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Logitech executives will decide in the next three months whether to sell off its LifeSize Communications video collaboration unit, which is struggling to compete in a market that includes such heavyweights as Cisco Systems and Polycom.
In an interview with Reuters after announcing the company’s most recent quarterly financial numbers, Bracken Darell—who became Logitech’s CEO Jan. 1 after joining the company a year ago—said the LifeSize business was strong in the small and midsize business space, but that he and other Logitech officials would need to decide whether it would be better to keep it or sell it off.
“This is such a tough market, and that’s the biggest driver of the impairment,” Darrell told Reuters. “It’s not an easy decision. Is this an asset that makes more sense for us to own or for someone else to own?”
The decision will come after a difficult quarter for Logitech. In the company’s fiscal year 2013 third quarter, Logitech saw revenues fall 14 percent—to $615 million—over the same period the year before, and losses of $195 million. In the same period in 2011, the company made $55 million.
Officials with the company, who announced the quarterly earning numbers Jan. 24, said the primary culprit in the poor showing was the declining worldwide sales of PCs as consumers turn more of their attention and technology dollars to tablets and smartphones. Logitech sells such PC-related peripherals as mice, webcams and keyboards, among other products, and Darrell said the company will look to build up its portfolio of tablet accessories.
In prepared statements released with the earnings results, Darrell said that despite the falling PC sales globally, the company’s financial numbers were “unacceptable” and that executives “are taking immediate actions to shape a faster and more profitable Logitech.”
One of those steps could be selling off the LifeSize business, which saw sales drop 4 percent in the quarter and faces growing competition in a video-conferencing market that itself is undergoing a painful transformation. Logitech’s $440 million video conferencing business includes not only LifeSize, but other units, such as Sightspeed, Paradial and Mirial.
However, LifeSize is the most prominent of the units, and the slowdown in sales led the company to announce that it was taking a $211 million charge for the FY 2013 third quarter.
Logitech Considers Selling LifeSize Video Conferencing Unit
Logitech bought LifeSize in 2009, at the tail end of the global recession and a time when the video conferencing business was booming, thanks to the strong adoption of video collaboration technology by businesses that wanted to find ways to increase employee productivity while driving down expenses, including traveling costs.
However, in recent years, the video conferencing market has slowed, with businesses buying fewer large, immersive telepresence systems and a shift in the space toward more software-based solutions. According to analysts at IDC, worldwide video conferencing revenue in the third quarter of 2012 declined 4.8 percent. Revenue for larger, multi-codec immersive telepresence systems showed the sharpest decline, with a 35.8 percent year-over-year drop, while sales of other components in video conferencing systems—including gateways and firewalls—dropped 26.8 percent.
There was some growth, in such areas as single-codec systems, personal video conferencing and sales of video multi-control units (MCUs), for multi-party video conferences.
IDC analyst Rich Costello said that economic concerns also played a factor, as were customer buying patterns. “We also feel that customers are considering more strategic approaches to deploying video technology and applications, leading to longer decision cycles,” he said in November.
Even as revenues decline, the market is getting more competitive. Established players like Cisco and Polycom continue to expand their offerings, while vendors like Avaya—which bought Radvision in 2012 to grow its video communications capabilities—and Huawei Technologies muscle into the space. In addition, there are a number of smaller companies—including Vidyo and Blue Jeans Networks—that also are gaining inroads.
However, some of these other vendors also are being impacted by the change in the market. Polycom officials reported Jan. 24 that fourth-quarter revenue came in at $353 million, a 9 percent decline over the same period in 2011.
Logitech CEO Darrell said he will aggressively move to cut costs beyond the $80 million that was targeted in April 2012 when the company announced restructuring plans. The company is also looking to sell other businesses—including its Harmony remote controls unit—as well as increase investment in products for tablets, smartphones and computer games.
“My goal is to get Logitech back to sustained profitability as quickly as possible,” Darrell said in a statement. “This requires unwavering focus on developing great products both for large and for fast-growing markets, removing unnecessary costs and a commitment to move at least as fast as the markets in which we participate.”