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Executives

Joe Greenhaigh – Vice President Investor Relations & Corporate Treasurer

Guerrino De Luca – Chairman of the Board

Bracken P. Darrell – President & Chief Executive Officer

Erik K. Bardman – Chief Financial Officer & Senior Vice President Finance

Analyst

Zahid Hussein – Citigroup Global Markets

Michael Foeth – Vontobel

John Bright – Avondale Partners

Simon Schafer – Goldman Sachs

Alexander Peterc – Exane BNP Paribas

Tavis McCourt – Raymond James

Paul Coster – JP Morgan

Stefan Gachter – Helvea

Logitech International, SA (LOGI) F4Q11 Earnings Call April 26, 2012 8:30 AM ET

Operator

Welcome to the Logitech fourth quarter financial results conference call. At this time all participants are in a 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 like to introduce your host for today’s call Mr. Joe Greenhaigh, Vice President of Investor Relations and Corporate Treasurer at Logitech.

Joe Greenhaigh

Welcome to the Logitech conference call to discuss the company’s results for the fourth quarter ended March 31, 2012. The press release, our prepared remarks, the slides and a live webcast of this call are available online at Logitech.com. As noted in our press release we have published our prepared remarks on our website in advance of this call. Those remarks are intended to serve in place of extended formal comments and we will not repeat them on this call.

During the course of this call we may make forward-looking statements including forward-looking statements with respect to future operating results that are being made under the Safe Harbor of the Securities Litigation Reform Act of 1995. The forward-looking statements involve risks and uncertainties that could cause actual results to differ materially than those anticipated in the statements.

Factors that could cause actual results to differ materially include those set forth in Logitech’s annual report on Form 10K dated May 27, 2011 and subsequent filings which are available online at the SEC EDGAR database and in the final paragraphs of the press release and prepared remarks reporting fourth quarter results available at Logitech.com. The forward-looking statements made during this call represents managements’ outlook only as of today and the company undertakes no obligation to update or revise any forward-looking statements as a result of new developments or otherwise.

This call is being recorded and will be available for replay on the Logitech website. Joining us today from Zurich are Guerrino De Luca, Chairman and Chief Executive Officer and Bracken Darrell, President and here in Newark is Erik Bardman, Senior Vice President of Finance and Chief Financial Officer. I’d now like to turn the call over to Guerrino.

Guerrino De Luca

I was pleased that we ended the year with results that were better than our outlook. It has been quite some time since we’ve been able to say that. Our results in Q4 were consistent with what we’ve seen through much of the year. Mice and keyboards are holding steady, tablet accessories are providing good incremental growth, and we’re building momentum in music.

Our product portfolio is not yet as strong as it needs to be and that’s especially true in the remotes and consumer video categories. The good news is that we’ll deliver a strong set of products that address the gaps across our whole portfolio in time for the holiday season. I was very encouraged by the return to growth in both sales and profitability in the EMEA in Q4 with the region being the primary driver of the substantial year-over-year increase in the company’s gross margin.

One year ago at this time we identified poor execution in the EMEA as the major negative factor impacting our results. It took us several quarters to get our business back to a healthy space. It is now clear that the execution issues are behind us and largest sales region is well positioned to deliver a much stronger fiscal ’13.

Our Q4 performance in China; we had a strong conclusion to a great year. We started fiscal ’12 with the goal of making China our third largest country for sales and we easily achieved that target with full year sales growing by 58% compared to the prior year. We’ve built a strong team in China and I’m comfortable we have the right strategy to drive continued growth.

This is the extent of my comments on the prior fiscal year. As we look at Logitech’s future, I’m very excited to be joined today by our new President, Bracken Darrell. Bracken has the right experience and the traits of a great leader which he has already demonstrated since joining the company earlier this month. I’m pleased to turn the call over to him now. I will return shortly with some comments on our fiscal ’13 product portfolio and then we’ll open the call to your questions.

