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Summary:

Logitech, a well known computer peripherals company made a strategic blunder by betting on Google TV software and in the end paid a hefty price. A terrible financial performance promoted industry observer Michael Mace to breakdown why Google TV-related turned into a minefield for Logitech.

Gerald Quindlen, outgoing CEO of Logitech

Michael Mace, CEO of Cera Technology and author of the Mobile Musings blogs is one of my favorite stops on the Internet. Every visit to his digital podium is an opportunity to learn. Today I found his breakdown of Logitech’s recent spate of problems that I find is worth sharing. It also ties into my deep philosophy that companies have certain DNA and when they try and go too far from it, they suffer.

Logitech, as you might know recently reported a disastrous quarter and had to get rid of its chief executive Gerald Quindlen and replace him with the Chairman and former CEO Guerrino De Luca.  Mace says Logitech is one of his favorite companies because it flies in the face of conventional wisdom.

* The Valley says you can’t make money in commodity hardware, but Logitech makes good profits from the most commoditized bits of the computer industry.

* The Valley says you especially can’t make money in low-end consumer hardware, but that’s where Logitech thrives.

* The Valley says that if you want to make money in hardware, you need to be based in a low-cost part of the world like China. But Logitech is Swiss-owned and headquartered in Silicon Valley, two of the highest-cost places to do business in the world.

Amen to that because the 101 is littered with shattered dreams of consumer device startups. There are a few standouts like Sonos, but they have a long journey ahead. Mace points out that reason

Logitech succeeded by picking well-established markets like keyboards and webcams where its skills in design, user experience, and added-value features let it charge a bit more than the commodity players.  As the folks at Logitech will tell you, “we’re chefs, not farmers.”  In other words, we don’t create new markets, we come to existing markets and do an especially nice job of rearranging the ingredients.

But Logitech’s financial performance hasn’t been great for the last two years, and the company’s most recent quarter was a loss. Logitech put much of the blame on its essentially failed Google TV product.  Apparently somebody at Google convinced Logitech to do some farming, and the company is paying dearly for it.

Why?

* the uncertainties of a new market.
* user experience constrained by Google’s software.
* without the ability to fully apply its own strengths.

Mace argues that is wrong to expect Google to help develop a market for you. I agree. Back in the day companies would bank on Microsoft and sign-up for ludicrous products Microsoft would cook up, spend hundreds of millions of dollars and realize that no-one wanted them anyway. I don’t think it is any different this time and consumer electronics companies are childish to think that they can count on Google to make them money. Google is in one business: To be everywhere on connected devices and make money through advertising and data mining of consumer preferences.

For Logitech, the current spate of problems are magnified manifold. Under the previous management, the company took some strategic bets but forgot to focus on their core business  — computing and related accessories. The business of computing is slowly shifting from personal computers to touch driven personalized computers. If Logitech needs to carve a future for itself, the company needs to think differently.

  1. The “valley” doesn’t say any of those things. Those perceptions are held by the VCs who live there, and who are wrong at least 70% of the time (at least the better ones are). Virtually all mass market hardware is commoditized now, and the profitable ones are those who are able to define and design some differentiation into their products. That distinction, however, is beyond the filtering capabilities of most VCs, so they just make these blanket statements that don’t get challenged because they invest in the occasional Google.

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    1. KenG

      Those are widely held perceptions that go beyond the VCs. I think historically it has been a difficult market for Valley companies to crack mostly because the valley skill set traditionally has been different but that is changing right now.

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  2. John Kneeland Thursday, August 4, 2011

    Touch connected computers? Perhaps Logitech can start makinga 21st century version of Nintendo’s PowerGlove..

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  3. Viljo Viitanen Thursday, August 4, 2011

    I wonder how D-link is doing with the Boxee box, a direct(?) competitor to the Revue.

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    1. Viljo Viitanen Thursday, August 4, 2011

      Yep.

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    2. Looking into this. Sorry about the problem.

