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Logitech International (NASDAQ:LOGI)

Appointment of New President Call

March 15, 2012 10:30 AM ET

Executives

Guerrino De Luca – Chairman and CEO

Analysts

John Bright – Avon Dale Partners

Simon Schafer – Goldman Sachs

Michael Föth – Bank Vontobel

Tavis McCourt – Morgan Keegan

Alexander Peterc – Exane BNP Paribas

Operator

Good day and welcome to the Logitech Conference Call. At this time, all participants are in listen-only mode. We will be conducting a question-and-answer session and instructions will follow at that time. This call is being recorded for replay purposes and may not be reproduced in whole or in part without written authorization from Logitech.

I would now like to introduce your host for today’s call, Mr. Guerrino De Luca, Chairman and CEO of Logitech.

Guerrino De Luca

Thank you, Lacy, and good morning, good afternoon and thanks for joining us on such a short notice. I will have a few remarks and then we’ll go to your questions. I am very pleased that Bracken Darrell will join Logitech as President on April the 9th. He brings pertinent experience and a track record of success with preeminent global consumer companies including Whirlpool, Procter & Gamble, and General Electric.

We conducted an extensive search over the past months, including interviews and in-person meetings with several outstanding candidates. We realize how attractive our company is for many qualified and engaging executives. In the end, Bracken stood clearly as the best choice for Logitech.

Bracken’s broad executive management experience expand product strategy and innovation, marketing, manufacturing, supply chain, and consumer services. He has led growth and reinvention for iconic brands like Braun, KitchenAid, Gillette, Old Spice, and Whirlpool. The board and I are particularly excited by Bracken’s passion for keeping the consumer at the heart of decisions, a perspective that we believe is critically important to drive Logitech to renewed profitable growth.

Add in his extensive international experience including his most recent role as President of Whirlpool EMEA and we believe that Bracken is an excellent match with our global business.

In his initial role as President, Bracken will have responsibility for the vast majority of Logitech’s operations including R&D, sales and marketing, manufacturing, supply chain and I.T, among others. These are the areas that we believe hold the greatest potential for meaningful transformation and that will benefit the most from Bracken’s fresh perspective.

I am confident he will prove to be a powerful change agent across the company with a mandate to drive improved efficiency, faster time to market, and revitalized connection between our products and their users. Bracken will succeed me as Logitech’s CEO on January 1, 2013. At that point, I will return to my role of Chairman. As you would expect, one of my top priorities between now and then will be to work closely with him as he transitions into the CEO role.

In addition, I will continue to play an integral part in improving our product roadmap for fiscal ‘13 and beyond. There is still work to be done there, but I’m very excited about the strength of the new products that we plan to introduce in the coming months. I believe these products will make a significant contribution to improved performance during the second half of fiscal ‘13.

Another key element in improving our performance is a simplification of our product portfolio. We plan to share more about this effort, which we launched l earlier this quarter during our April earnings call.

My responsibilities during the transition will continue to include providing an external face for the company’s IR and PR activities. Bracken’s external exposure will gradually increase in the coming quarters, but I believe that providing him the opportunity to initially focus exclusively on improving the company’s operation will result in the greatest long-term benefit to our shareholders, to our customers, partners, and employees. Bracken is not with us today, because he has yet to join the company, but I look forward to introducing you to him during our earnings call on April 26.

And with that, I am available to take your questions. Please follow the instructions of the operator.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) And our first question will come from the line of John Bright with Avon Dale Partners. Please proceed.

John Bright – Avon Dale Partners

Thank you. Good morning, Guerrino.

Guerrino De Luca

Good morning, John.

John Bright – Avon Dale Partners

Your focus has been on a product guy. One thing, I don’t see in here is CE or consumer electronics experience. Why is he the right product guy?

Guerrino De Luca

Yeah. First of all, because he has led global company that are product and consumer driven across a wide spectrum of consumer product.

