UPDATE 1-Logitech shares tumble on bleak Q4 outlook

* Q3 net profit down 70 percent

* Analysts point to weak outlook

* Shares down 9 percent

(Adds analyst comment, updates share price)

By Martin de Sa'Pinto

ZURICH, Jan 20 (Reuters) - Logitech (LOGN.VX), the world's largest computer mouse maker, reported a bigger than expected fall in third-quarter net income and gave a bleak outlook, sending the Swiss company's shares down 9 percent on Tuesday.

"Despite the profit warning two weeks go, the Q3 result was still below our and the market's expectations," ZKB analyst Richard Frei said in a note. "The outlook for Q4 is gloomy."

Logitech's net income fell 70 percent to $40 million, or 22 cents per share in the three months to end-December. Analysts had expected the company to earn $76 million, based on a Reuters poll of 12 analysts. Third-quarter sales fell 16 percent to $627 million, while inventories rose 34 percent.

"The deepening global recession had a significant impact on our operating performance as our customers continued to reduce inventory levels in the face of weaker consumer demand," Logitech Chief Executive Gerald Quindlen said.

ZKB's Frei said the decline affected the company's strongest business areas such as pointing devices and keyboards, as well as remotes and gaming devices where sales were "drastic".

At 0923 GMT, Logitech shares were down 9.0 percent at 13.30 Swiss francs, having hit their lowest level since late 2003 at 13.01 francs earlier.

The company said it expected the retail market to be even weaker in coming months. In the fourth quarter, it expects the fall in sales, operating income before restructuring charges, and gross margins will be similar to or worse than declines seen in the third quarter.

It expects to continue to generate positive cash flow from operations.

The company also said it started a restructuring plan that will reduce its workforce by 550-600 jobs and generate annual cost savings of about $50 million beginning in fiscal year 2010 at a cost of $20-24 million over the next 12 months. (Editing by Dan Lalor)