Mighty mouse gears up for more growth
There is nothing timid about the mouse at computer peripherals company Logitech. It’s been roaring to success for years and this looks set to continue.
In an interview with swissinfo, Logitech chief executive Guerrino De Luca said he was aiming to double sales growth over the next five years to $3 billion (SFr3.57 billion).
De Luca says there are plenty of opportunities around the globe to expand, with consumers updating their electronic systems to go into the era of the “digital living room”.
He also sees other trends – for example in cordless devices, internet communication and cell phones with stereo music.
To gear up for expected demand, Logitech spent $73.9 million in its last fiscal year on research and development alone.
And a new factory is nearing completion in Suzhou in China, with the plant expected to be fully operational in June. It offers 30 per cent more manufacturing capacity than Logitech’s current factory in Suzhou and can be doubled beyond that.
Logitech, which has its roots in Switzerland, on Tuesday announced a seventh consecutive record year, with net profit up by 13 per cent to $149 million. Sales almost reached the $1.5 billion mark.
swissinfo: How have you managed to achieve record results for the seventh consecutive year? What is the secret?
Guerrino De Luca: There is not much of a secret. It’s innovation. It’s hard work. It’s looking at the right markets and investing in the trends that consumers tend to prefer these days.
swissinfo: How feasible would it be to make a profit if you didn’t produce in areas of the world where there is cheap labour, in particular China?
G.D. L.: It would be impossible. We have been in China for ten years. This is not a recent phenomenon for us, we were ahead of the industry. The fact that we are, to all intents and purposes, a Chinese company certainly contributes to our success.
[But] it’s not just cheap labour. Labour is a very small part of our product cost at this point. It’s an infrastructure of component costs, logistics and aggressiveness over reducing product costs, which is typically Chinese. It’s the entire supplier environment which is also very favourable…. It’s not just about moving a factory into a remote location where there is cheap labour. You have to have an entire infrastructure with it and China has this.
swissinfo: In what direction are you steering Logitech?
G.D.L.: I like to think that we have had a vision for 23 years to make life more enjoyable and easier for people to interact with electronic and digital information and we’re not changing that… Today we make products on around six or seven different platforms – [for example] cell phones, MP3 players, iPod and games consoles.
On the other hand we’ve always been a personal peripheral company. We’ve not diversified the nature of what we do. And I believe that the potential of the market is large enough to continue to be a personal peripheral company and get where we want to be in terms of growth [doubling company sales to $3 billion in the next five years].
swissinfo: What kinds of products are you going to tempt us with over the next 12 months?
G.D.L.: We plan innovation across the entire portfolio. We have a visibility of our product pipeline which is between 18 and 24 months. I’m very excited by the pipeline for the summer, the Christmas season and beyond. But I cannot spoil the surprise. Just wait for it. It’s going to be exciting.
swissinfo: How important is it that Logitech has its roots in Switzerland?
G.D.L.: It has been a blessing for us in many ways. This is the place where we recruit top-notch engineering. The Federal Institutes of Technology and other universities in Switzerland provide great quality in mechanical and electrical engineering… All our main banking relationships are also in Switzerland. It’s great to be a Swiss company and it’s great to be everywhere. We wouldn’t be where we are if we hadn’t started being global from day one.
swissinfo: What are the prospects for the future, your outlook?
G.D.L.: We expect to continue the road of double-digit growth that the company has been on for seven consecutive years. You don’t see many in technology who do it that way… We have made investments this year that make us think that we can continue at this pace in the foreseeable future. We have a $3 billion Logitech target which is not just a sales target. It’s more an indication of size – twice the size of Logitech today.
In order to get there we have had to make investments [$73.9 million over the past 12 months] to strengthen research and development. We’ve added 200 engineers and now have a total of 550. Nobody in the industry has so many engineers. That’s just one of the ingredients.
swissinfo-interview: Robert Brookes in Zurich
Logitech has strategic partnerships with most top-tier PC manufacturers.
Its family of personal peripherals includes webcams, mice, trackballs, speakers, headsets, interactive gaming devices, digital pens and advanced universal remote controls.
Logitech provides cordless products for PCs, gaming consoles and mobile phones.
It has introduced more than 135 new products over the past 12 months.
Logitech has posted 26 consecutive quarters of double-digit growth.
It expects sales growth and operating income growth of 15 per cent for its fiscal year ending March 31, 2006.
“We look forward to the future with optimism,” says Guerrino De Luca.
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