Bracken P. Darrell

I’m going to spend a few minutes talking about why I’m thrilled to be here, my background, and my focus on simplifying the organization. Logitech embodies where I want to be, at the cross roads of innovation, consumer insight, and design module. I spent my entire career in consumer products because I love this place where humanity meets technology, the psychology and science of great consumer products.

Logitech has a successful track record of providing outstanding consumer branded technology products and it has a strategy I believe in. I also believe my background and experience are well suited to help mobilize the organization to drive towards improved performance to take advantage of the growth opportunities before us. I have extensive international experience working global companies and spent the last eight years living outside the US.

I’ve reignited consumer branded product companies with my role at Braun providing a very relevant experience. When I joined Braun it was an engineering driven design led organization, very similar to Logitech. I helped them leverage those strengths and made them more consumer centric in their product decisions and the result was a stronger connection with the consumer that led to significantly improved financial performance.

I want to talk now about the importance of simplifying the Logitech organization. I believe that Logitech’s size got ahead of its business over the last several years. It’s clear to me that to reignite growth we need to be faster, simpler, and more consumer centric. Some of this transformation has already begun with the management teams’ work to reinvigorate the product portfolio but we also need to simplify the organization through restructuring.

With board approval, I’ve already eliminated a layer of business and sales executive management. The leaders of our business groups and sales regions, now as of today, report directly to me. These changes will enable me to work more closely with our product and sales teams. Together, we can become more responsive to the changing needs of today’s consumers as we address new opportunities with greater speed and flexibility.

In addition, we’re consolidating brand management and product portfolio management under the leadership of the business groups and streamlining most other functions. I expect most of this restructuring to be completed by the end of the current quarter freeing up resources to pursue our growth opportunities. The planned restructuring should result in a reduction of approximately $80 million in annual operating costs. We plan to update you before the end of this quarter, Q1, with the size of the restructuring charge, most of which we expect to be booked this quarter.

Before wrapping up my comments I want to say how excited I am about the opportunity to help return Logitech to sustained profitable growth. We’re a company with a powerful combination of engineering talent and consumer insight and I believe the best is still to come. I look forward to providing you with updates on our progress in the coming quarters.

Let me turn this call back over to Guerrino.

Guerrino De Luca

Shortly after I returned to the CEO position in July 2011, we began to reemphasize the centrality of the products to Logitech’s success striving for the ultimate consumer experience in everything we do. Consumers are more than happy to spend their money on great product but their standards have changed over the last few years. We are focused on meeting and exceeding the new standards of consumer expectations and I believe we made excellent progress towards this goal with our new fiscal ’13 product portfolio.

Our product development efforts for fiscal ’13 have targeted our most promising growth opportunities including tablet, music, business product, emerging markets, window based, and LifeSize. As you know, the majority of our new product launches are still ahead of us, but I want to highlight a few recently announced examples starting with tablet.

Just last week, we announced the Logitech ultra thing keyboard cover. Priced at $99 and very positively viewed, it features as slim and sleek aluminum screen cover that protects the iPad screen and a built in keyboard that pairs through Bluetooth. It attaches securely to the iPad with a magnetic clip and it’s built in stand holds the iPad at the best angle for typing or watching a movie. But these words don’t describe the magic of this product, you should absolutely try it.

Moving to music, at the beginning of April we started shipping the Logitech UE Air Speaker. Our flagship speaker features AirPlay for wireless streaming from iTunes, iPhone, iPad, or iPhone Touch. The stylish modern design and the easiest set up of any AirPlay speaker in the market, it delivers high quality uncompressed audio in any room of the house over your Wi-Fi network.

I mentioned the opportunity for Logitech for business. Last month we introduced a new product category for unified communication, the all in one audio and video conference came. The Logitech BCC950 Conference Cam is the first communication tool to combine a full HD webcam with a high quality omni-directional full duplex speaker phone in one USB device. The conference cam is optimized for Microsoft Link and is Skype certified. With its $299 price, it’s ideal for meetings of one to four or more people whether in conference room or individual offices.

