Business Tech

Clarification at 7:40 a.m. PST: The percentage figure for net income has been fixed.

Logitech International announced late Monday plans to cut 550 to 600 jobs, as it posted a steep drop in its financial performance and predicted continued weakness in the months ahead.

The company expects to make the bulk of its job cuts in its fiscal fourth quarter, which started January 1, and take a charge of $16 million to $18 million during the quarter. Overall, Logitech expects to take a $20 million to $24 million charge over the next 12 months.

Logitech, a peripherals giant that sells to both retail stores and computer manufacturers, is facing a challenging time as its customers struggle as well. Retail store Circuit City, for example, said last week said it will have to liquidate after failing to find a buyer.

Logitech, which also announced its fiscal third-quarter results late Monday, said its quarterly net income fell 70 percent to $40 million, or 22 cents a share, year over year. The company's gross margin fell to 29.9 percent in the quarter, versus 36.9 percent a year ago.

The company posted a 16 percent drop in third-quarter revenue to $627 million, compared with a year ago. And the coming months ahead do not look any better, the company reported.

CEO Gerald Quindlen said in a statement:

All indications point to an even weaker retail environment in the coming months. Consequently, our plans assume that in Q4 we will see year-over-year declines in sales, operating income before restructuring charges and gross margin that are similar to or worse than the year-over-year declines we experienced in Q3.

However, we expect to continue to generate positive cash flow from operations as we focus on preserving the strength of our balance sheet. Moreover, we believe the substantial steps we are taking to align our cost structure with the current environment, combined with our continued emphasis on product innovation, will position the Company to successfully manage through this downturn and emerge stronger when the recovery begins.

In addition to its customers scaling back on orders as they seek to reduce their inventories, Switzerland-based Logitech was also hit by a stronger dollar and retailers engaging in steep price cuts, especially in the Americas, noted Quindlen.

Third-quarter sales in the Americas fell 21 percent, while Europe/Middle East/Africa were down 19 percent. Asia, by contrast, was up 8 percent in the quarter.

Correction at 8:00 a.m. PST: Logitech employs over 9,000 people.

Swiss peripherals manufacturer Logitech plans to cut approximately 15 percent of its salaried workforce. Logitech has more than 9,000 employees worldwide.

In a statement Monday, the company cited the deepening economic gloom as the reason for the cut.

"During the December quarter, the retail environment deteriorated significantly," Logitech Chief Executive Gerald Quindlen said. "We experienced varying degrees of weakness across all geographies and channels, as our customers reduced inventory levels in the face of weaker consumer demand. Moreover, we expect the economic environment to worsen in the coming months, and we are therefore taking significant actions to align our cost structure with what is likely to be an extended downturn."

Logitech, which has offices in Silicon Valley, Switzerland, and Asia, makes products such as keyboards, mice, Webcams, headphones, and remote controls. On Tuesday, it introduced several products at the Consumer Electronics Show in Las Vegas. Logitech has sales offices in major cities in North America, Asia, and Europe, including in the United Kingdom.

In its announcement about its restructuring, the company withdrew its growth targets for sales and operating income in its fiscal year 2009, and did not provide any new estimates.

Logitech will give details of the job cuts and restructuring with its fiscal third-quarter results, due on 20 January. It expects savings from the restructuring to begin to show in the first quarter of its fiscal year 2010.

Tom Espiner of ZDNet UK reported from London.

Logitech announced Tuesday that it has paid about $30 million in cash to acquire SightSpeed, a maker of cross-platform video chat and calling software. It's a logical acquisition for Logitech, which includes video cameras among its large portfolio of peripherals for PCs.

Berkeley, Calif.-based SightSpeed was founded in 2001 and has 25 employees. SightSpeed's video communications solution is based on the session initiation protocol (SIP) and offers 30 frame-per-second video and an integrated instant messaging service. SightSpeed supports 640 x 480 video windows at any speeds above 1.5 Mbps, multiparty conference calls and in-call file sharing. A free version is available and pricing for the SightSpeed Plus for consumers is $9.95 per month or $99.95 per year. Pricing for the more full-featured Business edition starts at $19.95 per user per month or $189.95 per year. The acquisition is expected to close next month.