LOGI

Logitech International S.A. (LOGI)

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Logitech International SA (LOGI)

F4Q2013 Results Earnings Call

April 25, 2013 8:30 AM ET

Executives

Teresa Thuruthiyil - Director, Investor Relations

Bracken Darrell - President and CEO

Joe Greenhalgh - Vice President, IR and Corporate Treasurer

Analysts

Andrew Gardiner - Barclays

Tavis McCourt - Raymond James

Paul Coster - J.P.Morgan

Joern Iffert - UBS

Alexander Peterc - Exane BNP

Andrew Humphrey - Morgan Stanley

Michael Foeth - Bank Vontobel

Felix Remmers - Credit Suisse

John Bright - Avondale Partners

Simon Schafer - Goldman Sachs

Corey Barrett - Pacific Crest Securities

Presentation

Operator

Good day. And welcome to the Logitech’s Fourth Quarter Financial Results Conference Call. At this time, all participants are in listen-only mode. We will be conducting a question-and-answer session, and instructions will follow at that time. This call is being recorded for replay purposes and may not be reproduced in whole or in part without written authorization from Logitech.

I would like to introduce your host for today’s call, Ms. Teresa Thuruthiyil, Director of Investor Relations at Logitech. Please proceed.

Teresa Thuruthiyil

Good afternoon and good morning. Welcome to the Logitech conference call to discuss the company’s financial results for the fourth quarter and full year ended March 31, 2013. The press release, our prepared remarks and slides, as well as the live webcast of this call are all available online at logitech.com.

As noted in our press release, we published our prepared remarks on our website in advance of the call. Those remarks are intended to serve in place of extended formal comments today and they will not be read on the call.

During the course of this call, we may make forward-looking statements, including forward-looking statements with respect to future operating results that are being made under the Safe Harbor of the Securities Litigation Reform Act of 1995. The forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated in the statements.

Factors that could cause actual results to differ materially include those set forth in Logitech’s annual report on Form 10-K dated May 30, 2012, and subsequent filings, which are available online on the SEC EDGAR database and in the final paragraphs of the press release and prepared remarks reporting fourth quarter and full year fiscal 2013 results available at logitech.com.

The forward-looking statements made during this call represent management’s outlook only as of today, and the company undertakes no obligation to update or revise any forward-looking statements as a result of new developments or otherwise. This call is being recorded and will be available for replay on the Logitech website.

Joining us today from Zurich is Bracken Darrell, President and Chief Executive Officer; and here in New York is Joe Greenhalgh, Vice President of Investor Relations and Corporate Treasurer.

I’d now like to turn the call over to Bracken.

Bracken Darrell

Thank you, Teresa, and thanks to all of you for joining us. I’m not pleased with our financial performance for fiscal 2013. But I’m encouraged to see that our retail business has begun to stabilize in our Americas and Asia-Pacific sales regions. Our performance in our EMEA sales region was impacted in Q4 by the combination of the difficult macro environment and the very weak PC market.

In response to these factors, during the quarter our channel partners further scaled back the amount of PC related inventory they are going to hold, which had a major negative impact on our sales in the region. During the quarter, our channel partners in EMEA reduced their inventory by over 20% on both a sequential and year-over-year basis.

Especially given the weakness in the global market for new PCs, sales in our PC related categories in the Americas and Asia-Pacific were solid, with growth in both mice and keyboards, even in the consumer webcam category we saw growth in Asia-Pacific and a modest single-digit decline in America.

Across all three of our regions, I was very pleased with the continued strong growth of sales of our tablet accessories. The Logitech Ultrathin Keyboard Cover was our best selling product both in the quarter and for the full year of fiscal 2013.

In the last 30 days, we’ve announced four new products for our tablet peripherals line up and there are more additions coming in fiscal 2014. I want to briefly focus on two categories why our Q4 sales declined steeply, audio wearables and wireless, and PC gaming. There was -- there was a down quarter for these categories in Q4, we believe we have substantial growth opportunities in both of them.

I’ll start with wearables and wireless, a category that illustrates a principle you’ll see from me as CEO of Logitech. That principle is learn and adjust quickly and decisively to reality.

As you may recall, we launched a number of new products in this category in late summer 2012, including wireless speakers, earphones and headphones. We’ve taken then number of learnings since then, but the most significant being that we would have benefitted from narrowing our focus to fewer products and fewer markets.

We spread ourselves too thin by launching on a relatively large number of new products in highly competitive categories. One such product, our large mobile Boombox, was not as well differentiated as it needed to be.

In the case of our headphones, we learned that exceptional product quality and consistently positive reviews were not enough to generate momentum in a category that requires a sizeable marketing investment to drive lifestyle brand appeal.

We’ve already adjusted our strategy accordingly, I’ve narrowed our primary focus in the wearables and wireless category to the promising growth areas we see in small form -- small form-factor wireless speakers, such as the Logitech UE mobile Boombox and in ultra-high performance earphones, such as the Logitech UE 900s. You’ll see some interesting things here from -- you’ll see some interesting things here from us in the coming months.

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