Logitech 2012 Annual Report Download - page 170

certain due to, among other things, the challenges presented by potentially entrenched local competition, higher
credit risks, and other factors that affect consumer trends in ways which may be substantially different from our
current major markets.
We believe that digital music, the seamless consumption of audio content on home and mobile devices, presents
a significant and natural growth opportunity for Logitech, based on our history of successful earphone, headset
and speaker products. Today’s consumers consider listening to music as a pervasive entertainment activity, fueled
by the growth in smartphones, tablets, music services and Internet radio. Logitech has a solid foundation of audio
solutions to satisfy consumers’ needs for music consumption, including Logitech UE earphones and speakers, and
Squeezebox Wi-Fi music players. As we have increased our focus on products for the consumption of digital music,
we are encountering competitors with higher consumer recognition and retailer shelf space, which may challenge
our success in the digital music arena.
We are also increasing our efforts on creating and selling products and services to enterprises. We believe
the preferences of employees increasingly drive companies’ choices in the information technologies they deploy to
their employee base, and this consumerization of information technology has made the enterprise market open to
embracing consumer technology and design. While our LifeSize division has extensive experience in developing
and selling products for enterprises, we are still in the early stages of our enterprise market team’s efforts for our
productivity peripherals and related services. Growing our enterprise business will continue to require investment
in creation of business-specific products, targeted product marketing, and sales channel development.
Our video conferencing segment represented 6% of our net sales for the fiscal years ended March 31, 2012
and 2011. The trend among businesses and institutions to use video conferencing offers a key growth opportunity
for Logitech. However, the growth of our video conferencing segment depends in part on our ability to increase
sales to enterprises with installed bases of competitor equipment, and to enterprises that may purchase competitor
equipment in the future. We believe the ability of our LifeSize products to interoperate with the equipment of
other telecommunications, video conferencing or telepresence equipment suppliers to be a key factor in purchasing
decisions by current or prospective LifeSize customers. In addition, LifeSize has broadened its product portfolio
to include infrastructure, cloud services and other offerings which require different approaches to developing
customer solutions.
Sales of retail video products represented 11% and 13% of our total retail sales for the fiscal years ended
March 31, 2012 and 2011. Future sales of tethered consumer webcams in the consumer market is unclear, as the
embedded webcam experience appears to be sufficient to meet the needs of many retail consumers as the quality
of embedded webcams improves. At the beginning of the quarter ended March 31, 2012, we launched the Logitech
HD Pro Webcam C920. This product is an example of how we intend to enhance our webcam product line-up by
enabling experiences that cannot be easily achieved with an embedded webcam.
Sales in our digital home category have declined significantly. We believe the disappointing sales results for
Harmony fiscal year 2012 reflect the aging of our Harmony products at the mid- and high-level price points as we
previously directed significant digital home engineering and marketing resources towards our Logitech Revue and
related peripherals for Google TV. We have exited the Google TV product category, and we plan to strengthen our
Harmony line in fiscal year 2013.
Sales of our OEM mice and keyboards have historically made up the bulk of our OEM sales. OEM sales
accounted for 8% and 9% of total revenues during the fiscal years ended March 31, 2012 and 2011. In recent years,
the shift away from desktop PCs adversely affected our sales of OEM mice and keyboards, which are sold with
name-brand desktop PCs. We expect this trend to continue and for OEM sales to comprise a smaller percentage of
our total revenues in the future.
We continue to evaluate potential acquisitions to enhance the breadth and depth of our expertise in engineering
and other functional areas, our technologies and our product offerings.
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