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.
Heading back to school means two things: getting back on a regular sleep schedule, and going shopping.
And consumer electronics retailers have always been particularly grateful during the season in between the Super Bowl and Black Friday for the spike in money spent at their stores during July and August every year.
Typical spending this time of year is on a computer, but as the U.S. becomes more and more saturated with PCs, the back-to-school retail boon for retailers is expected to be more modest this year than in years past.
This year there should be a 25-percent increase spread across July and early August, according to forecasts by The NPD Group. To compare, the week before the Super Bowl normally sees a 16 percent jump over the weeks before, and Black Friday alone sees a 160 percent jump.
As with previous years, the notebook is the computer of choice for most students heading back to campus. Currently, three out of every four computers sold at retail is a notebook, the rest are desktops. But it's more pronounced this time of year, when "over 80 percent" of computers sold are notebooks, according to Stephen Baker, vice president of industry analysis for The NPD Group.
And though retailers would love for shoppers to pick up cameras, GPS, and MP3 players while they're loading up for school, consumers do tend to stay focused. Printers, mice, USB sticks, external hard drives and keyboards--things that are made for use with the PC--are the other products that tend to get a back-to-school bump.
There are a few things happening this year that could prove interesting. First, there have been rumors of Apple redesigning the MacBook. It's the notebook that has a lot of cachet for college students in particular. The most sales for the season are done over Labor Day, but Apple--if it does update its signature notebook--won't do that until mid-September at the earliest.
There are also some things we won't see. Those cutesy, lightweight laptops you've been hearing about? Even though they're intended for educational applications, don't expect them to be on campus in large numbers come this fall. Though netbooks are no longer the domain of second-tier PC makers--all the big guys are making them now--Hewlett-Packard, Acer, Lenovo, and soon Dell.
"We haven't see a lot of indication that there's going to be much out there for back to school," said Baker, who tracks retail electronics sales. "Most (vendors) won't hit in big quantities until Christmas." Though models like Acer's Aspire One and HP's Mini-Note are available, they're online-only at this point.
And though it's done well at e-tailers like Amazon.com--where nine of the top 20 best-selling laptops are netbooks--online retailers are not necessarily indicative of the larger computer-buying population. "To get real industry-changing volumes, (netbooks) need to be at Best Buy, Circuit City, and Costco," said Baker.
Also, don't anticipate huge discounts on computer hardware. The average price of a Windows-based notebook sold at retail these days is $750, which hasn't changed at all from this time last year. That's because there's just not as much room for a lot of price slashing.
"There's not so much room for pricing to collapse anymore," said Baker. "We're not talking about $1,100 notebooks anymore." He's right. The margins are so thin on these that the lowest traditional notebooks can go anymore is about $399 or $499. Of course, exceptional consumer demand for netbooks could eventually change that.
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