Logitech Stock Jumps Most in Four Years as Company Sticks to 2011 Outlook
Logitech International SA (LOGN) rose the most in four years in Zurich trading after the world’s biggest maker of computer mice confirmed its forecasts following three profit warnings in the past seven months.
Logitech jumped 16 percent to 8.94 Swiss francs at the close in Zurich in the biggest gain since Oct. 18, 2007. That pared the stock’s decline this year to 50 percent.
“The company didn’t miss analyst estimates and guidance wasn’t lowered further,” said Richard Speetjens, a fund manager at Robeco Groep NV, which oversees about 150 billion euros ($213 billion) in assets. “ This was a great relief after a recent number of earnings downgrades.”
Logitech cut profit forecasts for a second time in two months on Sept. 22, putting pressure on interim Chief Executive Officer Guerrino De Luca to find a successor. At the time, Logitech lowered its forecast for operating profit to about $90 million in the year ending March 31, 2012, on sales of about $2.4 billion. Logitech confirmed those predictions today.
The full-year gross margin is expected to be about 33 percent because of “the very low margin” reported for the first quarter, the Morges, Switzerland-based company said in a statement. The gross margin in the third and fourth quarters will be “well above” the full-year average, said Logitech, which also produces home-entertainment control, gaming and wireless devices.
‘Back on Track’
“People are happy to see we’re back on track,” De Luca said in a phone interview today. “We’re showing that we can do what we said we would do and we’ve somewhat re-established confidence in the company.”
Operating income in the quarter ended Sept. 30 fell to $23 million from $51 million a year earlier. Analysts surveyed by Bloomberg had estimated $20.4 million.
“The overall situation seems to be stabilizing,” said Michael Foeth, an analyst at Vontobel Holding AG in Zurich. “Operating profit is a clear beat.”
Net income fell 59 percent to $17 million, while revenue rose 1 percent to $589. Net income had been estimated at $16.9 million on sales of $591.8 million, according to analysts surveyed by Bloomberg.
“We expect our initiatives will begin to contribute to improved performance as we move through the second half of full- year 2012,” De Luca said in the statement. Second-quarter results are “consistent with our expectations and the full-year outlook.”
Inventory levels in Europe are going down “to where they should be” and business in the Europe, Middle East and Africa region is “firmly in recovery mode,” De Luca said. Customers such as U.S. retailers and distributors are “very nervous about future demand,” and inventory in the region is “a little below. If demand ends up being where we expect it to be we’ll have to run to supply clients.”
Logitech has been affected by the proliferation of tablet computers, which may erode its traditional desktop and notebook business.
Second-quarter revenue excluding exchange-rate gains dropped 2 percent. Sales in the Americas and in the EMEA region fell 1 percent while sales in Asia advanced 22 percent. Revenue at LifeSize Communications Inc., the videoconferencing unit Logitech bought in 2009, rose 19 percent, making it the company’s fastest-growing business.
Logitech has applied to amend its $250 million share buyback program to allow the future repurchase of shares for cancellation, it said. The company has about $177 million remaining under the program after repurchasing about 7.6 million shares for a total of $73 million in the second quarter.
To contact the reporter on this story: Chiara Remondini in Milan at firstname.lastname@example.org
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