Logitech Sales Down, Profit Up on Higher Sales of Audio and Tablet Peripherals

Logitech exited fiscal 2012 “better than expected but far from where we need to be,” CEO Guerrino De Luca said Thursday on an earnings call, and the company’s goal now is to be “leaner, faster and simpler.” Sales for Q4 were $532 million, down 3 percent from $548 million in Q4 FY 2011, the company said, while operating income improved to $24 million from $4 million a year ago. Net income for Q4 2012 was $28 million, or $0.17 per share, compared with net income of $3 million, $0.02 per share, in Q4 of fiscal 2011, the company said. Gross margin for the 2012 quarter was 36.4 percent compared to 32.8 percent in the prior year.

A shift in mix to higher average selling price products drove Logitech’s audio business to the best retail performance for the company in fiscal Q4 2012, the company said. Audio sales -- up 17 percent in dollars and down 7 percent in units -- were driven by a mini Bluetooth boombox for tablets and smartphones and by headphones, which were up as a category 49 percent, the company said. Sales of PC speakers rose 6 percent, with growth in both the Americas and EMEA, the company said.

To return to “sustainable, profitable growth” the company needs to meet the “new standards of consumer expectations” and exploit opportunities in tablets, music, business products, emerging markets, Windows 8 and videoconferencing, De Luca said. Attach rates for the iPad “are pretty high” and will grow as consumers increasingly use iPads for more “than just watching a movie,” De Luca said. Noting that both Android and Windows 8 support pointing devices, he said that once consumers commit to using a tablet for productivity, “you don’t just want a keyboard, you want a mouse, too.” The connect rate of keyboards to iPads is “quite high” and will correlate to the growth of tablet sales, he said.

Following a 46 percent sales plunge in the digital home category, including Harmony remotes and peripherals for discontinued Google TV peripherals, Logitech is planning a “meaningful refresh” across the remotes category, where sales were down 38 percent, De Luca said. Most of the decline was in the Americas, while sales in EMEA grew 15 percent. The company plans to strengthen the Harmony lineup in the coming months, it said.

Sales in the keyboards and desktop category grew 4 percent, with units up 1 percent, Logitech said, driven by sales of iPad-specific keyboards. Cordless keyboard sales dollars jumped 42 percent and the number of units doubled, the company said. Sales at the high end of the keyboard and desktop category declined but there was growth in the low-end and midrange, the company said. Cordless mice sales inched up by a point, led by high-end cordless mice, and the category logged double-digit growth in EMEA and Asia Pacific regions.

A 75 percent drop in accessory steering wheels sales led to an overall 17 percent sales decline in the gaming category, while units were up 4 percent, Logitech said. PC gaming peripheral sales were up by 7 percent, with units up by 26 percent, reflecting a mix shift away from steering wheels to lower priced gamepads and keyboards, the company said.

De Luca said traditional tethered PC webcams “are not going to recover no matter how inventive they are” and the company doesn’t plan to pursue a “non-opportunity.” The company is looking for how to extend those video competencies in “adjacent areas” including “tablets and other platforms,” he said. Video sales fell 19 percent, with units down by 24 percent, reflecting softness in the mid- and low ranges of the line, Logitech said. Lower end webcams continue to be negatively impacted by consumer satisfaction with embedded webcam offerings and “gaps in our product portfolio,” the company said. Logitech plans to focus on the high end of the category with products like the HD Pro Webcam C920, which delivers a quality level for Skype users that’s not available with embedded webcams, the company said.

On changing retail trends in the U.S. from brick-and-mortar to online and Best Buy’s announced shutting of 50 stores, De Luca said Logitech hopes to be increasingly present in physical stores with music and tablet products, while remaining strong at Amazon and with other online retailers. The biggest opportunity for Logitech is with specialty stores, “especially the Apple store,” he said, where the company will be “increasingly present.” Consumers will buy “where it’s convenient for them,” De Luca said, “and we will be where they buy."

Logitech erased two executive management positions as part of a restructuring that’s aimed at chopping $80 million annually from operating costs, said President Bracken Darrell. The position of executive vice president of the products group and president of Logitech Europe, held by Junien Labrousse, was eliminated along with senior vice president of worldwide sales and marketing, held by Werner Heid, the company said. Leaders of the individual business groups now report to Darrell, he said. Labrousse was named senior vice president of the business group responsible for PCs, Macs and tablets; Heid will leave the company May 15. Additional details of cost-cutting moves will be announced at a later date, executives said.