We believe that the major navigational enhancement in Windows 8 due to ship in October, will provide a significant opportunity for our [BCC] peripherals and we will be ready with innovative compelling products when the new platform is launched. In the meantime, you can get a flavor and a preview of where we’re heading with the Logitech Touch Mouse M600. It was launched in Q4 and made a significant contribution to our mice sales during the quarter. Our latest wireless mouse is priced at $69 and features a touch surface that makes it easier to scroll, swipe, and surf wherever your fingers rest on the mouse. Clearly, there’s much more to come in this space.

There are many more innovative products in our fiscal ’13 roadmap and we look forward to telling you about them in the months to come. By the time we arrive at the holiday selling season we expect to provide consumers with our best portfolio in years with clear assortment and more compelling up sell propositions across all of our categories. I could not be more excited with what I see in our product pipeline and I can’t wait to introduce these great new products to consumers.

We exited fiscal ’12 with a better performance than what we had expected but obviously, we’re far from where we need to be financially. With key initiatives in place to strengthen our product offerings, reduce costs, and simplify our organization and processes, we believe we’re taking the slightest steps to position Logitech to deliver improving financial results beginning in the second half of the current fiscal year.

We understand the challenges before us, we see significant market opportunities for growth, and we’re taking action to aggressively pursue these opportunities. We know what needs to be done to return Logitech to the path of sustainable profitable growth, and I believe we’re on the right course. We look forward to keeping you abreast of our progress and in the meantime Bracken, Erik, and I are available to take your questions. Please follow the instructions of the operator.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Zahid Hussein – Citigroup Global Markets.

Zahid Hussein – Citigroup Global Markets

A couple of questions really, you’ve given us some interesting thoughts about op ex savings and COGS savings. I was just wondering if you could give us any color at all over how we should think about that? Is it 50/50 between COGS and SG&A or R&D or is it more skewed towards the COGS side? Secondly, on LifeSize if indeed we’re seeing a slowdown in Americas [similar] to what some of your competitors are saying, I would have thought you’d be looking to actually increase investment potential in sales [inaudible] to try and get more [inaudible] growth. Have you baked that into your op ex guidance or your sort operating cost savings as well?

Erik K. Bardman

Let me take the first part of your question there about op ex and COGS and the restructuring. At this stage, as we talked about and Guerrino and Bracken emphasized, we’re very committed to taking the $80 million out of our annual cost base but it’s really starting, as of today, we’re going to be doing the detailed analysis work to figure out when you look at the levers of the cost base what’s the at mix going to be. So for example, how much will come from personnel actions, changes we’ll make in the marketing area, engineering projects, or to your point things that we feel we can do to reduce our cost of goods sold over time.

So right now I’d say stay tuned. We’ve got the detailed analysis that we’re going to be doing and our current plan is we feel comfortable to complete that work before the end of the quarter and then come back to you with an update of what that mix looks like.

Guerrino De Luca

I’ll take the last part of your questions, yes you’re right about LifeSize it declined in the last quarter. The second half was not very good. Yes, I’ve heard other competitors complaining of some market weakness but that’s not where LifeSize is. LifeSize is in a different position. In a way, it’s ironically almost in a symmetrical position to where Logitech is. Logitech desperately needs new great products and it will get it. LifeSize over the last 12 months has dramatically broaden its portfolio and rightly so from a room system with marginal infrastructure offering we have now virtual life infrastructure products, cloud services, a very broad offering for our customers.

So the product team has delivered. What happens is that the translation of this broader and very differentiated offering into specific customer solutions is just taking time. The sales force need to understand and learn how to apply this broad offering to individual customers and that’s a classic growth pain that we’re facing with LifeSize. I think it’s temporary. We understand how to fix it. Does it need more investment? No, it doesn’t. We will continue to bet on the growth of LifeSize but no, we’re not expecting anything extraordinary to happen there.

I think that the team knows exactly what needs to be done and I am very confident that they will continue to be one of the growth drivers of Logitech moving forward.

