Logitech results impacted by weak Google TV sales

Thursday, July 28th, 2011 

Logitech Announces First Quarter Results for FY 2012; Company Takes $34M Q1 Charge for Planned Price Reduction on Logitech Revue

FREMONT, Calif. and MORGES, Switzerland — Logitech International (SIX: LOGN) (Nasdaq: LOGI) today announced financial results for the first quarter of Fiscal Year 2012.

Sales for Q1 FY 2012 were $480 million compared to $479 million in Q1 FY 2011. Excluding the favorable impact of exchange rate changes, sales declined by 4 percent year over year. The Company posted an operating loss of $45 million, compared to operating income of $12 million in the same quarter a year ago. Included in Logitech’s Q1 FY 2012 operating loss is a $34 million charge to cost of goods sold due to a planned price reduction on Logitech Revue with Google TV. The net loss for Q1 FY 2012 was $30 million ($0.17 per share) compared to net income of $20 million ($0.11 per share) in Q1 of FY 2011. Gross margin for Q1 FY 2012, reflecting the charge related to repricing of Logitech Revue, was 26.1 percent, down from 35.3 percent one year ago

Logitech’s retail sales for Q1 FY 2012 were flat year over year, with an increase in Asia of 29 percent, an increase in the Americas of 1 percent, and a decrease in EMEA of 14 percent. OEM sales decreased by 16 percent. Sales for the LifeSize division grew 34 percent.

In Q1, Logitech achieved strong growth in Asia, driven primarily by China. Also notable for the first quarter was continued sales momentum by the LifeSize division and a positive initial reception of the Company’s new tablet accessories.

While Logitech is making progress in improving operations in the Company’s EMEA sales region, the Q1 performance reflects sustained weakness in the region. The Company also experienced minimal sales growth in its Americas region, primarily due to very weak sales in the Digital Home category. Logitech’s loss in Q1 was compounded by the significant impact of the decision to reduce the price of Logitech Revue from $249 to $99 during Q2. The action was taken with the goal of accelerating adoption of the Google TV platform by removing price as a barrier to broad consumer acceptance.

LOGITECH REVUE PRICE REDUCTION

Q1 was a very weak quarter for sales of Logitech Revue. While we lowered the retail price to $249 during the quarter, it had little impact on consumer acceptance. Our enthusiasm for the promise of the Google TV platform has always been focused on the opportunity to develop another large installed base for our products over time. Up until now, the installed base has remained relatively small. Therefore, with the goal of accelerating adoption of the Google TV platform, we have elected to reduce the retail price from $249 to $99 during Q2.

We believe that this action will remove price as a meaningful barrier to broad consumer acceptance. We expect the lower price, particularly when combined with the upcoming enhancements to the Google TV platform, including the availability of an apps marketplace, should provide the consumer with a compelling value proposition.

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