Logitech Eyes Growth From Tablets, Google TV, Expanded Distribution

Logitech sees growth opportunities from tablet computers, Google TV, online video expansion, wider distribution in China and a move into more emerging markets, company executives told investors in New York Tuesday. CEO Gerald Quindlen touted the benefits of open ecosystems in general, specifically Google’s Android operating system, which he said offered long-term growth potential similar to Microsoft’s Windows.

The peripheral maker is still studying how consumers are using tablets, and it remains early for the category, with only one strong-selling product, Apple’s iPad, said Quindlen. But he predicted the category will be “additive” for Logitech.

The company plans to develop nine products specifically designed for tablets by March 31, 2012, said Junien Labrousse, executive vice president of products at Logitech. Twenty-five percent of Logitech’s products will be “tablet-friendly” by the end of fiscal 2012, he said. There’s significant opportunity for peripherals to improve tablets as a productivity platform, he said.

Open platforms and applications like Android, meanwhile, will drive a need for more advanced peripherals, said Labrousse. Logitech sees a significant opportunity in Google TV because there are now 60 million U.S. households with TVs and there will be 200 million Internet-connected TVs in the U.S. and Europe by 2014, he said. The company didn’t say how many Google TV products it initially sold.

The company plans to “ride the video wave,” Quindlen said, predicting Internet traffic will “quadruple” between 2010 and 2014, when online video will account for 57 percent of all consumer Internet traffic. Emerging applications including security will also provide new opportunities for Logitech in video, said Labrousse.

Logitech is seeing significant growth in China, with new population centers driving growth, said Quindlen. Results were strong in the market in Logitech’s Q2 ended Sept. 30, and the company is making progress in its goal of making China a top three market for it, he said. Logitech is also establishing a growth model there that it can use for other markets it is looking to have a stronger presence in, he said.

The manufacturer’s revenue in China was up 115 percent from last year, with units soaring 185 percent, said Werner Heid, senior vice president of worldwide sales and marketing. It’s seeing strong market share growth there across all categories, and has a No. 1 share in mice and a 40 percent combined share in mice, keyboards and other desktop peripherals, he said. Logitech also doubled its share in webcams there to 30 percent, making it No. 1 in that category, he said. It plans to triple fiscal 2011 revenue and profitability in China by fiscal 2015, with core PC driving most of the growth, he said. Logitech also plans to achieve leading market share in all relevant PC peripheral categories there, he said. The company will “go deep” in China by establishing a high-quality point-of-sales presence in 250 “T1-T3” cities there by fiscal 2015, will “go wide” there by expanding its marketing coverage to 400 “T4-T5” cities by the same time, and will “go young” by focusing its marketing strategy on 18-30 year olds, he said. Brazil, Russia, Turkey and India “will be next” for Logitech, he said, telling investors the company will leverage its China strategy in those markets.

Emerging markets will be the “most significant contributor” to PC and mobile screen growth long-term, said Quindlen. Logitech’s living room screen presence is being driven by growth in its Harmony remote business, its fastest-growing product category in Q2 (CED Oct 29 p4). The company saw 116 percent growth in the remotes category in the first half of this fiscal year versus the same period a year ago, and it expects the category to continue being its fastest-growing in fiscal 2011, Quindlen said. Logitech is “reaching new consumers” due to its recent introduction of low-cost remotes, he said. Harmony remotes are only being sold in the U.S. now, and only at Best Buy, Amazon and direct from Logitech, he said. But “we plan to expand that to other channels beginning in the fourth quarter, and we have every intention to work with Google and other partners to expand internationally beginning in calendar 2011,” he said.

On a long-term basis, Logitech expects its revenue from PC and mobile products will decline 10 percent, but business and professional communication video products from its recently purchased LifeSize division as well as digital home products will each grow 25 percent, Quindlen said. It, therefore, expects overall company revenue growth to increase in the “mid-teens,” he said. Logitech will reduce its rate of investment, narrowing its focus mainly to the key growth areas of Google TV, LifeSize and China expansion, he said.

Game peripherals received only scant mention in the presentation. It was the only category that Logitech didn’t see double-digit growth in so far this year, said Chief Financial Officer Erik Bardman. Only one customer -- Ingram Micro -- represented more than 10 percent of Logitech’s total sales in the first half of this year and last year, he said. Logitech’s manufacturing is now about evenly split between in-house and contract manufacturers, he also said. The company significantly reduced headcount in 2009. Since then, it’s efficiently managed headcount, but continues to selectively hire people to support growth areas including emerging markets, LifeSize and “critical” R&D projects, he said.