Zahid Hussein – Citigroup Global Markets

Just a follow up really about 2013, you’ve looked at your order book or you’ve looked at your product moment and where you think you’re going to go and you’ve managed to size up a cost saving. Can you give us any kind of guidance in terms of what you think that supports in terms of top line growth, or top line decline? I mean, how should we think about that because it sounds like you’re very excited about the second half of this year with most of your product gaps sorted out and up selling opportunities to most consumers and at the same time you’ve looked to your cost base and you’ve said, “Alright, we can take out $80 million.” I understood that you haven’t quite worked out where about that’s going to come out but you’ve made a sizeable number, at least 6% of your total op ex [breakdown]. What should we be thinking about in terms of top line?

Guerrino De Luca

I’m glad you asked the question and we’re not going to give specific guidance for the year. You’re right, we are very excited about the combination of actions. I am personally extraordinarily excited about what we’ve been able to accomplish in only sort of nine months on the product side and you haven’t seen anything yet really. Yes, we’re sort of hoping to provide a double whammy here much stronger product, and the lower cost base, and a simpler faster organization.

So you suggested that we are going to do better this year. Fiscal ’12 has been horrendous. It has been the worst year in the company history, certainly in my memory. But I am absolutely convinced that this will provide benefit definitely beginning with the second half of the year but I wouldn’t venture much further than that. Do you know why? I’ve personally been burned too many times promising and not delivering. There’s no value there. We will deliver in our products.

Operator

Your next question comes from Michael Foeth – Vontobel.

Michael Foeth – Vontobel

Just a follow up question on the restructuring, when you talk about this $80 million what is the basis for those cost savings? Is it the full year fiscal ’12?

Erik K. Bardman

Just to give you a little sense, when we talk about that we’re taking an annual run rate of costs because as you know, particularly with our business, there’s a seasonality aspect to it so the right way to look at the cost base is to look at your run rate over a 12 month period. So we take a trailing 12 month view and then when we look at that we fundamentally feel the mixture of things that we’re going to go and do the detailed work on now will net us $80 million of savings against that.

Michael Foeth – Vontobel

But again, I understand that your gross margin targets that you use to have between 35% and 37% is not an official target anymore but my question is do these cost savings include the fact that your gross margin should be higher going forward than what we saw in fiscal ’12 anyway?

Erik K. Bardman

I think very consistent with how we just talked about the op ex piece, there’s a lot of variables in our gross margin from that standpoint so at the end of the day when we figure out what costs we can take out of that run rate some of it will be things that come through gross margins, some of it will come truly through op ex. We’ll come back and delineate that for you and lay that out for you. It would be premature for me to say to you, “I know exactly where it’s going to come from.” But when we model in total, we’re very comfortable we’ve got the right steps we can go take to net us that $80 million.

Michael Foeth – Vontobel

At the same occasion will you also somehow update these kind of business plan targets that you use to have or is that not your intention?

Guerrino De Luca

Are you referring to the timing in which we’ll sort of tell you more about the restructuring charge?

Michael Foeth – Vontobel

No, really more you use to share with us kind of targets in terms of plans.

Guerrino De Luca

Look at it this way, the variability of the impact of the actions that we are taking is pretty significant. We’re restructuring, we’re introducing a brand new incredibly powerful portfolio across a number of categories. There are way too many variables so we need to learn a little bit. As we learn the direction of our business and we’ll know more about that throughout the second half of the year we will maybe become more comfortable in terms of indicating where the company is going.

I do believe the company is on the verge of retaking a growth trend to its past glory but it is way too early to tell. So we will learn more quarter-over-quarter. I can’t guarantee you that we will or when we will revise our business model, it’s too early to tell.

Operator

Your next question comes from John Bright – Avondale Partners.

John Bright – Avondale Partners

Could you please characterize the March sales between legacy products and new products?

