Logitech 2005 Annual Report Download - page 76

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Logitech’s cordless and corded product families include the Company’s mice, trackballs, keyboards and
desktops for the PC. Video is comprised of PC webcams; audio includes multimedia speakers, headsets and
headphones for the PC and for gaming consoles, headsets for mobile phones, and headsets, headphones and
speakers for mobile entertainment platforms; gaming includes interactive gaming controllers for the PC and for
gaming consoles; and other is primarily comprised of the Company’s advanced remote control, 3D input device
and digital pen offerings.
The sales growth in fiscal year 2005 was driven by strong demand for the Company’s retail products, partly
offset by lower OEM revenues. Retail sales growth occurred across all major product categories, with console
gaming and cordless mice contributing most significantly. The decline in OEM sales reflects the absence of sales
to Sony of the EyeToy™camera and the USB headsets for the Playstation®2. Approximately 53% of the
Company’s sales were denominated in currencies other than the U.S. dollar in fiscal year 2005. While the Euro
was stronger compared to the prior year, the benefit from the strengthening Euro in fiscal year 2005 was less than
the prior year. Any benefit does not take into account the impact that currency fluctuations have on the
Company’s pricing strategy resulting in lowering or raising selling prices in one currency to avoid disparity with
U.S. dollar prices and to respond to currency-driven competitive pricing actions. The Company believes that
currency fluctuations did not have a material impact on its revenue growth in fiscal year 2005.
Retail – Cordless. Cordless mice sales drove the majority of the growth in the retail cordless category, with
sales increasing 69% and unit shipments up 59% over the prior year. The introduction of the laser cordless mouse
in September 2004 made a significant contribution to this growth. Also, demand for Logitech’s cordless optical
mice for notebooks, including the high-end V500 contributed to the growth. Demand for the media cordless
mouse and value cordless offerings also contributed to higher sales during fiscal year 2005. Cordless desktops
sales were also higher due to strong demand for the Company’s new LX desktop family. Contributions from the
Company’s value desktop offerings and the cordless desktop for notebooks further drove growth in the cordless
desktop category.
Retail – Corded. The migration by consumers to cordless peripherals impacted sales for the Company’s
corded products. The largest component of the corded product category, corded mice, was essentially flat and
unit shipments were lower by 1% compared to fiscal year 2004. Sales of corded keyboards declined 7% while
unit shipments increased 11%. The decrease in sales, despite an increase in unit shipments, reflects a shift in the
product mix. The Company expects consumer adoption of cordless peripherals to continue to impact demand for
corded products in the future.
Retail – Video. Demand for video products continued to be strong due to the increased popularity of PC
webcams spawned by the growth of instant messaging and broadband connectivity. Sales of PC webcams grew
32% and unit shipments increased 53% due to continued demand for both the Company’s premium high-end
products and lower priced mass-market offerings. The increase in video sales was mitigated by the absence of the
Company’s dualcam products, a category Logitech discontinued late in fiscal year 2004.
Retail – Audio. Sales of audio products were higher by 33% and unit shipments increased 12% compared to
a year ago. The growth in both sales and units in the audio category was driven primarily by strong demand for
the Company’s Logitech branded PC speaker line. In particular, the success of the X family series, a mid-range
speaker line, made a major contribution to this growth. The Company also benefited from higher PC headset
sales. To a lesser extent, higher sales of headsets for mobile phones and the Xbox also contributed to higher sales
in the audio category.
Retail – Gaming. Sales of retail gaming peripherals grew considerably compared to last year. The growth
came primarily from the Company’s console gaming peripherals, with sales increasing 172% and unit shipments
growing 219% compared to a year ago. The most significant growth came from sales of cordless gamepads for
the Playstation®2 and Xbox™platforms. Sales of console steering wheels also showed growth and contributed to
the increase in console gaming. Sales of gaming peripherals for the PC grew at a slower rate, increasing 21%
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