Logitech Shares Plummet After Profit Warning

Shares in Logitech International SA (LOGN.VX) nosedived Friday, losing almost 20% in value after the Swiss technology firm warned its profits would be much lower than previously expected.

Investors dumped shares in the Swiss company, which has developed set-top box hardware for Google Inc.'s (GOOG) Google TV product, after it lowered its full year operating profit and sales outlook Thursday.

At 1050 GMT, Logitech shares were traded down 3.22 Swiss francs, or 19.5%, at CHF13.32, while the benchmark SMI traded up 0.5%.

The drop wiped nearly CHF500 million from the company's market capitalization, and contributed to a drop of 25% so far in 2011.

It came after Morges, Switzerland-based Logitech lowered its outlook for its financial year which ends on March 31.

Logitech said late Thursday that it now expects fiscal year 2011 sales in the range of $2.35 billion to $2.37 billion, down from the previous range of $2.4 billion to $2.42 billion.

It now expects 2011 fiscal operating income to be in the range of $140 million to $150 million, down from the previous range of $170 million to $180 million.

The company, which reports fiscal 2011 results April 27, blamed weakness in its European, Middle East and Africa sales region, where it said it has experienced lower than expected demand for its retail products from both distributors and retailers.

Europe is Logitech's largest market, responsible for around 36% of the company's sales.

Logitech's retail products include Internet video cameras, input and pointing devices and optical trackballs and keyboards.

It didn't specify which products had been particularly affected by the downturn. Logitech declined to comment further Friday.

In January, the company reported its fiscal third-quarter profit for the period ended Dec. 31 had jumped 14% as sales and margins grew.

Analysts were surprised by the profit warning, and reduced their price targets in response.

"Although recent consumer electronics data has been weak, the profit warning comes as a surprise as we had assumed that most of the weakness in retail was coming from the TV side," said Stefan Gaechter at Swiss brokerage Helvea.

"While the stock has arguably priced out a boost from Google TV and even if we assume the Japan quake impact has been priced in, we still think the stock will disappoint on a 12 month view," said Citigroup analyst Tim Shaw. He said he was unconvinced by the company's mid-teens medium term sales growth target, and kept his sell rating on the stock.

In January, Logitech Chief Executive Gerald Quindlen told Dow Jones Newswires that he expected the Google TV deal to contribute around $40 million in sales for the fiscal year ended March 31. He conceded at the time that he had been slightly disappointed with the uptake for the product in the U.S., but that demand had picked up in the last few weeks before Christmas.

-By John Revill, Dow Jones Newswires; [phone] ; [e-mail]