Guerrino De Luca

Let me try sort of qualitatively. We did grow tablets, we did grow music driven especially by new products so that was a significant component of our growth. But, our mice and keyboard business was quite stable. It has been like that for the year. It’s ironic because in the general sort of lay person opinion it’s kind of a doomed business. It isn’t, in fact there are reasons to believe what we will bring to market associated with the Mac and associated with Windows 8 might actually do something for that business but it’s too early to tell.

Clearly, the new sector is contributing more significantly than, if you want, the rest in terms of the growth. But also the new categories are way under populated today. We have had tablet products for a while, I think what we announced last week is absolutely dynamite. I would say anecdotally probably the product that has the highest number of pre booking on our website. I’m not talking huge numbers but if you compare statistically, people are enthusiastic about it and more will come while similar in a way in a differentiated nature.

Music, which [inaudible] demand we have two products. We have a new boom box that has done very well. We just introduce the flagship air. Many more products will come in music before Christmas in [inaudible] as well as speakers and streaming music. The first signals of the new categories are very good but they’re too small to matter. More will come later.

John Bright – Avondale Partners

Regarding webcams in the prepared slides you talked about new products that will enable experiences that cannot be easily achieved with an embedded webcam. Can you share with us what some of those might be?

Guerrino De Luca

Let’s put it this way, traditional tethered PC webcams are not going to recover no matter how inventive we may be with tethered webcams and we don’t intend to pursue that non-opportunity. In fact, our mission in that product business is to absolute maximize our margins and profitability because we do believe there is a subset, an increasing need small segment of the consumer users of PCs that do want a better [inaudible]. But, that’s kind of shrinking and those webcams are very good. They’re not best but they’re very good for most consumers.

So what we’re looking for is how to deploy the video competencies that we do have in somewhat adjacent areas. Things that may work with tablets, or things that may work with other platforms. I can’t go beyond that. I can’t go beyond that.

John Bright – Avondale Partners

Erik, the gross margins in the quarter continue to be strong 36% plus. Audio thought was an outperformer relative to our expectations and LifeSize, I think, was an underperformer. Two different gross margins, one maybe below corporate average and one significantly above corporate average. Can you talk about what’s keeping those gross margins so strong?

Erik K. Bardman

As you know as well, our gross margin is always a combination of factors whether it be audio, or LifeSize as you mentioned, or other pieces. In this particular quarter one of the biggest drivers particularly on a year-over-year basis was that improved pricing and promotion execution in EMEA had a very significant impact to gross margin. It took us a couple of quarters to get there as Guerrino talked about, but we’re starting to see some of the fruits on the profitability side of the work that the European team has been doing.

I think the other thing to your point is I think Q4 is a very good example where we’ve talked in the past when LifeSize is growing faster than the rest of Logitech it can be accretive to our gross margin. This was a quarter where unfortunately LifeSize wasn’t where they wanted to be on the top line but the portfolio of everything we do in terms of the product was still able to produce a very solid gross margin. So I think it comes back a little bit to how we try to manage it at a total portfolio level and I think we feel comfortable that we’ve got the right mix of things to allow us to keep doing that.

John Bright – Avondale Partners

Two final clean up questions for you Erik; one, I think you said you’ve now repurchased 14% of the shares what percentage may Logitech own under both trading lines?

Erik K. Bardman

Well today, we currently own just over 14% of our shares and as I think we talked about last quarter, that’s when we started repurchasing on the second trading line. So everything that we repurchased in the second quarter which was about 9.9 million shares or $83 million worth was repurchased on the second line.

John Bright – Avondale Partners

But what percentage can you go up to with the combined ownership? Can you go to 20% ownership if you want to?

Erik K. Bardman

No, actually to give you a better clarification it really is a bit of a moot point only because we’ve announced our attention when we get to our annual shareholders’ meeting which is in September of 2012 is to ask our shareholders for cancellation of all the shares that we’ve bought back on the second line. So that would include what we bought back in Q4, the 9.9 million shares that I mentioned as well as any shares we might buy back in Q1 and Q2 of FY ’13 and right now I don’t see any reason why shareholders wouldn’t be very supportive of that. So we would obviously go down quite a bit in terms of ownership at that point.

