Logitech Stock Jumps on Earnings Growth, Job Reductions

Logitech International SA jumped the most in more than four years as earnings beat estimates and the world’s biggest maker of computer mice announced measures including job cuts to save about $80 million a year.

Logitech shares rose 17 percent to 8.28 Swiss francs at the close of trading in Zurich, the biggest increase since October 2007. The stock has advanced 13 percent this year, beating a 3.1 percent gain for the Swiss Market Index.

“Results are better due to a good gross margin and slightly higher sales, while expenses were as expected,” said Michael Foeth, an analyst at Vontobel Holding AG in Zurich. “The main problem for Logitech remains the lack of growth, and that issue is not yet solved.”

Net income in the fiscal fourth quarter through March surged 10-fold to $28.3 million, Morges, Switzerland-based Logitech said in a statement today. Profit was more than double the $12.4 million average of eight analyst estimates compiled by Bloomberg. The gross margin widened to 36.4 percent of revenue from 32.8 percent a year earlier. Sales fell 3 percent to $532 million.

The company also cut a layer of management as leaders of business groups and sales regions will report directly to President Bracken P. Darrell, Logitech said. The restructuring, which will reduce operating costs, is expected to be completed by the end of this quarter, Darrell said in the statement.

‘Material’ Job Cuts

“We’re going to reduce the number of people across the board,” Chairman Guerrino De Luca said in an interview. “We don’t know how many positions will be affected yet, but the job reduction program is material.”

Logitech currently has about 3,500 employees, De Luca said. The figure excludes factory workers in China.

Darrell, who joined the company this month from Whirlpool Corp., restructured executive ranks to simplify and speed up product development and revive sales growth. The proliferation of tablet computers that don’t need mice has eroded the traditional desktop and notebook business of Logitech, which hasn’t been able to exceed the sales record set in 2008.

“Our product portfolio has a level of strength that we haven’t seen in a long time,” Darrell said in an interview. “We’re going to slim down and be leaner and consolidate our marketing organization.” De Luca added that the company “is focusing on fewer, stronger products.”

Reduced Forecasts

In January, Logitech cut full-year forecasts for the third time. The company reduced its sales forecast for the year through March 2012 to about $2.3 billion, with operating income predicted at about $60 million. Full-year revenue was $2.32 billion and operating profit fell 50 percent to $72 million, the company said today.

Logitech isn’t providing an outlook for the current fiscal year as “there are lots of variables involved, such as the impact of new products and the cost-reduction program,” De Luca said. “Also, we haven’t been particularly good at promising.”

Darrell will succeed De Luca as chief executive officer in 2013 as the company revamps products, Logitech said last month.

The company is continuing a stock-buyback program and in the fourth quarter it repurchased almost 10 million shares. De Luca said Logitech will propose that investors at the annual meeting in September agree to cancel the stock bought back in the fourth quarter, in the current period and the next three months to “dramatically improve earnings per share.”

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