Logitech (LOGI) Struggles as New CEO Takes the Reins

Shares of computer peripherals maker Logitech (LOGI: Charts, News) have plunged over 40% over the past two years, due to an aging product line and bleak personal computer sales worldwide. The Swiss company's recent failures have tarnished its legacy as one of the strongest names in personal computing, which dominated the era of Wintel machines.

Logitech's mice and keyboards were the primary catalysts of the company's growth since its inception in 1981. The company's growth topped out at the end of 2007, when shares closed at over $37 per share. Today, the company is worth a quarter of that, trading at approximately $9 per share. Daily Chart
In January, President Bracken Darrell will take over as CEO, succeeding long-time CEO Guerrino De Luca, who served as CEO between 1998 and 2008. De Luca returned in July 2011 after his successor, CEO Gerald Quindlen, resigned due to plummeting sales and devastating losses. Prior to joining Logitech, 49-year old Darell was a vice president of Procter & Gamble (PG: Charts, News), where he re-branded its flagship fragrance Old Spice for younger customers, doubling the products' sales within two years. Darell has also held posts at General Electric (GE: Charts, News) and Whirlpool (WHR: Charts, News). Darrell recently outlined his ambitions for Logitech, which he believed had "become too large," a disadvantage that "hindered" the development of new peripherals. Darrell described his strategy as one focused on a "small company" with "big products." He noted that Logitech was once seen as the "Apple" (AAPL: Charts, News) of the peripheral world, producing high quality products sold at a premium price. Over time, Logitech fell into a habit of emphasizing quantity over quality. Devoting too many resources to Google's (GOOG: Charts, News) failed dream of creating a joint-branded Google TV set-top box, which was abandoned after technical problems and poor customer reception, drained Logitech's R&D budget. The failed Google TV venture and weakness in Europe cost the company over $100 million in operating profit last year. In June, the company cut 13% of its workforce, or 450 employees, as part of an effort launched in April to shave costs by $80 million during the fiscal year. The popularity of smartphones and tablets remains a dark cloud over Logitech's primary product line of keyboards, mice, speakers and earphones. New computing habits now emphasize the preference for an all-in-one device, such as Apple's iPad and iMac, which require few additional peripherals. As major computer manufacturers, such as Dell (DELL: Charts, News) and Hewlett-Packard (HPQ: Charts, News), attempt to emulate Apple's success, fewer third-party peripherals appear to be necessary. Shipments of tablet computers are forecast to surge by 88% in 2012, dwarfing an anemic 12% gain in desktops and laptops. Although macro problems across several key markets and the personal computer industry will weigh heavily on Logitech in the short term, the company sees some potential "blockbuster" products in its upcoming peripherals. The company touted a washable keyboard and an ultra-thin keyboard for the iPad, both of which will be available soon. Its new wireless Bluetooth speakers are also expected to garner plenty of attention. Logitech acknowledges the shift in computing trends, but believes that keyboards and mice will remain important for producing documents. "I think typing and pointing in all its forms are here to stay," Darrell stated. "But gesture usage and touch in general open up whole new growth opportunities for us that we are excited about." Darrell also noted that wireless "touch mice," similar to those offered with Apple's flagship Mac computers, would be a "key area" of growth for peripherals. Although the long-term survivability of the computer mouse is questionable, Logitech managed to post a 7% increase in mouse sales to 95 million last year. Looking forward, Logitech has declined to provide full year guidance, which has raised red flags with concerned investors. The company introduced its first ever dividend, of 0.81 Swiss francs per share, in an attempt to assuage investors. The stock trades at 11 times forward earnings with a 5-year PEG ratio of 0.99. Other News About LOGI Logitech International SA Approves Dividend Logitech finally pays a dividend - but will investors stay on board? The Logitech Ultrathin iPad Keyboard Case Is Now Available In White Can Logitech ride on the coattails of Apple's success? Other Stocks in the News Is McDonald's A Good Investment? Is McDonald's truly an all-weather stock for every portfolio? Intel Shows Off Haswell' Chip Capabilities Intel unveils its latest chip in an effort to bounce back. Copyright 2012 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. 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Published on Sep 14, 2012
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

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