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  4. John Kneeland Thursday, August 4, 2011

    Um, GigaOM, you a pretty serious bug with the comment logins. I’m not John Kneeland, I’m @viljoviitanen on Twitter. We probably logged in the same time and I got John’s credentials here. The previous comment about the Boxee box was mine, not John’s.

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  5. All of those might have been some of the issues, but they are not the biggest ones – not even close. The biggest issue by far was that it was priced at $300 – a 50% price increase compared to Boxee Box and like 300% increase compared to Roku. Was their hardware that much better than the competitors I doubt it.

    “* The Valley says you especially can’t make money in low-end consumer hardware, but that’s where Logitech thrives.”

    $300 pricing certainly wasn’t low-end for a set top box. That should’ve been their first clue, if that’s really their strategy in general.

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    1. Travis Henning Thursday, August 4, 2011

      You are 100% correct it was too expensive, though I’m not sure it was totally Logitech’s fault. The question is why was it priced at $300? Logitech didn’t arbitrarily choose $300 because they wanted to gouge the customer. They did it to cover their hardware costs (driven entirely by Google requirements) plus R&D and marketing. For Logitech’s Google TV implementation two mistakes were made. Google made the biggest blunder by mandating expensive hardware. Logitech’s mistake was signing up to develop a market for Google knowing the hardware was overpriced.

      But that’s water under the bridge. The issue going forward as others have noted, Logitech needs to shift their focus to mobile accessories while maintaining and improving their PC product lines. Its going to be a crowded field but if they can use their past history of product ingenuity, differentiation and quality to set themselves apart, they will be fine.

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  6. Following on Lucian’s comment, Logitech also bought Ultimate Ears and tried to market $400+ earbuds. And an Internet video communication company because they thought people bought Logitech webcams for something other than Skype.

    The company doesn’t seem to have a clear strategy for mobile (their big sellers are built into laptops, and they showed up late for tablets and phones).

    Finally, even in the desktop category their keyboards and mice seem to be stalled, and quality has been more erratic recently.

    Good luck to them – hope they move a bit more quickly.

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    1. Great comment. I think you are onto something here.

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  7. How bout this for simplicity’s sake: don’t partner with a company that has done nothing to secure the content whose absence will faceplant your device?

    Seems pretty simple to me.

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  8. I think Logitech Transformation completed last Qtr& cleaned house for next Era,Why Growth company:

    in PC, Logitech testing Google Chromebooks with it’s Employees, so expect more for Business Cloud Chromebooks

    Also New CEO they are developing Apple Macintosh dedicated line-up

    Also said most of Tablets accessories are yet to be announced and will cover more categories
    —————————————
    Unified Communication,it is the Story of Huge dimension, Ubiquitous.

    Skype, Microsoft Lync, Tablets, Smartphones, PC, Mac, LifeSize Cloud Connection Service, End Points for SMB & Enterprise, Infrastructure, Logitech accessories for Think Clients & Cloud Computing.

    Skye-Facebook deal & Google+ will take Logitech and Lifesize to another level
    Music, Smart TV, Security Systems, Digital Home
    ——————————————
    Digital Home Potential could be bigger than PC as we will by Xmas our Home will be a Smart Home with Smart TV, Wireless Music, Smart Security, Smart Lightning, Smart Logitech accessories & New Breed of Harmony Remote as CEO said during CC

    “We plan to participate in a variety of ways using Harmony as the centerpiece of our strategy and focusing on smart TV, audio and video products and solutions. ”
    ——————————————-
    Major Markets will be US, Europe, China, other Emerging Markets (India, Latin America, Russia)

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  9. Also now Logitech Revue is top seller at Amazon Add TV cam and Video chat, Twitte and Watch TV, with major Update next month with Android store, gaming,full chrome Browser with more Logitech accessories this will be a hit, add it to Logitech Digital Home strategy in 2011, things will be big

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  10. GoogleTV needs another revision or two before it is fully baked. A lot of the things it needs to be successful like an app store and support for game controllers are not even in the OS yet. GoogleTV is like the first version of Android — not very good. It has a bright future though I think. Revision 2 or Revision 3 will be successful.

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    1. Version 2 September including Android 3+

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