Logitech eyes enterprise market, looking for new growth drivers

Swiss hardware accessories maker Logitech International SA is eyeing China's enterprise market to boost sales amid the global economic recession.

"We are looking for fresh growth drivers after years of operation in the consumer market," said Quin Liu, chief executive officer of Logitech China.

Logitech urgently needs its business-to-business arm in China - a new division that was launched this month - to generate profit, and the directors have set a high bar for the division.

"We estimate that sales in the business market could be at least 25 percent of our total revenue three years from now," Liu said.

The move came after Logitech posted lower-than-expected results last month, caused by slowing demand in the consumer market.

On July 25, Logitech said global sales for the first quarter of fiscal year 2013, which started in April, were $469 million, down 2 percent year-on-year. The net loss for the first quarter was $52 million compared to $30 million in the first quarter of the previous fiscal year.

Guerrino De Luca, Logitech's chairman and chief executive officer, admitted that the company is facing a tough time. The most optimistic words that De Luca used at the quarterly conference call were "we are in the middle of our turnaround".

Business-to-consumer technology companies, such as Nokia and Logitech, have suffered losses due to sluggish demand.

"Headquarters expect Logitech China to contribute more to revenue," Liu said.

And because the nation's B2C market is already packed with rivals, the company hopes that China's B2B sector is the market that will drive the turnaround.

The total annual sales of China's enterprise market are expected to hit 2 billion yuan ($314 million) in the next three years, which is expected to generate large demand for the company, according to Eric Kintz, general manager of Logitech for Business.

Logitech China's B2B sector will not generate more revenue than the better-established B2C sector, but the company is not trying to hide its ambition in the emerging sector.

At this month's MacWorld Asian conference, as all the other accessories makers were trying their best to show off their gadgets for Apple Inc's products, Logitech spent most of its time introducing its newly created B2B division.

"We surely have high expectations for the new division because of the large demand in China," said Liu.

The growth in the Chinese market remains robust compared to other markets. The country will likely become Logitech's second-largest market this year, surpassing Germany, with most of the revenues generated in the consumer market.

However, Logitech also has to move fast to keep its edge in the B2C sector, the company's major profit driver.

The challenges are obvious in the B2C sector as an increasing number of accessories makers are pouring into the market. Hundreds, if not thousands, of local and overseas gadget and accessories makers are entering the competition.

"The boundaries among the different sectors in the IT industry are not as clear as they were five years ago," Liu said.

Old sectors - such as mobile phones and PCs - have been merged into one big industry driven by innovation.

The integration forced accessories companies to produce more types of gadgets that could cover the entire product spectrum of the world's top cell phone, tablet and PC makers, said Liu.

gaoyuan@chinadaily.com.cn