,” North America, Europe and Asia Pacific, he said.

Logitech will “further strengthen the competitiveness of our webcam offerings by bringing HD to the entire lineup in the coming months,” Quindlen said, predicting “strong growth for us in the webcam category this year.” The company will also “bring video calling to the living room in time for the 2010 holiday selling season,” he said. It will also “refresh our entire line of digital video security cameras” this summer, he said.

Audio revenue increased 23 percent in Q4, while units jumped 28 percent. OEM revenue inched up 1 percent, while units grew 10 percent, it said.

The only category that saw any downturn was game peripherals. Overall game revenue jumped 32 percent in Q4, but unit sales fell 2 percent. Weighing the category down was console gaming, where revenue soared 53 percent, but unit sales fell 11 percent. PC game peripheral revenue increased 26 percent, while units increased 4 percent.

Quindlen said 2010 was “arguably the most difficult year in Logitech’s history, noting Logitech ended the year “on a very positive note with very strong sales and gross margin performance.” Overall Q4 revenue increased 29 percent from Q4 last year to $525 million, and Logitech swung to a $24 million, 14 cents per share, profit, reversing the prior year’s $35 million, 20 cents per share, loss. Gross margin increased to 35.8 percent from 25 percent. But fiscal year sales fell to $2 billion from $2.2 billion and its profit narrowed to $65 million, or 36 cents per share, from $107 million, 59 cents per share.

Logitech expects to report sales of about $2.3 billion for fiscal 2011 ending March 31, 2011, and sales of about $450 million-$465 million for Q1 ending June 30, 2010, it said.

The company plans to significantly grow its business in China, Quindlen said. It already has “a strong presence” in certain unspecified cities there, making China “one of the three largest markets in our Asia Pacific region,” he said. But he said the goal is to make China “one of our three largest markets worldwide,” a plan that “will take several years to achieve."

Logitech is “taking a wait-and-see attitude” with products for the iPad and other tablet computers, Quindlen also said. “We see the emerging tablet category as an opportunity,” but it’s not yet clear how consumers are using those products vs. netbooks, he said.