If you buy a house in a nice neighborhood, you’re going to buy the premium accessories. The Kohler bathroom fixtures, beveled glass on the front door and the brass doorknobs. The same can be said for computing and you can capitalize on the great accessory turnaround.
Whether you love or hate Apple, you cant deny the company has had a tremendous impact on the way people use both phones and computers. Tablets are clearly reducing the demand for PCs and Laptops which has destroyed companies that are related to the WinTel food chain. However, for companies that are transitioning their businesses, its like getting in on the ground floor of the next wave in computing!
We’ve found a stock that was crushed by this trend but has made the difficult choices and is now reaping the benefits!
Logitech is more like a dorm room name than a household name but colleges are at the cutting edge of tablet computing. In the past, LOGI had been focusing on wireless mice and trackballs but now the company is putting its efforts behind bluetooth speakers and tablet cases which, surprisingly are very different businesses!
Logitech is a Swiss company that has been making computer accessories since 1981. It started out by redesigning the computer mouse when that was an uncommon product and have moved on to focus on making the “last inch” of computing better. It is focused on making it easier and more comfortable to interact with computers. Because of the nature of the business, as the environment changes, needs change and financial results come under pressure until the company can find a new trend to lock on to. That s where we are now. PCs are in decline and the slack is being take up by tablets
New management: In the last year, Logitech’s management transition has included BOTH a new CEO in January and a new CFO in September. The prior management team had been slow to develop product for the new computing paradigm and driving a decline from $37 to a low of $6. Now with one quarter of solid results behind the company, and a new wave of tablet products released for both Samsung and Apple, the Christmas season looks bright for Logitech.
Laptop replacements: Tablets have been being used more and more as laptop replacements by students and business professionals alike. The 10 hour battery and light weight is great for taking through an entire day of classes or multiple sales presentations. Now that keyboards are becoming prevalent, people are much more effective at creating rather than simply viewing information.
Why Logitech? Technology and distribution. Keyboards and speakers have been available for years but the quality has not been comparable to what could be purchased for a PC. Logitech has taken its intellectual property and refocused it on tablets. For instance, the recently announced Keyboard Folio combines a highly water resistant keyboard with a protective portfolio for the device. It’s a premium case for a premium product from a company that has ties into all of the big box retailers.
Over the last two quarters we have seen LOGI beat street earnings expectations on better than expected sales of pc related products and bluetooth speakers for the last two quarters. The new tablet keyboards have recently been announced and not impacted numbers yet. These new products should boost results from the Christmas season and help the management team guide to higher 2014 results.
So with a new management team the company is streamlining its products to focus on tablets rather than just PCs. The results are starting to come in with two quarters of earnings coming in better than expected and products on two new tablet platforms contributing in the coming quarters. If the PC accessory market holds up at the same time that the tablet market accelerates, without introducing new products, the company could conceivably double its EPS expectation leading to a $25 share price next year!
Tracking the Jackpot,