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We recently upgraded Logitech International (LOGI - Analyst Report) -- which designs, manufactures and markets innovative peripherals for the digital world -- from Neutral to Outperform based on its improved prospects. Also, the company became Zacks Rank #1 stock on June 25, 2013, followed by improved performance factors.

Why the Upgrade?

The growing adoption of new mobile platforms, such as tablets and smartphones in both mature and emerging markets, is paving the way for increased demand of Logitech’s peripherals and accessories. In order to capitalize on this burgeoning business proposition, the company launched a slew of innovative products. This includes a new Apple (AAPL - Analyst Report) keyboard that has a strong growth momentum.

Also, with its universal remote app for iPhone and Android, Logitech will no longer sell this business as it had been planning earlier, since it expects better near-term trends. Logitech intends to tap the high potential market for accessories by further expanding its product lines. In the last reported quarter, tablet accessories was the best-performing retail product category with sales increasing a robust 119.2% year over year.

The company also intends to divest its non-strategic assets. This will make the business more focused towards core product line. Logitech is in the process of exiting roughly one-third of its product categories, including Remotes and Video Security, which it expects to completly divest by the end of fiscal 2014. As it focuses on resources away from PC peripherals towards the growing mobility categories of tablets accessories, it is expected that the company will return to its year-over-year growth in revenue by the end of 2015.

The company announced to initiate a recurring regular dividend, to be issued and paid on an annual basis. This proves that the company is now reaping the benefits of healthy performances. Also, positive trends are expected both in the short-term and over the longer term as well.

With the current revised cost structure and new product line, the company expects to experience growth in the coming years. In fiscal 2015, the company estimates sales of $2.1 billion, an operating income of $90 million and gross margin of 34.5%. In fiscal 2016, performance is expected to be even better with sales of $2.25 billion, an operating income of $150 million and gross margin of approximately 35%.

Other Stocks to Consider

Logitech has a Zacks Rank #1(Strong Buy). Other notable companies like, Yahoo! Inc. (YHOO - Analyst Report), Lam Research Corporation (LRCX - Snapshot Report) and AVG Technologies N.V. (AVG - Snapshot Report) operating in the same sector also have Zacks Rank #1(Strong Buy) each.

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