Logitech International SA (
FQ4 2011 Earnings Call
April 28, 2011 8:30 a.m. ET
Joe Greenhalgh – Vice President, Investor Relations
Gerald Quindlen – President, Chief Executive Officer
Erik Bardman – Chief Financial Officer
Ashish Sinha – Morgan Stanley
Paul Coster – JPMorgan
Andreas Mueller – ZKB
Michael Foeth – Vontobel Group
Andy Hargreaves – Pacific Crest Securities
John Bright – Avondale Partners
Yair Reiner – Oppenheimer & Co.
Nicolas von Stackelberg - Macquarie
Michael Studer – Bank am Bellevue
Christoph Gretler – Credit Suisse
Beat Keiser - Cheuvreux
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Good day and welcome to the Logitech fourth quarter financial results conference call. At this time, all participants are in a 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, Mr. Joe Greenhalgh, Vice President of Investor Relations and Corporate Treasurer at Logitech.
Welcome to the Logitech conference call to discuss the Company’s results for the fourth quarter and full year ended March 31, 2011. The press release, our prepared remarks and slides, and a live webcast of this call, are available online at Logitech.com.
As noted in our press release, we have published prepared remarks on our website in advance of this call. Those remarks are intended to serve of place of extended formal comments, and we will not repeat them on this 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 27, 2010 and subsequent filings, which are available online on the SEC EDGAR database and in the final paragraph of the press release reporting fourth quarter 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 statement as a result of new developments or otherwise.
Joining us today from Zurich is Gerry Quindlen, President and Chief Executive Officer; and here in Freemont is Erik Bardman, Senior Vice President of Finance and Chief Financial Officer.
I’d now like to turn the call over to Gerry.
Thanks, Joe. Thanks everyone for joining us today. We realize that it has been frustrating for you to have to wait several weeks since the pre-announcement for a thorough explanation of our Q4 results. We regretted having to single the change and outlook without providing more detail, but we felt it was appropriate to let the market know as soon as possible the impact of what we were seeing, even though we had not yet started the financial close process.
Now we know that you have many questions, so I will limit my opening remarks to just a high-level overview of what we reported today, so that Erik Bardman and I may get to those questions.
The very disappointing conclusion to the year, which resulted in lower-than-expected full-year sales, operating income and gross margin, was due to weaker-than-anticipated demand in the second half of Q4 for our products and our EMEA retail sales region.
The weakness in EMEA was the result of two factors: lower-than-expected demand late in Q4 and poor execution of pricing in channel programs in the region.
We understand the factors that led to the shortfall in EMEA, and we are taking steps to address the ones under our control in order to improve our performance. We estimate that it will take up to two quarters to fully implement the necessary changes.
Our prepared comments, which are posted on our website, contain additional information on what happened in EMEA, and our action plan for improvement.
As disappointed as I with the conclusion for fiscal 2011, there were several full-year highlights. We achieved sales growth of 20% and our operating income nearly doubled. We saw meaningful returns from our strategic investments in our LifeSize video conferencing business and our China initiatives. And we also delivered double-digit growth in our America’s and Asia-Pacific retail sales regions.
Let me briefly address our outlook for fiscal 2012.
First, we are extremely focused on getting our EMEA sales region back on track. Beyond getting EMEA back on track, we are focused on rapidly realigning our resources and prioritizing our spending to support what we see as our most promising growth opportunities in the new fiscal year and beyond. These opportunities include China and emerging markets more broadly, tablet peripherals, LifeSize, Unified Communications, and the next generation of Google TV.
I do want to emphasize that a key planning assumption underpinning our outlook for fiscal 2012, is that we expect to experience a decline in sales of our PC peripherals in mature markets. We therefore expect a majority of our sales growth to be driven by these promising new growth opportunities that I just mentioned.
For fiscal 2012, we’re targeting sales around $2.6 billion. We expect our gross margin to be around 35% and our operating income to be roughly $185 million. We target our full-year tax rate at approximately 15%.