LOGI

Logitech International S.A. (LOGI)

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Logitech International SA (LOGI)

NASDAQ OMX 29th Investor Program Conference Transcript

December 5, 2012 3:30 AM ET

Executives

Guerrino De Luca - Chairman and CEO

Analysts

Andrew Humphrey - Morgan Stanley Research

Presentation

Andrew Humphrey - Morgan Stanley Research

Well, good morning, ladies and gentlemen. I'm Andrew Humphrey. I’m the Tech Hardware Team at Morgan Stanley Research. It's my pleasure to welcome Guerrino De Luca on stage from Logitech, Chairman, and I think for the next few weeks also CEO of the company.

Guerrino, maybe we could start just with some conversations about the core PC market. I think we had Seagate on stage yesterday saying that Windows 8 was probably much more of a 2013 driver than a 2012 driver.

I think you've been quite cautious in your recent comments on the potential upside from Windows 8 related sales over the next few quarters. Maybe you could talk a bit about whether that's changed since you made those comments based on conversations with the channel or anything else you're seeing in the market?

Guerrino De Luca

Well, when we saw the dramatic slowdown in sort of the September quarter of PC sales and everybody saw this, probably the most dramatic since the crisis ages ago. Our interpretation was that rather then the expectation for Windows 8, consumers that had reached the point where their PCs needed to be replaced, were looking for sleeker, lighter, slimmer much more Mac Air like PCs to come out. Most people are Max Air envious and they can’t afford it or they just can’t buy it for reasons that have to do with standards and other things.

So, and clearly the PC industry has been late in developing and delivering those kind of more beautiful machines as opposed to the dinosaurs that most people carry today. So some of these PCs are coming up right now and they are quite attractive, maybe not as the Mac Air but quite attractive for consumers.

I would say that at this point the arrival of Windows 8 is more of a hesitation point for the consumer. They have to get it to this new metaphor which I think is a brilliant move from Microsoft overtime. But clearly creates some hesitation at the beginning. The people have been used to Windows 7 or Windows screen for long time. So they have to get use to this hostile situation.

So different from many other releases of Windows. This is not necessarily an incentive for early purchase. What the incentive is, is a better PC and overtime, people will get familiar with Windows 8 and appreciate the seamlessness across multiple platforms. So tend to agree with the Seagate comment and I believe that the short-term catalyst for PC sales is going to be more the attractiveness of the new PCs.

Andrew Humphrey - Morgan Stanley Research

So, I am, I guess, we’ve had Ultrabooks in the market for few quarters now, admittedly based on previous situation of the software. And what you seem to be suggesting now is that actually what we’ve got is the situation where there is quite a serious change going on in terms of technology, in terms usability of it…

Guerrino De Luca

Yeah.

Andrew Humphrey - Morgan Stanley Research

… people getting use to a new form factor. They want to touch the screen as well as type and is that?

Guerrino De Luca

Yeah. People will just are getting familiar with this new platform, and probably the biggest change this platform introduces that is relevant to us, is the -- the predominance of touch and interface.

Now the situation for tablets will be the most all of Windows 8 tablet would have touchscreen and so let’s put that on aside for a second. But more traditional PCs, the ones that come with the keyboard and hard disk will tend to be a combination of touch and not touch.

Some of the PCs that have been upgraded to Windows 8 have no touchscreen and many of the PCs that will be bought with Windows 8 have no touchscreen. The reason being that the average selling prices of PCs does not allow to include touchscreen in every PC.

PCs are sold at an average of $400, just as a point of comparison, the Mac average selling price is about $1000. So there is a huge gap and people that are would be ready to buy a $1000 PC probably had bought Mac already.

So the challenge for the PC industry will be to how to make the most out of Windows 8 in a non-video touch environment, and that’s where I think the relevance of navigation devices will change dramatically.

We have three products in the market today that add touch and gesture to non-touchscreen PCs hopefully added to touchscreen PCs. And the first response particularly to our touchpad which is a great glass-based tablet that acts very much like the Apple touchpad if you have used it, so nothing that the PC industry has ever seen in terms of smoothness, in terms of gesture recognition and motion. We believe that combination of a touch sort of pointing device and Windows 8 will be attractive to consumers especially to those that will not buy the touch-enabled laptops.

Andrew Humphrey - Morgan Stanley Research

So if you look out, I don’t know, year to two years on the source of PCs, I mean, the more desktop PCs that we’ll see in the market.

Guerrino De Luca

Yeah.

Andrew Humphrey - Morgan Stanley Research

Read the rest of this transcript for free on seekingalpha.com