John Bright – Avondale Partners

Final question; the sale of the manufacturing building in China does this change the 50/50 manufacturing strategy?

Erik K. Bardman

No. Actually, this was a building that was part of our manufacturing footprint in China but it has been unused for the last couple of years and just took us a little while to make the disposition to happen and it took place this quarter. But, it really doesn’t change the capability and roughly 50/50 split of how we manufacture in house versus with partners.

Operator

Your next question comes from Simon Schafer – Goldman Sachs.

Simon Schafer – Goldman Sachs

A question for Bracken; it’s great to see the pace with which you’ve begun to at least implement a plan in terms of simplifying structures, and costs, and so on. But I wonder what your perspective is in terms of the company’s ability to see a quick and accelerated come to market strategy? I guess some of the growth challenges you’ve experienced as a company is down to perhaps time to market and so on. So just in perspective of how much of a quick fix that may be Bracken, would be very helpful.

Bracken P. Darrell

I guess my overall reaction to that is since I’ve arrived I’m really impressed with the engineering and technology capability here. So that side of it is the biggest challenge normally in terms of going to market [inaudible]. On the other side, I think we’ve got work to do to make sure we’re always launching the most powerful products we can possibly launch and Guerrino described some of the products that are coming out now which I think if you haven’t seen them yet, you’re going to find very impressive.

I think this can absolutely be a company that launches products rapidly to the right places in the market. I do think it’s more important to get the right products launched than to get them launched really fast. But, with that said, we’re in a fast paced market. I think we can do it, I think we can be a pretty fast go to market company and it really starts with leveraging the strong engineering talent we have here and making sure we’ve got the right consumer insight to go to the right place.

Simon Schafer – Goldman Sachs

My second question would just be on the share repurchase program. I think there’s about $100 million left or $94 million, or something. Is the plan and strategy that you would announce, just like you have in previous periods, an extension of the program into future periods?

Erik K. Bardman

To give you a little bit of sense of that, our current plan is we feel that the $94 million we have left on the program allows us to do what we need to do in the near term and if we get to the point where we approve a new program going forward that would be something we would communicate at that point in time. As we’ve said, I think, in our prepared remarks as well, we plan on continuing to repurchase shares in Q1 and Q2 and then the intent to ask shareholders for cancellation of the balance of those shares when we get to September.

Operator

Your next question comes from Alexander Peterc – Exane BNP Paribas.

Alexander Peterc – Exane BNP Paribas

I would just like you to clarify a little bit the movement of sales into the channel and sell through in EMEA. Sales into the channel exceed the sell through by about 12% but then I look at your comments you said channel partners inventory in EMEA was down -10% sequentially and -21% yearly so I kind of can’t quite reconcile that so if you could clarify that for me?

Erik K. Bardman

One of the challenges when you compare year-over-year growth rates it’s really hard to factor in everything that’s happened in the period a year ago versus now. I think the most important metric and it’s one of the things we focus on quite a bit, when I’m looking at the health of a region when it comes to channel inventory, in this case Europe, I’m really going to look at what’s the absolute level of the inventory and what’s changed.

The good news in terms of Europe is our channel inventory is down 21% year-over-year and down 10% sequentially. So we feel that we’re in a much better position clearly obviously, than we were two or three quarters ago and we’re going to continue to focus on that quite a bit. But when we look at health of the channel in Europe that’s what we’re focused on quite a bit.

Operator

Your next question comes from Tavis McCourt – Raymond James.

Tavis McCourt – Raymond James

A couple of questions; Guerrino is it still correct to think of tablet peripherals as a low single digit percentage of sales at this point?

Guerrino De Luca

We don’t talk about that and I would say that we probably won’t in the future. We see increasingly that there is platform elasticity taking place in certain tablet peripherals and that’s the way we go about it. We’re targeting PCs, we’re targeting Macintoshs, we’re targeting iPad. We will be targeting successful future tablets, there will be some, eventually. So I would look at it that way. I would look at it as how can we deploy Logitech into products across the boards.

