Logitech 2006 Annual Report Download - page 91

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
This Annual Report on Form 20-F to shareholders contains forward-looking statements that involve risks
and uncertainties. The Company’s actual results could differ materially from those anticipated in these
statements as a result of certain factors, including those set forth above in Item 3D “Risk Factors,” and below in
Item 11 “Quantitative and Qualitative Disclosure about Market Risk.”
Overview
Logitech is a leading global technology company and earns revenues and profits from the sale of personal
peripherals that serve as the primary physical interface between people and their personal computers 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 sells its products to both original equipment manufacturers
(“OEMs”) and to a network of distributors and resellers (“retail”).
The Company’s markets are extremely competitive. Some of our competitors are well established with
substantial resources, others are less established and compete at lower price points. These markets are
characterized by aggressive promotional and pricing practices, short product life cycles, rapidly changing
technology and evolving customer demands. In order to remain competitive, continued investment in product
research and development is critical to driving innovation with new and improved products and technologies.
Logitech is committed to meeting customer needs for personal peripheral devices and believes innovation and
product quality are important elements to gaining market acceptance and strengthening market leadership. The
Company has historically targeted peripherals for the PC platform, a market that is dynamically changing as a
result of consumer trends toward notebooks. Logitech remains focused on strengthening its market leadership in
the PC market with the introduction of products that support the continued growth of the notebook market
segment. The Company has also expanded into peripherals for other platforms, including video game consoles,
mobile phones, home entertainment systems and most recently, mobile entertainment and digital music systems.
Over the last several years, Logitech has laid a foundation for long-term growth, expanding and improving
its supply chain operations, investing in product development and marketing, delivering innovative new products
and pursuing new market opportunities beyond the PC platform. During this time, the Company has significantly
broadened its product offerings and the markets in which it sells them. Although most of this expansion has been
organic, the Company’s business has also grown as a result of a limited number of acquisitions that have
expanded the Company’s business into new product categories.
In fiscal year 2006, revenues increased 21% to $1.8 billion and net income increased 21% to $181.1 million
reflecting the results of the Company’s continued investment in new product categories and diversification of the
existing product portfolio. Audio and video retail sales were the key growth categories contributing to the
Company’s fiscal 2006 financial performance and are expected to continue driving growth in the near term. Sales
of advanced remote controls have contributed to the increased revenue and present growth potential for the
future.
The Company’s focus in fiscal year 2007 is to capture the growth opportunities in the business and improve
profitability. Audio, video and advanced remote controls will continue to be the key growth drivers. Cordless
desktops and mice are also expected to return the cordless category to solid growth as a result of focused product
and marketing initiatives. New products to be launched later in fiscal year 2007, particularly in the speaker and
cordless categories, are expected to carry higher margins than the products replaced as a result of the Company’s
product development efforts. Further, Logitech is investing in business applications and information technology
upgrades. These investments are necessary to position Logitech for future growth by improving operational and
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