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Tech Industry

Inside Logitech's mouse of style

CNET News.com's Michael Kanellos pays a visit to CEO Guerrino De Luca, who tells him that success is often a matter of simply giving the public what they want.

Some claim that the optical mouse has risen in popularity because it allows users to scroll on any surface. Others believe that ergonomics and superior performance lie behind the popularity.

In reality, it's probably the little light.

"We are fairly convinced that people buy the optical mouse because it glows," said Guerrino De Luca, CEO of Logitech, one of the leaders in the PC peripheral market. Although the performance of mechanical mice may get worse if they get dirty, "there is no technical explanation" for the preference, he said.

Although the high-tech industry has become a formidable presence in the world through hard-won scientific breakthroughs and by channeling customers through so-called inflection points--when the underlying relationships in the world economy shift--success is often a matter of simply giving the public what they want.

Which sounds a lot easier than it is. Bluetooth, at one point, was supposed to be the keystone of the wireless Web. Notebooks would wirelessly pipe data to high-speed cell phones, which would then connect to the outside world. Bluetooth chips, however, proved expensive to make. Plus, there's that contortionist aspect: If you're typing with a notebook on your lap, the best place for the cell phone is between your knees. Wi-Fi won out. Bluetooth backers have scaled back their earlier ambitions and are targeting the technology at headsets and printers.

The same sort of thing happened to Internet appliances, home MP3 players and the electronic "Monday Night Football" game with magnetic players. (A substantial number of third-graders from 1971 to 1980 bought it, but it never worked.)

Anticipating the public taste is especially pertinent now. Technology spending remains in a slump, but people and companies will pry open their wallet when persuaded to through the lure

Bluetooth backers have scaled back their earlier ambitions and are targeting the technology at headsets and printers.
of aesthetics or novelty. When you look around the landscape, most of the products that show promise--Tablet PCs, flat-panel displays, DVD players and burners, cameras with integrated phones--are things nobody actually needs to survive.

Logitech's success in this area is difficult to argue with. The company saw revenue hit $351.8 million in the quarter that ended in December--an 18 percent increase over the same period in 2001--mostly through increased sales of game console accessories, wireless keyboards and mice, and PC speakers. Net income came to $40.4 million, or 80 cents a share. During the calendar year 2002, when most of the tech industry was struggling, Logitech's revenue passed $1 billion for the first time.

This growth, moreover, largely comes as a result of impulse buying. Eighty-five percent of Logitech's revenue derives from peripherals that are sold as aftermarket PC add-ons and that are generally replacing working mice and keyboards. Consumers replace their first mouse within 6 to 18 months after buying their PC, although generally the devices last three to four years.

"Our products have been below the check-with-the-spouse threshold," De Luca said. "It (the aftermarket strategy) was largely a matter of luck, but I can rebuild it as a strategic choice."

The shift from science to sales began about six years ago. In the past, the Swiss-based company was driven by engineering concerns. Logitech came out with the first PC camera, the Photoman, in 1992. The company also designed a mouse for children. These products didn't succeed wildly, De Luca noted.

The pen itself costs $200, so it's not the sort of thing most people will want to chew on.
One of the initial milestones in the shift toward marketing occurred when a poll of users voted Logitech as the third most-recognizable brand in keyboards. Because they weren't even selling keyboards at the time, the company saw it as promising opportunity.

"We were the No. 3 brand, but we weren't making them," De Luca said. The Cordless Desktop--a bundle that includes a keyboard and mouse--emerged. Since then, the company has sold more than 30 million cordless devices.

The company also retained an industrial designer--Ireland's Design Partners--to work on the aesthetic and functional aspects of its products.

Logitech's next project involves expanding the market for the Io pen, an electronic pen that stores handwritten notes in digital form. The current model stores up to 40 pages of notes that can be transferred to a computer via a USB (universal serial bus) dock. A coming model will allow users to search handwritten notes for key words and characters.

The pen has drawbacks. Users have to write on special paper with an embedded geographic grid. Pads cost $10. The pen itself costs $200, so it's not the sort of thing most people will want to chew on.

Still, it does pass the gut-level "This is sort of cool" threshold, which is a major first step. Whether or not it succeeds, and how the company adjusts to public opinion, will bear watching.