I am actually very impressed with the success of keyboards for iPads. It’s saturated pretty high relative to the base and I think the reasons is increasingly people do use the iPad to do something more productive than watching a movie and that’s when they inevitably get there and we’re ready. But there’s more to the iPad opportunity than keyboards. By the way, on non iOS tablets the opportunity will combine not only keyboards but pointing devices as you know both Windows 8 and Android support, pointing devices on tablet implementations. This is one of the highest demand of people that use tablets for productivity.

You may be amazed to hear it but once you want to use it for productivity you don’t want just a keyboard, you want a mouse. But, that’s beside the point. I think the connect rate of keyboards to iPad is quite high and so in a way as the iPad has become the incredible success it is becoming and grows relative to the base of installed PCs and Macs which is still enormous, that percentage of keyboards will increase. But giving you a percentage, first of all we do not and I’m not sure it’s so significant. We’re not looking at the business that way. Let’s put it this way.

Tavis McCourt – Raymond James

The percentages you gave for percentage of sales of products over $100, what’s been the kind of recent high? I’m trying to gage if you’re successful at the new product portfolio and creating more innovation at the high end, where would you like that percentage to go? And, maybe kind of compare it to where it was maybe back in ’07 or ’08 when it peaked.

Guerrino De Luca

Again, not necessarily something [inaudible] will look through when we sort of plan and execute our business. We want high margin, we want products that are more attractive. Of course, as you have seen in the few examples that I illustrated today, our new products tend to be in the mid range and kind of high end of their categories. It’s not going to be just that, rest assured. There are products that are actually great entry level products but clearly the line required a dramatic improvement in the most attractive of its sort of positioning.

That’s what you will see certainly in the fiscal ’13 wave. Let’s put it that way. But, I don’t like to look at the business as we have to reach 60% of sales at higher than $100. That’s not the way I see it. It may end up that way but to me it’s gaining differentiated and strong brand positioning across a number of categories old and new. And guess what? It sometimes happens through more expensive products but it’s the consequences of the goal.

Tavis McCourt – Raymond James

Final one, Erik if I was hearing you right on the answer in terms of the gross margin staying elevated in the March quarter, it sounds like you probably had a couple of quarters of channel inventory to take care of in Europe and that cost some lower margins in Europe and that finally settled out in the March quarter. What I’m wondering is, is there any work to do in that regards in the US still or should we think about the first half of fiscal ’13 as not being encumbered at this point by any excess channel inventory anywhere?

Guerrino De Luca

The simple answer is you can assume there is reasonably healthy channel across all regions and certainly in the two big ones. It’s interesting, when you compare the performance of the Americas with the performance of the EMEA in the last quarter you see EMEA kind of substantially improved in all dimensions. You can’t find a place where the EMEA didn’t do it. You might have the sense to believe that they are just God and the heroes, but you have to realize they come from a really poor comparable so they’re getting back to healthy.

EMEA has been doing quite well across all these periods. What they’re feeling right now is they’re feeling it in the top line more than anywhere else, is the current weakness of the portfolio across categories, certainly in some which the EMEA is very strong, camera in particularly and that hurt. So in a way the two regions come from two different places. The Americas come from a place of health and it is now seeing the need to get fuel and we are providing this fuel. Europe comes from the darkness and it’s now getting back to health. The two combined provided the performance that you see in Q4. Net/net the engine, the machine, the cars are in good shape. The pilots are ready, we need to provide refuel and we are and will.

Operator

(Operator Instructions) Your next question comes from Paul Coster – JP Morgan.

Paul Coster – JP Morgan

The consumer electronics retail channel in North America is changing pretty significantly at the moment as you know. Conventional bricks and mortar are losing out to online hence it kind of sides with weakness for you but I’m not sure the two are related. Are they related? And even if they aren’t what does Logitech do to respond to these pretty significant changes as far as downsizing?

