Logitech 2007 Annual Report Download - page 64

If we do not successfully introduce and market products for notebook PCs, our business and results of
operations may suffer.
We have historically targeted peripherals for the PC platform, a market that is dynamically changing as a
result of the increasing popularity of notebook and mobile products over desktop PCs. In our OEM channel, this
shift has adversely affected our sales of OEM mice, which are sold with name-brand desktop PCs. Our OEM
mice sales have historically made up the bulk of our OEM sales, and our OEM sales accounted for 11% and 12%
of total revenues during fiscal year 2007 and 2006. If the desktop PC market continues to experience slower
growth or decline, and if we do not successfully grow our non-mouse OEM business, our OEM revenues could
be adversely affected.
In our retail channels, the impact of the growing popularity of notebook PCs and mobile devices is
uncertain, but may result in a decreased demand by consumers for keyboards and desktops (mouse and keyboard
combination). This could negatively affect our sales of these products which would adversely affect our business
and results of operations.
Our effective tax rates may increase in the future, which could adversely affect our operating results.
We operate in multiple jurisdictions and our profits are taxed pursuant to the tax laws of these jurisdictions.
Our effective tax rate may be affected by changes in or interpretations of tax laws in any given jurisdiction,
utilization of net operating loss and tax credit carryforwards, changes in geographical allocation of income and
expense, and changes in management’s assessment of matters such as the realizability of deferred tax assets. In
the past, we have experienced fluctuations in our effective income tax rate. Our effective income tax rate in a
given fiscal year reflects a variety of factors that may not be present in the succeeding fiscal year or years. There
is no assurance that our effective income tax rate will not change in future periods. The amount of income taxes
we pay could be subject to ongoing audits in various jurisdictions and a material assessment by a governing tax
authority could affect our profitability. If our effective tax rate increases in future periods, our operating results
could be adversely affected.
We are exposed to significant costs and risks associated with complying with Section 404 of the Sarbanes-
Oxley Act.
Section 404 of the Sarbanes-Oxley Act of 2002 requires the management of public companies in the United
States to evaluate and report on the Company’s systems of internal control over financial reporting. Further,
Section 404 requires the company’s independent registered public accountants to attest to and report on
management’s evaluation of those controls. We have and will continue to incur significant expenses and
management resources to comply with the requirements of Section 404 on an ongoing basis.
In addition, the Company’s growth strategy, through innovation, product line expansion and the acquisition
of complementary businesses, requires periodic changes and enhancements to our operational, financial, and
management controls, and to our reporting systems and procedures. Our compliance with the annual internal
control reporting requirements for each fiscal year will depend on the effectiveness of our financial reporting and
data systems and controls across the Company, and future changes in our control environment that may affect
those systems and controls. If we do not implement the required new or improved controls, if we encounter
difficulties in their implementation or operation, or if we experience difficulty in the assimilation of acquired
businesses into our internal control systems, our financial reporting could be negatively affected.
Inferior internal controls or the determination that our internal control over financial reporting is not
effective might cause investors to lose confidence in our reported financial information, which could cause
volatility in the market price of our shares.
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