(Amends headline to read "moves away from computer mouse"
instead of "kills off computer mouse")
* Operating profit falls but better than analyst forecasts
* To quit low-margin mouse manufacturing for PC makers
* Product price rises to partly offset forex declines-CEO
* Actions position firm for sustained sales growth, CEO says
By Eric Auchard
FRANKFURT, April 23 Gadget maker Logitech
International SA said on Thursday quarterly operating
profit fell 34 percent on steep currency declines and shrinking
demand for accessories like the computer mouse on which it built
its global brand name.
Nonetheless, strong demand for newer music and video
accessories helped profits to come in higher than all analyst
Logitech has refocused on new lines like wireless music
speakers, videoconferencing and video game controllers,
offsetting a decline in personal computers and demand for its
mice and keyboards it has made since the dawn of the PC age.
Towards that end, Logitech said it will exit a low-margin
business that mainly makes computer mice for PC makers to sell
as their own. Sales there fell 26 percent in the latest quarter.
It reported operating profit of $14.5 million for the
quarter ended March 31, compared to $21.8 million a year ago,
due to pockets of sales strength, lower costs and fewer
restructuring charges. Net sales in the March quarter fell 4.7
percent to $467.2 million, at the high of estimates.
Logitech has at best managed slow sales growth for six of
the past seven years. However, underlying demand for new
products and action to cut costs and raise prices are
positioning it for sustained growth in coming years, it said.
Shares of the Lausanne-based company traded up 2.2 percent
at midday on the Zurich stock exchange, following the report.
PRICE HIKES PLANNED
Once Logitech exits the declining computer mouse
manufacturing business, underlying sales results from are set to
show sustained sales growth in constant currency terms, Chief
Executive Bracken Darrell said in an interview.
"This (retail business) is going to be the bulk of our
business going forward," Darrell said. "What we are announcing
today is the simplifying of our story."
Excluding currency swings, sales nudged up 1 percent.
Logitech's retail business, which generates 90 percent of sales,
grew 7 percent in constant currency. Importantly, newer growth
categories on which it is betting its future business, grew 45
percent and now make up nearly one-third of its retail business.
Darrell, who has moved Logitech into new product lines while
cutting costs in older product areas, said Logitech was prepared
to increase prices to offset currency declines.
"We are raising prices around the world," Darrell told
Reuters, referring to markets outside the United States. The
price increases will take effect in this quarter," he said.
The CEO said he believes the company commands pricing power
in many of its accessory lines including what is now its
best-selling product line -- wireless Bluetooth speakers. It
plans to raise prices around 11 to 13 percent in Europe, for
More than half of Logitech's costs and expenses are in U.S.
dollars and roughly 10 percent are in Swiss francs while it
relies on suppliers in Asia, where currencies have been stable,
to source most of its hardware.
(1 Swiss franc = $1.0314)
(Reporting by Ismail Shakil and Narottam Medhora in Bengaluru;
Editing by Keith Weir)