Logitech 2007 Annual Report Download - page 13

WEBCAM PENETRATION
300
250
200
150
100
50
0
Global Broadband
Subscribers
Webcams Installed
MILLIONS iPOD INSTALLED BASE
100
80
60
40
20
0
FY 01 02 03 04 05 06 07
MILLIONS
FY 02 03 04 05 06 07
Source: Point –Topic, Logitech estimates based on available market data Source: Company reports
Video: Riding the Rapid Growth in
Internet Communication
Video communication is going mainstream, with consumers
becoming increasingly aware of the new communication
capabilities. More and more consumers have access to a
broadband Internet connection, which provides the base
for high-speed video communication. Fiscal Year 2007
was a solid year for webcams with retail sales growth of
15 percent year over year to $314 million. The penetration
of webcams in the PC installed base remains small at
13 percent, leaving signifi cant room for future growth.
The main growth enabler in the category has always been
applications, which is where we’ve focused the majority
of our video R&D efforts. The Logitech Video Effects
software has proven to be a very successful source of
competitive differentiation, with more than 14 million
Video Effects downloaded since the launch in August
2005. Our RightLight™ 2 and RightSound™ technologies
optimize lighting and sound conditions for video commu-
nication. As one example of hardware innovation, in
FY 2007 we introduced the QuickCam® Ultra Vision. This
top-of-the-line webcam provides noticeably higher-quality
images through the use of a large glass lens. While Micro-
soft’s entry in the category in FY 2007 created substantial
volatility that contributed to a signifi cant slowdown in
our sales growth in the second half of the year, we believe
the strengths we’ve demonstrated over the last eight
years in both software and hardware technology will
allow us to generate continued double-digit growth
and maintain our market-leading position in the retail
webcam category.
In addition to our retail offerings, we also had success
in our OEM business with the sales of embedded video
modules for notebooks. We’re excited about the trend
toward notebooks including an embedded webcam.
As the leader in webcams we believe we’re well-positioned
to both capture a sizeable share of the embedded video
market with the leading PC OEMs and to benefi t in our
retail business from consumers’ increased awareness of
the benefi ts of video communication.
Audio: Growth through End-to-End Solutions
Our audio business continued to grow in FY 2007 with
sales up 21 percent year over year to $404 million. We
were able to signifi cantly improve profi tability in our PC
speaker business due to a variety of factors, including
redesigning our packaging to reduce our logistics costs.
We also reinvented the PC speaker category with the
introduction of the Z-10 Interactive Speaker System. The
Z-10 speakers feature a high-style design as well as a
touchpad to control digital music on the PC, including
iTunes®. This was the fi rst PC speaker with embedded soft-
ware, an innovation that we view as an opportunity for
strong differentiation and higher price points. As a result
of the value and innovation across our range of offerings,
our PC speaker business grew 21 percent in FY 2007.
We also achieved strong growth in FY 2007 in our iPod
speaker business, which more than doubled year over
year. Much of our success in this category was driven by
our mm50 Portable speakers for iPod, which have been
one of our best-selling speakers for the last two years.
Expanding our iPod speaker offerings allowed us to
signifi cantly increase our market share in the category
during FY 2007.
Digital music is the core of the digital home. The ongoing
transition of music collections from CD storage to PC
storage drives a growing need for access and distribution
solutions for music in the home. To signifi cantly strengthen