Second, if the question is, why can a person that doesn’t come from a technology industry lead a technology company? That is kind of a – it misses a key point. There is a lot of technology expertise in the company. We match their every technology that we need for our products and we understand the technology landscape.

What we want is a person that is able to transform this technology and this opportunity into products that people want to buy, and love to use and do that with an extreme DNA focus on the consumer. If you worked at Procter & Gamble, at General Electric, at Whirlpool, if you led brawn into its turnaround, you know that it’s in your DNA to think consumer first, and I think the company would benefit immensely from that.

In addition to the fact that he brings a perspective from outside this core industry that is absolutely vital to the transformation of Logitech. I interviewed several great technology executives and as I said in my prepared, I mean, I was very, very pleased with the quality of people that were interested in this job. Believe me, I would not choose any of these people over Bracken any time.

John Bright – Avon Dale Partners

The transition period you are talking about, through the end of this year until you step back into the role of chairman – so you’re going to continue to lead the, if you will, the new product, the new market focus largely while he focuses today more on the really the operation side – is that the correct understanding?

Guerrino De Luca

It is the correct understanding, but don’t take it too literally. This is going to be a partnership effort irrespective of what your site says. I want Bracken to put his nose into the product lineup. That’s exactly why he is here, but at the same time I want to ensure continuity to the several set of actions that I’ve helped to put in place over the past several months and I want to make sure that we don’t miss it there.

John Bright – Avon Dale Partners

Thank you, Guerrino.

Operator

And our next question will come from the line of Simon Schafer with Goldman Sachs. Please proceed.

Simon Schafer – Goldman Sachs

Yes, thanks so much. Thanks Guerrino. I just had a follow up question, I guess when you now think about this transition period and you sort of give your own perspective and perhaps also instruction almost to Bracken as to what do you think the ultimate priorities lie, maybe just remind us as to what you think your initial message to him will be. I suspect sort of in line with what you’ve talked to us all about in terms of reviving growth and product innovation, but perhaps just as a reminder as to what you think his initial priorities should really be?

Guerrino De Luca

Definitely, I appreciate the question. You’re right. In the entire interview process, especially when we got to fewer and fewer candidates and zoomed in the finalists, it’s clear the discussion about strategy, priority to the company was central. On one side we were trying to assess the people that we were interviewing.

On the other side, we wanted to understand and begin to understand how these people were thinking about the company. And, you know, this is an outside perspective no matter where you come from, it’s an outside perspective. So, yes, I did share our strategy and priorities with Bracken and, yes, he appreciates and understands them. As far as he can with the knowledge that he has of our company.

To summarize, the company has weaken its portfolio as gone for quantity as opposed to – quantity versus quality, has been focused on too many things. As recovered – we need to recover for a couple of missteps, operational missteps and most importantly needed to simplify both the portfolio and the way we run the company and focus on fewer, greater things, products and otherwise. I think you know any intelligent person that has been in this industry understands what I’m talking about and an intelligent person that has led transformations in multiple companies understands that and that’s his priority.

So specifically, it’s a simplification of the company, the product portfolio, a focus on fewer, greater things and certainly reemphasize of growth. We have chosen the field in which we want to play. We have to protect the core. We have to expand in emerging markets. We have to provide, to exploit the opportunities that the business market allows us. We have to revamp our digital home efforts after the step back of Google TV, and we have to win in this new major initiative in music.

So summarizing here, and that’s what Bracken understands and that’s what he will focus on. He will obviously focus on assessing the company, how we operate, how we run, how we do things, how truly we let the consumer drive our choices. And then sometimes in some cases, probably, we don’t yet and that’s what I want him to do. And I think that’s what he’s prepared to do.

Simon Schafer – Goldman Sachs

That’s very – great announcement. Thank you.

Guerrino De Luca

Thank you.

Operator

(Operator Instructions)

And our next question will come from the line of Michael Föth with Bank Vontobel. Please proceed.

Michael Föth – Bank Vontobel

Yes, hi, Guerrino.

