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Chandan Dubey
Chandan Dubey
Articles (150) 

Logitech - Are You Buying More?: Portfolio Update

January 26, 2012 | About:

For my previous coverage of Logitech, see Companies With Buybacks: LOGI Edition.

In the above article I discuss the opportunity Logitech offers, its compensation practices, the running share buyback program, the risks and valuation. This article updates the recent development after the third-quarter 2012 results. The shares have suffered a 14% drop on the Swiss exchange this morning which represents a very good buying opportunity. Read below for a quick rundown of the figures from this quarter.

About Logitech:

Logitech is a world leader in products that connect people to the digital experiences they care about. Spanning multiple computing, communication and entertainment platforms, Logitech's combined hardware and software enable or enhance digital navigation, music and video entertainment, gaming, social networking, audio and video communication over the Internet, video security and home-entertainment control. Founded in 1981, Logitech International is a Swiss public company listed on the SIX Swiss Exchange (LOGN) and on the Nasdaq Global Select Market (NASDAQ:LOGI).

Key figures

No. of shares173,656,000 (Dec 31, 2011)
Price per share6.45 CHF (Jan 26, 2011)
Market cap1.12 billion CHF (Jan 26, 2011)
Total liability$786 million (Dec 31, 2011)
Cash and equivalents$523 million (Dec 31, 2011)
Enterprise value (EV)1.36 billion CHF

Figures for this quarter

Operations (in thousands)

Dec 31, 2011Dec 31, 2010
Gross margin36.2%36%
Operating margin9.76%10.08%
Net income$55,333$65,002
EPS (diluted)$0.32$0.36
Shares outstanding173,656179,703

Balance sheet (in $ thousands)

Dec 31, 2011Dec 31, 2010
Current assets1,211,2581,155,923
Total assets1,990,6861,948,013
Current liability590,224599,655
Total liability786,180768,568

  • Sales for third-quarter 2012 were down 5% from third-quarter 2011. Gross margin has remained almost the same.
  • Logitech's retail sales for third-quarter fiscal year 2012 decreased by 4 percent, with an increase in Asia of 13 percent, a decrease in EMEA of 5 percent and a decrease in the Americas of 8 percent. OEM sales decreased by 24 percent. Sales for the LifeSize division grew 6 percent.

  • After announcing the results today, Logitech’s shares have fallen nearly 14% on the Swiss exchange. This is a very good opportunity to buy shares of a quality company with good management on a forward P/E of 5.
  • The founding member (Daniel Borel) owns 6.3% of the company and the board owns an additional 2% of the stocks.
  • Logitech has a pristine balance sheet. It has $523 million in cash and $786 million in total liability. The current enterprise value is equal to the shareholder equity.
  • Logitech had a bad first quarter because of the failure to generate any value from its Google revue venture. Logitech is recovering nicely from the fiasco.
  • Logitech has been managed quite well and has never had negative FCF in the last 10 years.
  • At the current price the market is expecting negative FCF growth of 36.62%.

About the author:

Chandan Dubey
I invest because I want to be free by the time I reach 40 years of age i.e., 2025. My investment style is to find a small number of bets with large margins of safety. I pay a lot of attention to management and their incentive. Ideally, I like to buy owner operator businesses. I am fortunate to have a strong inclination towards studying. I aid my financial understanding by extensive reading in psychology, economic, social sciences etc.

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