Guerrino De Luca

First of all by downsizing, yes we installed Best Buy as 1,100 stores and they’re cutting 50 and they’re opening a lot of smaller stores in which we hope to be included in the presence particularly with our music products and our tablet products. That’s kind of beside the point because your point is right, the traditional big format retailers are suffering. There are extremes that are winning, the Wal-Mart extreme, the Apple Store extreme the specialist, and the online extreme. So clearly the channel is going there.

The good news is a) we are very strong with online, very strong with Amazon they’re great customers of ours, very strong with the mass market web channels like Target and Wal-Mart and we are with Best Buy we’re not going to go away from them. Actually, we’re going to follow them into this sort of shrinking of the footprint of their stores.

The biggest opportunity we have is the specialty store and particularly the Apple store. We were nowhere in the Apple store two and a half or three years ago. We’ve begun to be present and we’ll be increasingly present in the Apple stores together with the strengthening of our music lines, the strengthening of our offer for the iPad and with the strengthening of our offer for the Mac. So I think we’re well positioned across these dimensions.

It’s obviously a dynamic that we’re watching very carefully but I think we’re capable to respond appropriately. None of the channels that will clearly over a certain period of time win are new to us or are channels that make us uncomfortable. We’re very comfortable playing in these spaces and you know what? At the end of the day there’s a bunch of consumers out there who will buy great product across the most convenient channel to them and we will be where they buy.

Paul Coster – JP Morgan

My other questions is I’m sort of still carrying around with me this notion that Logitech has got strategic growth initiative associated with the enterprise and now of course, we’re going consumer centric and streamlining and I’m not sure I reconcile the two subparts so if you could help me there.

Guerrino De Luca

First, we do have a significant business opportunity both in LifeSize [inaudible] but also, and decreasingly with Logitech products. One of the four products I mentioned today is exclusively available to the business channel and we are increasingly successful there and it is really one of the great opportunities there. However, if you look closely at the BCC950, the conference cam, I hope you have an opportunity to look at it on our website or something, it’s a true consumer product for the business market.

We will continue to make products for eth business market that appeal to the user and the user gets more and more power in business and every win that we’ve had has been driven by the fact that every IT manager, every office manager, every employees of the companies which we want, knows and likes Logitech. It’s a tremendous sort of reservoir of goodwill that we’re tapping into but we’re not designing like grey serious products for the enterprise and fancy gold products for the consumer, we’re designing for the end user in the enterprise and in the consumer market.

Operator

Your next question comes from Stefan Gachter – Helvea.

Stefan Gachter – Helvea

On LifeSize, if I understand you correctly, you remain pretty convinced about the prospects for LifeSize? I mean, given the recent weakness I was going to ask whether we’ll see some changes in the business model but that seems not to be the case. I’m just wondering whether you will eventually, I guess not today, but further down the road ever be willing to share some of your near term targets in terms of the growth potential and profit contribution of LifeSize? That would really help us a lot if we got to that topic.

Guerrino De Luca

Well, LifeSize as I said remains one of our growth opportunities. I said, and I want to repeat, I believe the issues that the division is facing right now are understood and temporary and we’ll get back to growth there. Clearly, our focus is to continue to growth and increasingly make LifeSize profitable. It’s a fact, we are shooting for profitability, we want to get there, we have a goal to get there. I won’t share the exact day and month and year, or the century in which that will happen but it will happen and we’re shooting for that to happen.

In terms of describing and articulating a sort of target goal for growth and profitability I wouldn’t go so far. We first need to understand the totality of Logitech including LifeSize and where it will go and as I answered in the previous question we will not be in a position to truly do that credibly for the world and comfortably for ourselves until we see the trajectory of all the actions that Bracken and the team are driving. At that point we may or may not be in a position to sort of kind of explicitly talk about LifeSize but certainly not before that.

Operator

(Operator Instructions) There are no further questions at this time. That does conclude our conference call for today. You may all now disconnect. Thank you and have a great day.

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