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 (s LOGI), 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(s goog) convinced Logitech to do some farming, and the company is paying dearly for it.
* 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(s msft) 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.