Logitech 2005 Annual Report Download - page 45

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• Our revenues and profitability depend in part on the mix of our retail and original equipment
manufacturers, or OEM, sales as well as our product mix. Our prices and gross margins are generally
lower for sales to OEM customers compared to sales to our retail customers. Our prices and gross
margins can vary significantly by product line as well as within product lines.
• Fluctuations in currency exchange rates impact our revenues and profitability because we report our
financial statements in U.S. dollars whereas a significant portion of our sales to customers are transacted
in other currencies, particularly the Euro. Furthermore, fluctuations in foreign currencies impact our
global pricing strategy resulting in our lowering or raising selling prices in a currency in order to avoid
disparity with U.S. dollar prices and to respond to currency-driven competitive pricing actions.
Fluctuations in our operating results may cause volatility in the price of our ADSs and registered shares. For
example, in the first quarter of fiscal year 2004, our operating results did not meet our targets, which had a
significant adverse effect on the trading price of our ADSs and registered shares.
If we do not introduce successful products in a timely manner, our business and operating results could
suffer.
The market for our products is characterized by rapidly changing technology, evolving industry standards,
short product life cycles and frequent new product introductions. As a result, we must continually introduce new
products and technologies and enhance existing products in order to remain competitive. If technologies or
standards that we adopt fail to gain widespread commercial acceptance, demand for such products could decline
and our business could be adversely affected.
The success of our products depends on several factors, including our ability to:
• anticipate technology and market trends;
• develop innovative new products and enhancements in a timely manner;
• distinguish our products from those of our competitors;
• manufacture and deliver high-quality products in sufficient volumes; and
• price our products competitively.
If we do not execute on these factors successfully, our business, financial condition and operating results
could suffer.
Production levels that do not match demand for our products could result in lost sales or lower gross
margins.
Our industry is characterized by rapid technological change, frequent new product introductions, short-term
customer commitments and rapid changes in demand. We determine production levels based on our forecasts of
product demand. Actual demand for our products depends on many factors, which makes it difficult to forecast.
We have experienced differences between actual and forecasted demand in the past and expect differences to
arise in the future. The following problems could occur as a result of these differences:
• If demand for our products is below our forecasts, we could produce excess inventory or have excess
manufacturing capacity. Excess inventory could negatively impact our cash flows and could result in
inventory impairments. Excess manufacturing capacity could result in higher production costs per unit
and lower margins.
• If demand for our products exceeds our forecasts, we would have to rapidly ramp up production. We
depend on suppliers and manufacturers to provide components and subassemblies. As a result, we may
not be able to rapidly increase production levels to meet unexpected demand, and we could lose sales
7
CG
20-F
LISA