Logitech International SA (LOGN) dropped as much as 13 percent in Zurich trading after the company cut profit forecasts for a second time in two months, putting pressure on interim Chief Executive Officer Guerrino De Luca to find a successor.
The stock fell as much as 1.02 Swiss francs to 6.78 francs, the steepest decline since April 1. Logitech traded 11 percent lower at 10:07 a.m. in Zurich, valuing the largest maker of computer mice at 1.3 billion francs ($1.4 billion).
“The situation has worsened in the last two months in Europe and the U.S., especially for consumers,” De Luca said in a phone interview today. “The tougher the economy, the more difficult for consumers to take out their wallets.”
Operating profit will be about $90 million in the year ending March 31, 2012, on sales of about $2.4 billion, Romanel- sur-Morges, Switzerland-based Logitech said in a statement today. That compares with previous projections of at least $143 million for operating profit and $2.5 billion for revenue. Gross margin for the year will be about 33 percent, the company said.
“These figures are a heavy blow for interim CEO de Luca after less than three months on the job,” Beat Keiser, an analyst at CA Cheuvreux in Zurich, wrote in a note. “Many people have pinned their hopes for a turnaround of what remains a severely challenged business model on him. This will certainly not happen anytime soon.”
De Luca, who served as CEO between 1998 and 2008, returned in July to replace Gerald Quindlen after Logitech posted a first-quarter loss that was wider than analysts’ estimates amid slumping sales in Europe, the Middle East and Africa. Logitech shares had lost about half their value this year through yesterday as surging sales of Apple Inc.’s iPad threaten the company’s traditional desktop and laptop businesses.
“The search for the new CEO is going very well, we’re into it, but we absolutely need to get the right person,” De Luca said. “I’m under no pressure to go and will stay around as long as needed.”
“The traditional PC is all but dying and sinking Logitech’s bread-and-butter keyboard and mice business with it,” CA Cheuvreux’s Keiser wrote.
‘Not Good Enough’
The company lowered its forecasts to factor in the “current economic environment” in Western markets and its product offerings, according to the statement. Logitech, which also makes home-entertainment control, gaming and wireless devices, is trying to improve its product lineups while reinforcing sales and marketing efforts, De Luca said.
“The strength of our portfolio is not good enough and we’re working on it, but a portfolio rejuvenation doesn’t happen overnight,” De Luca said. “Retailers and distribution partners are more cautious and inventories have been building up.”
De Luca said that excluding keyboards, which are doing “very well,” all lines including digital music with earphone speakers, have to be improved “dramatically” in coming months.
Logitech reduced its revenue and operating income estimates on July 28 after reporting a net loss of $29.6 million for the quarter through the end of June. The company on March 31 had lowered its sales and profit forecasts for the full year through that day because of “projected shortfalls” mainly due to “weakness” in the company’s Europe, Middle East and Africa retail sales region.
“The July targets were overly optimistic and I hadn’t had enough time to assess the situation then,” De Luca said. “This is the third consecutive time we disappoint and I tell you it’s the last one.”