Logitech Cuts 600 Jobs After Q3 Net Profits Sink


Logitech's retail sales for the quarter sank 16 percent year-over-year, with sales down in the Americas by 21 percent. OEM sales fell 11 percent.

"The deepening global recession had a significant impact on our operating performance as our customers continued to reduce inventory levels in the face of weaker consumer demand," said President and CEO Gerald Quindlen, in a statement released Monday.

The company also reported a 29.9-percent drop in gross margins in the quarter from 36.9 percent in the year-ago period.

"Two factors primarily contributed to the decline in our gross margin from last year's record high -- the negative impact of a significantly stronger dollar and a retail environment that was highly promotional, particularly in the Americas," Quindlen said.

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Ahead of its earnings announcement, Quindlen said that Logitech had already taken steps to stem losses.

"During the quarter, we were able to scale back our operating expenses in anticipation of the challenging environment," he said.

In light of its dismal quarterly performance, Logitech has initiated a restructuring that includes cutting between 550 and 600 employees. On Monday, the company said it had already begun layoffs on Jan. 1, the start of its fourth quarter. Logitech said it expects that the move will generate annual cost savings beginning in fiscal year 2010 of roughly $50 million.

Quindlen warned that even though Logitech is taking several cost-cutting measures, it is strapping in for a bumpy ride.

"All indications point to an even weaker retail environment in the coming months," Quindlen said. "Consequently, our plans assume that in Q4 we will see year-over-year declines in sales, operating income before restructuring charges and gross margins that are similar to or worse than the year-over-year declines we experienced in Q3."

In the face of the news, Quindlen still remains hopeful that the company will turn around.

"We believe these factors are tied to the current economic conditions and are not permanent," Quindlen said.

"We believe the substantial steps we are taking to align our cost structure with the current environment, combined with our continued emphasis on product innovation, will position the company to successfully manage through this downturn and emerge stronger when the recovery begins," he said.

While Logitech waits for electronic retail sales to pick up, the sector has taken a huge wallop in the current economic climate. Last week, Circuit City, the country's second-largest consumer electronics outlet, closed its 567 stores, putting 30,000 employees out of work. The chain failed to find a buyer after it filed for bankruptcy protection last November.

Meanwhile, a spokesperson for Best Buy, the country's No.1 electronics retailer, told Reuters that the Circuit City news marks a 'sad day' for the industry, but would not comment about how its demise might affect Best Buy's business.