Corrects the day of release to 'Monday' from 'Tuesday' in the first para.
Computer interface devices manufacturer Logitech International S.A. (LOGI) announced late Monday that profit for the third quarter dropped from last year, hurt by lower margins and a a 16% sales decline. Additionally, non-GAAP earnings per share and revenues for the quarter missed analysts' expectations. The company now sees fourth quarter operating results to be similar or worse than in the third quarter.
Earlier in the month, Logitech withdrew its fiscal year 2009 sales and operating income growth targets, citing the deepening global recession. Additionally, on a cautious note, Logitech said it expects the economic environment to worsen in the coming months and announced a 15% reduction in its salaried global workforce. Logitech expects to generate annual cost savings of about $50 million related to the restructuring beginning in fiscal year 2010. The company also anticipates incurring a charge between $20 million and $24 million over the next twelve months.
With the deepening financial crisis, companies are cutting costs and postponing purchase-related decisions, along with a focus on reduction in inventory. The general economic gloom in the industry has led to companies operating across a wide spectrum to issue profit warnings and reveal restructuring measures.
In a statement, president and chief executive officer, Gerald Quindlen said, "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."
Third Quarter Results
The Apples, Switzerland-based company reported GAAP net income of $40.49 million or $0.22 per share for the third quarter, sharply lower than $133.57 million or $0.71 per share in the prior-year quarter.
Results for the year-ago quarter included an impairment loss on short-term investments of $5.50 million and a net realized gain on sales of short-term investments of $27.8 million. The company revealed no significant adjustments to its GAAP results for the latest quarter.
Excluding the adjustments, the company's non-GAAP net income for the quarter was $41.28 million or $0.22 per share, lower than $111.32 million or $0.59 per share. On average, seven analysts polled by First Call/Thomson Financial expected earnings of $0.43 per share for the third quarter. Analysts' estimates typically exclude special items.
Net sales for the quarter dropped 16% to $627.47 million from $744.24 million in the same quarter last year, and missed Wall Street analysts' consensus estimate of $699.26 million.
Segmental Details
Net sales through retail channel decreased 16% to $545.54 million from the year-ago quarter. Meanwhile, sales to OEMs were down 11% to $81.93 million from the prior-year quarter.
Retail sales grew only in the Asian region, rising 8% year-over-year, while sales dropped 21% in the Americas region and it fell 19% in the Europe, Middle East and Asia region.
Among the product families sold through retail channel, audio and pointing devices were the best performing categories in terms of contribution, while audio as well as video products were the only categories posting growth. Audio products sales were $152.43 million, up from $148.51 million in the year-ago quarter. Video products sales grew to $71.15 million from $66.47 million last year. On the other hand, pointing devices showed a sales drop to $149.06 million from $186.56 million in the prior-year quarter.
Other Metrics
Logitech's operating income for the third quarter plunged 63% to $42.78 million from $116.23 million in the prior-year quarter, while total operating expenses was $144.72 million, down from $158.21 million in the year-ago quarter.
Gross margin for the quarter fell to 29.9% from 36.9% in the comparable quarter a year ago, reflecting a significantly stronger dollar and a highly promotional retail environment, mainly in the Americas.
Capital expenditure for the third quarter totaled $13.58 million, up from $11.37 million in the corresponding quarter a year ago. Logitech ended the third quarter with cash and cash equivalents of $480.18 million, compared to $499.25 million at end of the prior-year quarter.
Nine-Month Highlights
For the nine-month period of fiscal 2009, Logitech's net income declined to $142.11 million or $0.77 per share from $170.69 million or $0.90 per share recorded in the prior-year period.
Excluding impairments on short-term investments, non-GAAP net income for the period was $143.87 million or $0.78 per share, lower than $215.85 million or $1.14 per share reported in the year-ago period.
Net sales for the year-to-period rose to $1.80 billion from $1.77 billion posted in the same period last year.
Looking ahead…….
Logitech noted that all indications point to an even weaker retail environment in the coming months. However, the company's initiatives to align the cost structure with the current environment and continued emphasis on product innovation would enable it to withstand the downturn and emerge stronger. The company also expects to continue to generate positive cash flow from operations.
For the fourth quarter, Logitech anticipates declines in sales, operating income before restructuring charges and gross margin, similar to or worse than in the preceding quarter. The company also expects to incur a charge of about $16 million to $18 million, related to the restructuring.
Stock Quote
LOGI closed Friday's regular trading session at $13.21, down $0.54 or 3.93% on a volume of 1.19 million shares, higher than the three month average volume of 1.11 million shares. In the past 52-week period, the stock has been trading in a range of $11.10 to $33.38.
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June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.