Logitech 2007 Annual Report Download - page 85

We have historically targeted peripherals for the PC platform, a market that is dynamically changing as a
result of consumer trends toward notebooks and other mobile devices. We remain focused on strengthening our
leadership in the PC peripherals market through the introduction of products that support the continued growth of
the notebook market segment. We have also expanded into peripherals for other platforms, including video game
consoles, mobile phones, home entertainment systems and mobile entertainment and digital music systems.
Logitech’s markets are extremely competitive and are characterized by short product life cycles, rapidly
changing technology, evolving customer demands, and aggressive promotional and pricing practices. In order to
remain competitive, we believe continued investment in product research and development is critical to driving
innovation with new and improved products and technologies. We are committed to meeting customer needs for
personal peripheral devices and believe innovation and product quality are important to gaining market
acceptance and strengthening market leadership.
Over the last several years, Logitech has created a foundation for long-term growth, by expanding and
improving our supply chain operations, investing in product development and marketing, delivering innovative
new products and pursuing new market opportunities. We have significantly broadened our product offerings and
the markets in which we sell. Our expansion has been primarily organic, but we have also grown as a result of a
limited number of acquisitions that expanded our business into new product categories.
In fiscal year 2007, revenues increased 15% to $2.1 billion and net income increased 27% to $229.8 million,
reflecting our 2007 focus on capturing growth opportunities and improving profitability. We achieved continued
growth in all major product categories, an indication of the strength of our product portfolio. Cordless mice and
desktops, audio and Harmony remote control retail sales were key growth categories contributing to the
Company’s fiscal 2007 financial performance. We also achieved strong gross margin improvements through our
emphasis on driving product innovation and controlling and reducing our product cost structure. We also
invested in business applications and information technology to improve our operational and financial processes.
Our strategy for fiscal year 2008 remains to position Logitech as a premium supplier in our product
categories, offering affordable luxury to the consumer while continuing to compete aggressively in all market
segments, from the entry level through the high-end. To implement this strategy, our focus will include continued
growth through innovative new products and enhanced scalability of operations. We plan to expand our
successful line of peripherals for the notebook platform, particularly with new cordless mice and products similar
to the Logitech Alto notebook stand. We have a number of innovative keyboards and desktops planned for
desktop PC users. We will also introduce major navigation innovation in the pointing device category. In the
digital music arena, we plan to introduce new PC and iPod®speakers for all major price points, and leverage the
opportunities provided by our Slim Devices acquisition in the wireless streaming of digital content. Innovative
new gaming products and the continued expansion of the Harmony remote control product line are also in our
plans for fiscal year 2008. To support our planned growth, we intend to scale our processes to handle the
increased complexity of our product line and improve the product life cycle management process. We also intend
to manage our operating expenses in line with our gross profit growth for the year.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with generally accepted
accounting principles in the United States of America (“U.S. GAAP”) and in compliance with relevant Swiss law
requires the Company to make judgments, estimates and assumptions that affect reported amounts of assets,
liabilities, net sales and expenses, and the disclosure of contingent assets and liabilities.
We consider an accounting estimate critical if it: (i) requires management to make judgments and estimates
about matters that are inherently uncertain; and (ii) is important to an understanding of Logitech’s financial
condition and operating results.
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