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Logitech Turns To Q1 Profit On Margin Expansion, Sales Growth; Boosts 2011 Sales Outlook - Update

July 29, 2010 | Chris Payatagool
Logitech_logo.jpg (RTTNews) - Computer interface devices manufacturer Logitech International S.A. (LOGI) reported Wednesday a profit for the first quarter compared to a loss last year, boosted by 47% sales growth and margin expansion amid improved sell-through across all retail regions.

Both earnings per share and quarterly revenues for the quarter topped analysts' expectations. The company also raised its sales forecast for the full-year 2011, citing strong first quarter performance and improving consumer demand for its products.

In a statement, president and chief executive officer, Gerald Quindlen said, "Logitech's Fiscal Year 2011 is off to a strong start. We exceeded our sales and profitability targets and achieved our best-ever Q1 gross margin. And we had robust growth in most of our retail product categories, led by Harmony remotes and pointing devices."

The Apples, Switzerland-based company reported net income of $19.52 million or $0.11 per share for the first quarter, compared to net loss of $37.37 million or $0.21 per share in the prior-year quarter.

On average, five analysts polled by Thomson Reuters expected the company to report earnings of $0.03 per share for the first quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter surged 47% to $479.33 million from $326.11 million in the same quarter last year, and topped five Wall Street analysts' consensus estimate of $456.50 million. Excluding the unfavorable impact of exchange rate changes, sales climbed 50%. Logitech had projected sales to range between $450 million and $465 million in the first quarter.

Net sales through retail channel increased 39% to $393.87 million from $283.77 million in the year-ago quarter. Retail sales climbed 66% in the Americas region, up 24% in the Asian region, and up 21% in Europe, Middle East and Asia or EMEA region.

Sales to OEMs rose 38% to $58.34 million from the prior-year quarter's $42.34 million. LifeSize Communications, acquired in December 2009, contributed total sales of $27.13 million.

Logitech acquired Austin, Texas-based privately held LifeSize Communications for $405 million in cash. The acquisition is expected to enable Logitech to break into the videoconferencing market.

Among the product families sold through retail channel, only the gaming products posted a decline in sales, with pointing devices continuing to be the best performing category in terms of contribution, followed by audio products and then keyboard & desktops.

Pointing devices recorded a sales growth to $131.85 million from $90.24 million in the prior-year quarter. Further, audio products sales were $95.65 million, up from $72.12 million in the year-ago quarter, and keyboards & desktops sales grew to $76.17 million from $58.01 million last year.

Operating income for the first quarter was $11.80 million compared to operating loss of $35.11 million in the prior-year quarter.

Gross profit for the quarter was $169.03 million, up from $77.82 million in the same quarter last year, and gross margin climbed 1140 basis points to 35.3% from last year's 23.9%. Total operating expenses were $157.23 million, up from $112.93 million in the year-ago quarter.

Capital expenditure for the first quarter totaled $11.92 million, higher than $7.70 million in the corresponding quarter last year. Logitech ended the first quarter with cash and cash equivalents of $317.32 million, compared to $567.42 million at end of the prior-year quarter.

"Based on our strong Q1 performance and improving consumer demand for our products, we are increasingly optimistic about our full-year performance for Fiscal Year 2011 and have raised our outlook accordingly. Furthermore, we are enthusiastic about the pending launch of Logitech products for Google TV and the potential for further upside to our FY11 sales outlook," Quindlen added.

Looking ahead to fiscal 2011, the company raised its sales outlook to a range of $2.3 billion to $2.35 billion from the prior guidance for sales of about $2.3 billion. The Street is currently looking for full-year 2011 revenues of $2.32 billion.

The company also boosted its full-year operating income target to between $160 million and $170 million from the earlier forecast of about $156 million. Gross margin is now expected between 34% and 35%, up from the prior guidance of about 34%.

LOGI closed Wednesday's regular trading session at $18.46, up $0.19 or 1.04% on a volume of 2.50 million shares, higher than the three month average volume of 1.06 million shares.

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