Logitech Earnings Outdo Estimate - Analyst Blog

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Logitech International SA ( LOGI ) reported financial results for the fourth quarter and fiscal year 2012. Net income was $28.3 million or 17 cents per share in the fourth quarter of 2012, reflecting a 13.3% increase from year-ago quarter. Earnings surpassed the Zacks Consensus Estimate by 10 cents in the quarter.

For fiscal year 2012, net income declined 44% year over year to $71.5 million or 41 cents per share compared to $128.5 million or 72 cents per share reported in 2011. However, earnings were well above the Zacks Consensus Estimate of 31 cents.

Revenues

Overall net sales in the fourth quarter 2012 were $532 million, declining 3% year over year. Excluding the adverse impact of currency translation, sales declined 2% year-over-year. The reduction was due to the decline in the company's LifeSize, OEM and Americas retail sales division which was partially offset by increase in revenues in the EMEA and Asia during the quarter.

Sales by Channel

During the quarter, Retail sales declined 1.7% year over year to $455.4 million. The decline was primarily attributable to a 17% decline in the Americas, which was partially offset by 12% growth in Asia and 13% in EMEA. OEM sales for the quarter also declined 9% year over year to $41 million. However, LifeSize division witnessed a 9.6% year over year growth in revenue to $35.6 million.

For fiscal year 2012, total sales were $2.3 billion versus $2.4 billion in 2011. Retail sales reduced marginally by 1.1% year-over-year. OEM revenues for the full year declined 16.9% to $186 million, while LifeSize revenues surged 10.1% annually to $147.5 million at the end of 2012. Annual sales were affected by decline in sales of PC peripherals, in mature markets.  

Sales by Product Division

Sales of pointing devices in the quarter increased marginally by 1% to $147.6 million, keyboards and desktops sales increased 4.4% year-over-year to $108.6 million and revenue from audio devices grew 17.3% to $112.7 million. However, this increase was fully offset by an 18.9% decline in video and a 16.7% decline in digital home. Revenue from the Gaming division also declined 46.2% to $17.3 million.

Income and Expenses

Gross margin for the quarter was 36.4% compared to 32.8 % in the year-ago quarter. This rise was driven by continuous progress in the EMEA sales. Operating income for the quarter was $24 million versus $4 million in the previous year quarter. The increase was due to the decline in the operating expenses.

Operating expenses for the fourth quarter 2012 were $170.1 million, down 3.2% y/y. The decline was attributed to the cutback in General and Administrative expenses and Marketing and Selling expenses by 6.3% and 6.1% year-over-year, respectively. However, R&D expenses grew 7.4%, to $41 million in the quarter.

For fiscal 2012, gross margin was 33.5% versus 35.4% in 2011 while operating income was $72 million, which declined 50% from the prior year.

Balance Sheet & Cash Flow

As of March 31, 2012, cash and cash equivalents were flat year over year at $478.3 million and the shareholder's equity was $1.1 billion.

Net cash provided by operating activities amounted to $199.3 million at the end of fiscal year 2012 compared to $157 million in fiscal 2011. Capital expenditures incurred in the year 2012 were $51 million compared with $43 million at the previous year.

Peers

Logitech designs, produces, and markets hardware and software products for personal computers and other digital communication platforms. The homogeneous digital communications market is severely competitive resulting in cut-throat pricing policy. The company's peers, Koninklijke Philips Electronics ( PHG ) and Microsoft Corp. ( MSFT ) deepen the competitive landscape.

Our Recommendation

The company has a commanding position in the emerging markets, particularly with a strong presence in China. However, the company needs to have a strong pipeline of new products in order to compete effectively in the market.  We maintain our long-term Underperform recommendation on Logitech. Currently, it holds a short-term Zacks #4 Rank (Sell) on the stock (for the next 1-3 months).


 
LOGITECH INTL ( LOGI ): Free Stock Analysis Report
 
MICROSOFT CORP ( MSFT ): Free Stock Analysis Report
 
KONINKLIJKE PHL ( PHG ): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: LOGI , MSFT , PHG

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