Logitech International (LOGI)

Morgan Stanley Technology, Media and Telecoms Conference

November 16, 2011, 05:15 a.m. ET

Executives

Guerrino De Luca - Chairman, Acting President and CEO

Analyst

Ashish Sinha - Morgan Stanley

Presentation

Ashish Sinha

- Morgan Stanley

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Good afternoon, ladies and gentlemen, thanks for attending the session. It's my pleasure to welcome Guerrino De Luca, Acting CEO of Logitech. Thanks for being here Guerrino.

Guerrino De Luca

Thank you.

Ashish Sinha

- Morgan Stanley

Very quickly just wanted to set the tone for the chat, it's been a few months now since you have been hands-on on the business again, after a few years of the hands-off, if I can use that word. May be we can just start with a high level view of coming back to the business. where do you see the biggest challenges and opportunities for Logitech and how do you view things the way they are maybe as we go on we can touch on each of these points.

Guerrino De Luca

Yes, well, I think Logitech has always been a great product company, and I think that over the course of the last two or three years, that part of the business which is essential has seen, I wouldn’t say down played but certainly is not as prominent, was not as prominent as I think it should be in a company that makes consumer products fundamentally that you have to want to buy. And this is particularly true in certain areas; we have done a wonderful job in entry level product across the portfolio. We have not done a good enough jobs in an area that is essential for our profitability and health which is sell up or up sell proposition in certain categories. What do I mean by that is that, when a consumer is (inaudible) to consider a mouse or a keyboard or a web camera, very classical loves their product? We have given this consumer less reasons to buy up instead of buying an entry level products, and that of course, has impact on a price. It's a product portfolio challenge that we can fix. It's completely in our control and in fact we are progressively fixing it and in certain categories we are already there.

The proof that this is really important is that in categories where we do have a strong up sell proposition, one being keyboards which some people consider maybe the most boring of all categories, who wants a keyboard these days, right. It's actually doing very well, because we have a great up sell from the basic keyboard to illuminated keyboard solar powered keyboard and consumer and consumers buy those. But more in general I think that the issues that we have had in the past two or three years, is to believe what the naysayers were saying, is to believe that the potential for growth around the PC platform in the established consumer developed market was gone. It is not. And it is not because I’m blind and I don’t see the growth of the iPads and tablets and I don’t see the declining or very modest growth of the PC platform, but new sales in the PC platform, we see all of that.

But first of all there is just way too many PCs out there to be discounted, I don’t know of anybody that bought an iPad who threw away his laptop, in fact the laptop and the PC in general continues to be used in certain circumstances and as the iPad becomes the mobile platform of choice your laptop PC is even more residential and even more friendly to add-ons. So I think that we believed it because everybody was telling as this and it's because it's the simple thing to believe and in fact that was a mistake. In fact I don’t believe it at all, I think that obviously we have tremendous opportunities in emerging markets and around the PC of course, largely underpenetrated but we have solid opportunities across the number of categories in the western world in addition to what we are putting together more intensively which is a focus on PC peripherals in the business market, which is way underpenetrated on our side, and it's an add-on chance.

So, that we have focused on more iffy growth opportunities outside the PC and we forgot the bread and butter or largely forgot the bread and butter and that’s what I’m trying to correct.

Ashish Sinha

- Morgan Stanley

Okay. Two things emerging from that, which I think is pretty interesting. First, you said consumers creating up, what is your view in given the current macro in what it meant, how much are consumers willing to spend the extra 20, 30, $50 to create up to the next level, anything kind of postpone their decision. That’s one. The second theme, you talked about is product portfolio, now within the latest categories Logitech has, what is your view coming from a different role. What is your view of where the product portfolio currently stands, what are the gaps and what do you think you can do to achieve that, what’s the timeframe and how that’s everything fit together?

Guerrino De Luca

Okay. On the trade off kind of dynamic, obviously, the word is gloom and doom, and I think we haven’t even seen the worst of it. It's obviously in the west. What I know in this we’re intruding the past that it's true today, is that they will hire product categories that are impacted more dramatically by concerns by the consumer than others.

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