The Swiss superstar of computer peripherals manufacturing reported first-half results last evening and, well, I guess I see some room for optimism here. After badly misreading the gravity of the economic downturn earlier this year, Logitech has finally moved to slash inventories and get its free cash flowing again. Inventories dropped 26% year over year, or almost as fast as sales plummeted (down 30%).
The liquidation of unsold merchandise has unleashed a torrent of tied-up cash, with the result that Logitech generated nearly $115 million in free cash flow through the end of the fiscal year's first half, and the company's war chest now brims with $525 million in cash (versus no long-term debt).
And yes, all this stands in stark contrast to the report's "headline numbers," which paint the otherwise bleak-seeming picture of sales falling fast, and gross margins falling faster (they gave up 630 basis points to end at 27.9%).
Call it a hunch, but I suspect the real reason Logitech shares fared so well today is partially thanks to investor optimism over the release of Windows 7. Microsoft's
But how much of that enthusiasm will transfer to Logitech's products? I don't know about you, but when I buy a brand-new computer system -- whether ordering from an established computer maker like Hewlett-Packard
Granted, when I do decide to replace the comp's original keyboard or mouse, or add on a webcam, Logitech is generally my first choice for quality and value. But remember, this is months or years down the road. In contrast, investors bidding up Logitech shares 4% today seem to be implicitly betting that a near-term surge in sales will follow the Windows release.
Is that a good bet? Or have investors gotten illogically exuberant about Logitech? Scroll down, and sound off.
Fool contributor Rich Smith does not own shares of any company named above.
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