Logitech Assigns Carrying Value of Harmony Business at $4.1 Million After Pulling Sale
After pulling its Harmony Remote business from the selling block earlier this year after it was unable to fetch an acceptable price, Logitech reclassified its Harmony Remote assets back to goodwill and other intangibles from those held for sale, setting the carrying value at $2.5 million for goodwill and $1.6 million for intangibles, the company said in a 10-Q filing this week. Logitech had put its Harmony business up for sale in January but decided in Q2 not to sell the remotes business after concluding that the carrying value was less than fair value (CED July 26 p4).
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According to CEO Bracken Darrell, speaking on the company’s earnings call last month, the Harmony Remote business returned to growth in Q1 ended June 30 and Logitech plans to “sustain” that growth. New Harmony products were selling well, he said, and new distribution looked “very promising.” Remote revenue for the quarter totaled $14.6 million, up from $13.7 million in the year-ago quarter, the company said in the 10-Q.
By retail category, pointing devices represented $114.7 million revenue in fiscal Q1 2014, slipping from $115.8 million in the 2012 quarter; non-gaming PC peripherals grew to $98 million from $94.6 million and tablet accessories jumped to $38.6 million from $15.9 million, according to the 10-Q. Audio PC accessories fell from $62.5 million to $52 million, but audio for the wearables and wireless segments grew from $14.6 million to $19.1 million on demand for wireless speakers for smartphone and tablets and for UE devices, it said. Video accessories declined from $37.2 million to $35.3 million on weakness in the webcam line, while PC game peripherals jumped to $39.6 million from $26.8 million on growth in mice, keyboards and headsets, it said.
Logitech’s retail sales increased 5 percent in fiscal Q1 versus the 2012 quarter, while the number of units sold fell 6 percent. In its OEM business, Logitech’s fiscal Q1 revenue dropped 6 percent from the year-ago period, while units sold slipped 2 percent, it said. Declines are due to “overall weak market conditions” of desktop PC sales, it said.
PC peripherals sold in the U.S. and Europe have comprised the majority of Logitech revenue historically, but the PC market has “changed dramatically” in the past two years and “there continues to be significant weakness in the global market for new PCs,” the company said in the 10-Q. The weakness impacted all of Logitech’s PC-related categories and reflects “the growing popularity of tablets and smartphones as mobile computing devices,” it said. Future growth will be determined by the company’s ability to “rapidly create innovative products across multiple digital platforms,” with a focus on accessories for tablets, smartphones and other mobile devices, for digital music -- including wireless speakers and wearables, such as earphones, it said. The company is pursuing opportunities in emerging markets and enterprise markets, it said.
In fiscal Q1 2014, Logitech identified errors related to the accounting for its product warranty liability and amortization expense of certain intangible assets, it said. The errors impacted prior reporting periods dating back to fiscal year 2009. While these errors were not material to any previously issued annual or quarterly consolidated financial statements, management concluded that correcting the cumulative errors and related tax effects, which amounted to $19.1 million, in fiscal Q1 2014 would be material to the consolidated financial statements for the quarter ended June 30, 2013, and to the expected results of operations for the fiscal year ending March 31, 2014, it said.