What happened

Shares of Logitech International (LOGI -0.98%) were taking a dive today after the maker of computer accessories like mice, keyboards and webcams posted disappointing results in its preliminary earnings report for the third quarter of fiscal 2023, ended Dec. 31, 2022.

The stock was down 17% as of 12:05 p.m. ET.

So what

Logitech said preliminary revenue fell 22% to 23%, or 17% to 18% in constant currency, to $1.26 billion to $1.27 billion, which was well below the analyst consensus at $1.39 billion.

On the bottom line, operating income under generally accepted accounting principles (GAAP) was down 33% to 35% to between $171 million and $176 million, while adjusted operating income was down by a similar amount to between $198 million and $203 million.

CEO Bracken Darrell said in the release:

We are disappointed in these preliminary third-quarter results. They reflect challenging macroeconomic conditions including a slowdown in sales to enterprise customers in the quarter. Based on the softer than expected third-quarter results, and uncertainty in supply availability related to the current Covid outbreak in China, we are reducing our full-year outlook.

Now what

Logitech now expects constant-currency revenue to decline 13% to 15% for the full year, compared to an earlier forecast of a 4% to 8% decline. It also lowered its adjusted operating income guidance from a range of $650 million to $750 million to a range of $550 million to $600 million. 

Given the industry decline in PC shipments, it's not surprising to see Logitech posting weak results as the company's business is correlated with new computer sales. Management's comments about enterprise customers also indicated that broader headwinds in enterprise tech spending persisted through the end of the year as well.

As a cyclical business, Logitech should bounce back when the economy improves, but it's clear why investors are disappointed with the update.