Guerrino De Luca

Hi.

Michael Föth – Bank Vontobel

Just one question. What is your assessment as to how visionary Bracken is with positioning the company and the products also for the long-term really?

Guerrino De Luca

I’m tempted to borrow some (inaudible) famous first one to answer to a question about vision. The new CEO of IBM talked about – in the old times, talked about the presence. The last time the IBM is a vision. I disagree with that then and I disagree with that now.

But what Logitech needs – I think Logitech has a sound strategy. Logitech has to adapt it and execute it. And I think we are on that ramp and I think we have the right person for that.

Bracken is an enthusiast with products. He is a fanatic user of Logitech products, maybe because he currently lives in Switzerland. It’s an easier thing to do. And – so he understands sort of the gadgetry nature, the intangible attractiveness of products, he understands all that. But the truth is that we need a leader that transforms the company and, of course, the vision has to be that we’re delivering unique experience in this new world and we’re doing so profitably and with a growth accent.

Michael Föth – Bank Vontobel

Okay. Thanks a lot.

Operator

And our next question will come from the line of Tavis McCourt with Morgan Keegan. Please proceed.

Tavis McCourt – Morgan Keegan

Hey, thanks for taking my question, Guerrino. So I just wanted to kind of confirm, should we think about calendar 2012 in terms of the plans for resource allocation between R&D and sales and marketing and product choices that’s largely baked in the cake and kind of the first year that he’ll have a real impact on kind of resource allocation or product choices would be calendar 2013?

Guerrino De Luca

Yes and no. On one side, we do have a roadmap. We do have a set of priorities and Bracken embraces those. On the other hand, I would not be as lenient with him, saying that his contribution will start in 2017. I think he will start contributing from day one. And the best outcome that you see the progress the company and you will be puzzling yourself to attribute that to Bracken, to the prior strategy, it doesn’t matter.

He will lead it and will make it happen so, but, no, I don’t expect there to be a discontinuity in 2014 or something like that, no. I think that Bracken would begin to contribute right away and, of course, progressively he needs to familiarize himself with the company. But certainly when it comes to efficiency, focus, and the way we run the company, I expect his contribution to be pretty rapid.

Tavis McCourt – Morgan Keegan

Great. Thanks a lot.

Operator

And our next question will come from the line of Alexander Peterc with Exane BNP Paribas. Please proceed.

Alexander Peterc – Exane BNP Paribas

Yes, hi, again. Thanks for taking my question. I’d just like to understand little bit your choice of individual where you’re prioritizing someone who is able to retrench the company as such and make it more profitable and structure and focus it, or were you looking for someone that would be able to explore new avenues of growth as well? What was the most important thing in your choice? Thanks.

Guerrino De Luca

The answer is yes, Alexander. Let me be less facetious. Yes, Bracken has proven to be able to streamline and transform and that’s going to be important. Yes, Bracken has proven to be able to grow and create opportunities and strengthen brands that were more advance.

And which is not the case of Logitech today. He is taken company like (inaudible) basically one of those hallmarks of industrial design in a very difficult time and he brought it back to growth. He is, early in his career, taken a very bland and unknown sort of fragrance brand like Old Spice and made it the leader in deodorant. So he has done both and I think that’s what I wanted. He has done both also with a global perspective.

This is something that has not come up in this session of Q&A. And I want to make sure I emphasize that. This is a global company truly, not only because we operate in every country, but because our culture is a blend of many cultures. And I couldn’t be happier with this blend in the experience of Bracken – he spent the last seven years in Europe. And so he’s not an American executive that have run global business, there many of those. It’s an American executive that have run global businesses physically present in different geographies. It’s an enormous plus for us.

Alexander Peterc – Exane BNP Paribas

Okay. Thanks a lot.

Operator

(Operator Instructions) At this time, I show that we have no further questions in queue. That concludes our conference call today. You may all now disconnect. Thank you.

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