Reduced Sales Decimate Logitech's Earnings

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On Jan. 19, 2009, Logitech International (LOGI Quote) reported a 69.7% decline in its Q3 FY09 earnings on reduced sales. Net income plunged to $40.49 million or $0.22 per share from $133.57 million or $0.71 per share in the previous year's quarter. Excluding one-time items, earnings dropped 62.9% to $41.28 million or $0.22 per share, which missed the consensus estimate of $0.43 per share.

Logitech's net sales for Q3 FY09 decreased 15.7% to $627.47 million from $744.24 million a year ago, led by lower product sales through retail and original equipment manufacturer (OEM) sales channels. Retail sales fell 16.4% to $545.54 million from $652.62 million, with sales down in the Americas and EMEA (Europe, the Middle East and Africa) by 21.0% and 19.0%, respectively. Except the retail sales of audio and video products, sales of all other products declined over the year-ago quarter. Retail video and audio sales grew 2.6% and 7.0% to $152.43 million and $71.15 million, respectively. Sales of pointing devices, keyboards & desktops, gaming, and remotes slipped 20.1%, 28.0%, 31.0% and 40.9%, respectively. At the same time, OEM sales were down 10.6% to $81.93 million from $91.62 million.

As a part of its restructuring program, LOGI is reducing its global salaried workforce by 550 to 600 employees. LOGI expects to incur a total charge of approximately $20.00 million to $24.00 million over the next 12 months, and expects to generate annual cost savings of around $50.00 million beginning FY10.

Going forward, Logitech expects lower sales during Q4 FY09 compared to the last year's quarter. Moreover, the company anticipates operating income before restructuring charges and gross margin to remain similar to or worse than the year-over-year declines experienced in Q3 FY09.

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