LOGI's Cost-Cutting Initiatives

Logitech International (LOGI - Analyst Report), a leading company in the field of digital products, announced its plans to take up cost-cutting initiatives.

LOGI, which has been reporting poor results for the last few quarters, reported a loss of $1.24 per share in the third quarter of 2013, with an operating expense of $765 million, up 43.2% year over year. The company’s first quarter 2013 results were also disappointing in which the company also posted a net loss of 32 cents a share. Such a prolonged weak performance of the company made it essential for management to take up cost cutting initiatives.

As announced in the outlook for third quarter, the company started the procedure to divest its remote control and digital video security categories with further plans to discontinue other non-profitable products, such as speaker docks and console gaming peripherals, by the end of 2013.

Logitech believes that by adopting these cost control measures the company will not only become a more focused company but will also hel Logitech reduce its costs. Through these initiatives Logitech intends to generate incremental savings amounting to approximately $16 to $18 million. This amount is incremental to the $80 million saving already proposed from reducing operating costs and cost of goods sold for fiscal 2014.

Following the restructuring operations, the company expects to save approximately $12 million to $14 million in the fourth quarter of fiscal 2013. These savings will mainly come in from the workforce reduction. Logitech is required to lay off 140 employees, or 5% of its workforce as part of its cost cutting measure.

Logitech’s newly appointed CEO Bracken P. Darrell, believes that these initiatives would result in improved operational efficiency and higher profitability coupled with faster growth in performance. In response to these restructuring activities Logitech shares moved up to $6.80, compared with its previous day’s closing.

Currently Logitech rates a short-term Zacks Rank #5 (Strong Sell), while its competitors Stratasys Ltd. (SSYS - Analyst Report) and Immersion Corporation (IMMR - Snapshot Report) has a Zacks Rank #3 (Hold).