Logitech who recently parted Company with Harvey Norman appears to be struggling with the Company announcing that sales are set to fall by $100M and that projected profits are set to fall from $143M to $90M following a $45M loss in the first quarter.Guerrino De Luca, Logitech’s interim chief executive, said the company had failed to develop enough “must-have devices”. “It is not just about the economy because you can look at companies like Apple that can sell expensive devices in a terrible market. But in tough times you need very compelling reasons for consumers to spend their money and from a product point of view, we are not where we need to be,” Mr De Luca said.
He said Logitech had missed opportunities to develop products for the digital music market – such as wireless speakers and headsets – because it had been too focused on PC speakers.
Many of Logitech’s products have been focused on the PC market, which is seeing sharply slowing growth as consumers migrate to tablets and smartphones.
“The traditional PC is all but dying and sinking Logitech’s bread-and-butter keyboard and mice business with it,” noted Beat Keiser, analyst at CA Cheuvreux.
Logitech Australia who recently moved to selling products online in Australia at prices up to 70% above what the Company sells the same products for overseas are not saying what impact the loss of Harvey Norman sales will have on their business.
Logitech blamed the dimmer outlook on the current economic environment in markets like Australia, Europe and the USA. They also said that their margins are set to fall as they move to discount slow moving stock.
“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 reorganisation of several global sales units in particular Europe, where sales have sagged significantly. “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 first iPad accessories this summer, and adding a Harmony remote device 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.”