Logitech 2003 Annual Report Download - page 125

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Competitors for our interactive entertainment products include Guillemot, Interact Accessories, Gravis, Mad
Catz, Microsoft and Saitek Industries. Our cordless controllers for PlayStation®2 are competing against Sony’s sales
of their own corded controllers. Sony has substantially greater resources than we do.
Competitors in audio devices vary by product line. In the PC speaker business, competitors include Altec
Lansing and Creative Labs. In headset, microphone, and telephony products, competitors include Altec Lansing,
Plantronics, and GN Netcom. These markets are intensely competitive and market leadership changes frequently as a
result of new products, designs and pricing. In addition, with our entry into the mobile phone headset business, we
are competing against mobile phone and accessory companies such as Sony and Ericsson, each of whom have
substantially greater resources than us and have established market positions in this business.
See discussion in Item 3.D Risk Factors – “If we do not compete effectively, demand for our products will fall
and this could result in reduced revenues, margins, and profitability.”
Intellectual Property and Proprietary Rights
Intellectual property rights that apply to our products and services include patents, trademarks, copyrights and
trade secrets.
We hold a number of patents and pending applications from the U.S., as well as from other countries. While we
believe that patent protection is important, we also believe that patents are of less competitive significance than
factors such as technological expertise, ease-of-use, and quality design. No single patent is in itself essential to us as
a whole. From time to time we receive claims that we may be infringing patents or other intellectual property rights
of others. When we receive such claims, we refer them to our counsel, and current claims are in various stages of
evaluation and negotiation. If we determine that it is necessary or desirable, we may seek licenses for certain
intellectual property rights. However, we can give no assurance that we will be able to obtain licenses from any
claimant, that we can accept the terms of any offered licenses, or that litigation will not occur. The failure to obtain
necessary licenses or other rights, or litigation arising out of such claims, could adversely affect our business. See
also the discussion in Item 3.D Risk Factors – “We may be unable to protect our proprietary rights. Unauthorized
use of our technology may result in development of products that compete with our products.”
To distinguish genuine Logitech products from those of our competitors and makers of counterfeit products, we
have used, registered, and/or applied to register certain trademarks and trade names in the U.S. and in foreign
countries and jurisdictions. We enforce our trademark and trade name rights in the U.S. and abroad. In addition, the
software for our products and services is entitled to copyright protection, and we generally require our customers to
obtain a software license before we provide them with that software. We also protect details about our products and
services as trade secrets through employee training, license and non-disclosure agreements and technical measures.
Governmental Regulation
We are subject to various safety, environmental, electrical and mechanical governmental regulations that exist
throughout the world. The effects of these government regulations on our business are limited to the cost of
allocation of the appropriate resources for agency fees and testing as well as the time it takes to obtain agency
approvals. The costs and schedule requirements are industry requirements and therefore do not represent an undue
burden relative to our competitive position. As regulations change, we must modify our products or processes to
address these changes.
Seasonality
Logitech’s retail sales are seasonal. Our sales are typically highest during our third fiscal quarter, due primarily
to the increased demand for our products during the year-end holiday buying season, and to a lesser extent in the
fourth fiscal quarter. Our sales in the first and second quarters can vary significantly as a result of new product
introductions and other factors.
Materials
We purchase some of our products and key components used in our products from single or limited sources. In
particular, a significant portion of our cordless keyboards is single-sourced and the sensor in our optical mice is
provided by one supplier. See discussion in Item 3.D Risk Factors – “We purchase key components and products
from single or limited sources, and our business and operating results could be harmed if supply is restricted or
ends.”