By Peter Galli
January 16, 2008
Buying Logitech (Nasdaq:
LOGI) could help Microsoft better compete with the likes of Apple and other competitors of the Zune and Xbox.
Microsoft may be looking to acquire Swiss-based computer peripherals maker Logitech International so it can better compete with Apple and other competitors of the Zune and Xbox, according to some analysts.
Rumors about a possible deal between the two companies surfaced the week of Jan. 7, which helped boost Logitech’s share price, but neither firm will comment on the speculation.
Were the deal to actually happen, it would immediately make Microsoft a major power in PC peripherals, gaming accessories, mobile accessories, and iPod accessories, said Rob Enderle, an analyst with The Enderle Group.
It could also help Microsoft with the much-needed accessories for the Zune and Xbox, he said, noting that the Zune needs a much deeper set of accessories to compete with Apple. The deal also would help correct some of the difficulties Microsoft has had building Xbox accessories.
“In fact, if the deal took place, Logitech would likely have a lot to do with the design of the next Xbox. In addition, the combination of the Zune and Logitech groups would create a much more credible challenger for Apple,” he said.
With regard to Logitech, which “leads a market that few care about,” such a deal would give the company access to resources that put it in another league entirely, Enderle said.
Acquiring Logitech’s remote product line could also help propel Microsoft's vision of the connected home further, faster, Chris Swenson, an analyst with the NPD Group, told eWEEK.
“The remotes from Logitech have support for Xbox 360, Windows Media Center, and thousands of other devices. Microsoft is going to need technology like this for all the electronics the company is trying to stuff into the American living room,” he said.
But Directions on Microsoft analyst Matt Rosoff is more skeptical that the deal will take place, in large part because of the price Microsoft would likely have to pay for the firm.
“Microsoft will likely have to pony up around $6 billion for Logitech [whose current market capitalization was $5.46 billion on Jan. 15], which is a large number, even for Microsoft, and even for a well-established company that made about $230 million in profit on more than $2 billion in revenue last year. Overall, I don't think it's going to happen,” he told eWEEK.
However, Microsoft did fork out about $6 billion last year to buy aQuantive, which only earned $14 million in profit on revenue of $140 million in its last quarter as an independent company, Rosoff said.
However, even though Microsoft has also historically favored organic growth on this front, that could be changing, he said, noting that “if Microsoft really wants to expand into consumer electronics by building more types of hardware, Logitech might be a logical place to start.”
Enderle also said that Microsoft’s hardware unit has been struggling, particularly as he believes that “in a software company like Microsoft, there just isn’t a great deal of interest for folks to work on hardware, so they don’t have a core to build off of.”
Logitech, which has historically done better in this space than most of its competitors, including Microsoft, would give the software maker that core, he said.
Rosoff agreed, saying that while Microsoft Hardware has been around for a long time and consistently profitable. “if you remove the Xbox from the equation, then the Entertainment and Devices business unit, including hardware, is not growing very fast.”
Source: eWeek.com
Microsoft Could Make Apple Play with Logitech
