Logitech International SA (LOGI) reported disappointing financial results for the first quarter of fiscal 2013. The company posted a net loss of 32 cents a share compared to a loss of 17 cents in the prior-year quarter and compared to the Zacks Consensus Estimate of $0.00. Excluding one-time items, the net loss was 11 cents a share.
Increase in net loss was primarily attributable to costs incurred by the company associated with its exit from its old campus in Freemont California, along with costs related to acceleration of its product portfolio.
Revenues
Overall net sales in the first quarter of 2013 were $469 million, declining 2% year over year. Excluding the adverse impact of currency translation, sales were flat year-over-year. The reduction was due to the decline in the company’s OEM and Americas retail sales division, which was partially offset by an increase in revenues in the EMEA.
Sales by Channel
During the quarter, Retail sales were flat year over year at $395 million. The decline was primarily attributable to an 11% decline in the Americas and a 17% decline in OEM, which was partially offset by 17% growth in EMEA and 1% in Lifesize division. Retail sales in Asia were flat year over year.
Sales by Product Division
Sales of pointing devices in the quarter declined 4.5% to $115.7 million, keyboards and desktops sales increased 16.8% year-over-year to $110.4 million and revenue from audio devices grew 16.0% to $90.0 million. However, this increase was fully offset by a 25.6% decline in video and 26.6% decline in gaming. Digital home during the quarter reported a 5.2% increase.
Income and Expenses
Gross margin for the quarter was 30.8% compared to 26.1 % in the year-ago quarter. This rise was driven by continuous progress in the EMEA sales.
The company reported an operating loss of $59.2 million during the quarter compared to a loss of $45 million in the year-ago period. The decline was due to higher restructuring costs in the reported quarter. Operating expenses for the first quarter of 2013 were $203.5 million, up 19.3% y/y.
Balance Sheet & Cash Flow
As of March 31, 2012, cash and cash equivalents were $360 million and the shareholder’s equity was $1.0 billion.
Net cash provided by operating activities was negative $7.0 million at the end of the quarter compared to a positive $3.7 million in the prior-year period. Capital expenditures incurred during the quarter were $19.6 million.
Peers
Logitech designs, produces and markets hardware and software products for personal computers and other digital communication platforms. The homogeneous digital communications market is severely competitive, resulting in cut-throat pricing policy. The company’s peers, Koninklijke Philips Electronics (PHG) and Microsoft Corp. (MSFT), deepen the competitive landscape.
Our Recommendation
The company has a commanding position in the emerging markets, particularly with a strong presence in China. However, the company needs to have a strong pipeline of new products in order to compete effectively in the market. We maintain our long-term Underperform recommendation on Logitech. Currently, it holds a short-term Zacks #4 Rank (Sell) on the stock (for the next 1-3 months).
LOGITECH INTL (LOGI): Free Stock Analysis Report
MICROSOFT CORP (MSFT): Free Stock Analysis Report
KONINKLIJKE PHL (PHG): Free Stock Analysis Report
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