Logitech 2013 Annual Report Download - page 96

Enterprise Market. We are continuing 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. Growing our enterprise peripherals business will continue to require investment in
selected business-specific products, targeted product marketing, and sales channel development.
Tablets, Smartphones and Other Mobile Devices. The increasing popularity of smaller, mobile computing
devices, such as tablets and smartphones with touch interfaces, have created new markets and usage models
for peripherals and accessories. Logitech has begun to offer products to enhance the use of mobile devices. For
example, we are experiencing strong demand for our tablet keyboards, led by our Logitech Ultrathin Keyboard
Cover, which currently represents our best selling product across all of our product categories. During the fourth
quarter of fiscal year 2013, we also introduced the Logitech Ultrathin Keyboard mini, a slim protective keyboard
cover designed to enhance the iPad mini experience. Initial demand for the Logitech Ultrathin Keyboard mini has
been very positive. The tablets and accessories category is one of the primary strategic categories of our business.
We continue to expand and leverage on our success in this category through the introduction of innovative products
such as the Logitech Keyboard Folio and Folio mini, and the Logitech FabricSkin Keyboard Folio for iPad and iPad,
announced in late March 2013 and April 2013.
Digital Music. We believe that digital music, the seamless consumption of audio content on home and mobile
devices, presents a growth opportunity for Logitech, based on our history of successful earphone, headset and
speaker products. Many consumers listen 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 digital music speakers.
OEM business. Sales of our OEM mice and keyboards have historically made up the bulk of our OEM sales.
In recent years, there has been a dramatic shift away from desktop PCs and there continues to be significant
weakness in the global market for PCs which has adversely affected our sales of OEM mice and keyboards, all of
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.
Trends in Other Peripheral Product Categories. Some of our other peripherals product categories are
experiencing significant market challenges. As the quality of PC-embedded webcams improves, we expect future
sales of our PC-connected webcams in mature consumer markets to continue declining. During the third quarter of
fiscal year 2013, we identified a number of product categories that no longer fit with our current strategic direction.
As a result, we made a strategic decision to divest our entire Retail-Remotes product category and our digital video
security product line included in our Retail-Video product category, and we plan to discontinue other non-strategic
products, such as speaker docks and most console gaming peripherals, by the end of fiscal year 2014.
Trends Specific to our Video Conferencing Segment
The trend among businesses and institutions to use video conferencing offers a long-term growth opportunity
for Logitech. However, the overall video conferencing industry has experienced a slowdown in recent quarters.
In addition, there has been an increase in the competitive environment in fiscal year 2013. This resulted in a
$214.5 million non-cash goodwill impairment charge in the fiscal year ended March 31, 2013. We believe the growth
in our video conferencing segment depends in part on our ability to increase sales to enterprises with existing
installed bases of equipment supplied by our competitors, and to enterprises that may purchase such 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. We also are seeking to offer LifeSize products designed to enhance the use of mobile devices
in video conferencing applications.
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