Clarification at 7:40 a.m. PST: The percentage figure for net income has been fixed.
Logitech International announced late Monday plans to cut 550 to 600 jobs, as it posted a steep drop in its financial performance and predicted continued weakness in the months ahead.
The company expects to make the bulk of its job cuts in its fiscal fourth quarter, which started January 1, and take a charge of $16 million to $18 million during the quarter. Overall, Logitech expects to take a $20 million to $24 million charge over the next 12 months.
Logitech, a peripherals giant that sells to both retail stores and computer manufacturers, is facing a challenging time as its customers struggle as well. Retail store Circuit City, for example, said last week said it will have to liquidate after failing to find a buyer.
Logitech, which also announced its fiscal third-quarter results late Monday, said its quarterly net income fell 70 percent to $40 million, or 22 cents a share, year over year. The company's gross margin fell to 29.9 percent in the quarter, versus 36.9 percent a year ago.
The company posted a 16 percent drop in third-quarter revenue to $627 million, compared with a year ago. And the coming months ahead do not look any better, the company reported.
CEO Gerald Quindlen said in a statement:
All indications point to an even weaker retail environment in the coming months. Consequently, our plans assume that in Q4 we will see year-over-year declines in sales, operating income before restructuring charges and gross margin that are similar to or worse than the year-over-year declines we experienced in Q3.
However, we expect to continue to generate positive cash flow from operations as we focus on preserving the strength of our balance sheet. Moreover, we believe the substantial steps we are taking to align our cost structure with the current environment, combined with our continued emphasis on product innovation, will position the Company to successfully manage through this downturn and emerge stronger when the recovery begins.
In addition to its customers scaling back on orders as they seek to reduce their inventories, Switzerland-based Logitech was also hit by a stronger dollar and retailers engaging in steep price cuts, especially in the Americas, noted Quindlen.
Third-quarter sales in the Americas fell 21 percent, while Europe/Middle East/Africa were down 19 percent. Asia, by contrast, was up 8 percent in the quarter.