Logitech Is On A Roll But What About Their Future?
In Australia Logitech, has gone from flogging keyboards and mice to a new generation of top end Bluetooth headphones, conference communication gear to UE Boom speakers.
Their packaging is now up there with the best there is out there, and retailers such as JB Hi Fi, Harvey Norman right through to the specialist solution provider are today reaping the benefit of the new look Logitech due in part to the 50% margin that Logitech products deliver for retail partners.
Then came along Bracken Darrell who as the CEO of Logitech quickly took the Company in a new direction.
This was no ordinary tarting up of a Company.
The Swiss-based company who were already famous for developing PC and mobile accessories, including keyboards, mice, and gaming equipment moved to refresh a lot of their existing products.
Today they design and sell webcams, presentation tools, audio equipment, and more recently they have branched out into the IoT market, with home security and smart home products, including their Harmony and POP hub range.
No stranger to expanding its business through acquisition, Logitech’s 2016 purchase of Saitek and Jaybird further improved its gaming and audio offerings whilst also providing the Swiss firm with its own fitness monitoring tool.
Darrell claims that everything Logitech “is doing today is [about] creating cloud-based peripherals.”
SeekingAlpha said of Logitech, ‘While there may be reasonable doubts about Logitech, you can’t doubt its CEO’s success in turning the company around since his appointment, nor his belief in his vision for the future’.
During the past five years, the company has seen its share price almost quadruple, rising from $7.70 a share to $29.52.
Yearly and year-to-date figures are also equally impressive at 91.43% and 19.18%, respectively.
In fact, most of the basic data about the $5.11bn market-cap company reads positively.
The most recent company reports released on the 25th of January show revenues up by 7.3% year on year, with rising revenues generated from areas including Gaming (+38%), Mobile Speakers (+25%), and Collaboration (+38%).
Even the old warhorse on which almost half of Logitech’s revenue is built, keyboards and mice, saw sales up 3%, proving CEO Darrell right that it is not PC sales which dictate this portion of the company’s business, but the installed base.
According Darrell, the next step is to really push for a stake in the cloud, which he describes as “the new growth platform for Logitech.”
Some observers claim this could move the Company away from selling their products via retailers to selling direct online.
Another initiative is that Darrell wants Logitech to be a major player in the voice activation market where voice can be used to activate TVs, appliances and voice-controlled devices.
“They want to be at the centre of connected homes but you’ve got to sleep with one eye open” because erstwhile allies may well become rivals, IDC analyst Jonathan Gaw told Bloomberg recently.
Darrell insists the new strategy won’t be a dramatic change from the way Logitech has long operated What he wants to do is to make his offerings work with Logitech’s UE Boom speakers so that they can easily talk to Apple’s Siri, Google Now and Amazon’s Alexa to control everything from TVs to lights and heating, and its accessories can turn iPads into mini-laptops.
“There’s no way these big players are going to want to be in every little puddle around their operating systems,” Darrell, 55 told Bloomberg at, Logitech’s “Innovation Centre” at the Ecole Polytechnique Federale de Lausanne, a top Swiss technical university with long ties to the accessory company.
“We’ve always been in categories where the big players are.”
To fund that strategy, Darrell aims to wring maximum profits from his PC mouse and keyboard business, which racks up sales of almost $1 billion a year.
That will let him enter new areas driven by voice-controlled devices, video collaboration, and augmented-reality games.
Tavis McCourt, an analyst at Raymond James, praises Darrell for turning around a company that was “really struggling to define what it was.”
The downside for Logitech is that the big hitters such as Amazon, Google, Microsoft and Apple, have a massive advantage over Logitech, which has historically been better at commercializing others’ inventions than developing its own.
Logitech, whose revenue is forecast to reach $2.2 billion this year, devotes less than $150 million annually to research and development. Microsoft last year spent about $12 billion, Google $14 billion, and Amazon $16 billion.
That could make it tough for Logitech to build products with enough sophistication to command premium prices, said Torsten Sauter, head of Swiss Research at broker Kepler Cheuvreux.
“The smart home looks difficult” for Logitech to crack, Sauter said. “They have no software, no ecosystem. Logitech is much more a design company than a tech company.”
Darrell believes he can succeed by stressing design and marketing to create hits like the UE Boom speakers, as well as novelties such as a “silent” mouse and a wireless dock for phones that lets users toggle between typing on their PC screen and smartphone.
Darrell told Bloomberg that projects in the works include cloud services tied to Logitech products, such as storing video collected by home-surveillance cameras. He points to Spotlight, a $130 remote for presentations, as an example of the hardware and software integration and higher-quality manufacturing Logitech is shooting for.
Its weighty aluminium feel and simple three-button design are reminiscent of Apple products, and it works with both Windows and Macs to highlight specific areas of a computer screen.
Further out, Logitech is researching how gestures may replace computer mice and considering devices designed for use in self-driving cars, said Alastair Curtis, a Nokia veteran Darrell hired in 2013 as design chief.
“When I first joined, Logitech was not in a good place,” Curtis said. “I gave a brutal assessment.” Now, he says he’s happy with the company’s direction and position vis a vis tech’s agenda-setters. “We’re closer to Apple than ever before.”
A Gartner analyst observed, “Apple are going nowhere, they are living off yesterday’s products and are struggling to innovate, the new iPhone 8 really has to breakthrough when it comes to design”.