Logitech 2006 Annual Report Download - page 73

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In July 2003, the Company made a $15.1 million cash investment in the Anoto Group AB (“Anoto”), which
represented approximately 9.5% of Anoto’s outstanding shares as of March 31, 2006. The investment was
subsequently decreased to 5.5% of Anoto’s outstanding shares due to a sale of securities in April 2006. In
connection with this investment, a Logitech executive was elected to the Anoto board of directors. Anoto is a
publicly traded Swedish high technology company from which Logitech licenses digital pen technology. The
license agreement requires Logitech to pay a license fee for the rights to use the Anoto technology and a license
fee on the sales value of digital pen solutions sold by Logitech. Also, the agreement requires Logitech to pay
non-recurring engineering (“NRE”) service fees primarily for specific development and maintenance of Anoto’s
licensed technology.
In prior years and most recently in May 2004, Logitech made cash investments in A4Vision, Inc.
(“A4Vision”) totaling $1.2 million, which represented approximately 4% of A4Vision’s outstanding shares. In
connection with this investment, a Logitech executive was appointed to the A4Vision board of directors. During
fiscal year 2006, the Company determined that a decrease in A4Vision’s value is more than temporary based on a
review of its fair value and impaired the investment. A4Vision is a privately held company from which Logitech
licenses face tracking software. The license agreement requires Logitech to pay a license fee based on the
number of its products sold with A4Vision’s licensed software.
B. Business Overview
Company Overview
Logitech is a leader in the design, manufacture and marketing of personal peripherals for PCs and other
digital platforms. For the PC, the Company’s products include mice, trackballs, keyboards, gaming controllers,
multimedia speakers, headsets and webcams. For digital music devices, the Company’s products include
speakers and headphones. For gaming consoles, the Company offers a range of controllers, audio products and
other accessories. In addition, Logitech offers wireless music solutions for the home and advanced remote
controls for home-entertainment systems. Logitech also offers digital writing solutions, 3D control devices, and
headphones for mobile phones.
The Company’s products, many with software included, provide user-centric solutions intended to be easy
to install and easy to use. Logitech’s personal peripheral products are often the most frequent point of physical
interaction between people and the digital world. As such, they are a significant factor in determining the man/
machine interface and in increasing its richness. These products allow users to personalize and enrich their digital
environment, and to easily operate in a variety of applications. The Company is committed to offering products
that bring together the tools that business people, consumers, and computer and console gamers need to make
their experience more effective, comfortable, and enjoyable. The Company’s products are sold through a variety
of channels, including consumer electronics retailers; mass merchandisers; specialty electronics stores; computer
and telecom stores; value-added resellers; online merchants and OEMs.
The Company’s retail products target and appeal directly to consumers and businesses as they purchase
add-on devices for their PC, gaming console, mobile entertainment and communication device, or home
entertainment system. Logitech’s products are purchased as add-ons to enable or improve applications that
require dedicated devices, including webcams, PC headsets, speakers, steering wheels and joysticks for PC and
gaming consoles, and media-control devices. The products are also purchased to replace the basic peripherals
that originally came with the platform (PC, gaming console, mobile entertainment and communication device, or
home entertainment system) with devices that offer increased comfort, flexibility and functionality. Logitech’s
OEM products are a frequent choice among PC manufacturers, who need high-quality, affordable, and functional
personal peripherals in high volumes.
Over the past 20 years, Logitech has established itself as a leader in the design, manufacturing and
marketing of PC control devices. Building on this leadership position, the Company has capitalized on the
growth in personal computing and the advent and growth of the Internet by significantly expanding its product
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