The death of the Mouse or, Shorting Logitech?

January 12, 2011

ANT hasn’t done a ton of research on this idea. That being said, we can all agree that tablets are exploding and that they are a touchscreen device, no mouse/keyboard needed. We can also agree that smartphones are exploding and again no keyboard/mouse needed. Finally we can all agree that laptops have stolen massive share from desktops, again, no mouse/keboard needed. Given the clear consumer preference for new innovative input methods (touch, gesture, Wii motion control), who is likely to be negative affected most by these trends: LOGITECH, the leading computer peripheral maker.

The stock trades at 12.5x LTM EBITDA and on an LTM basis revenue is up 18% (after falling in FYE March 2010). Here are the scary bullet points:

1. 27% of Revenue from “Pointing Devices” (re: Mice) and 15% from “Keyboards & Desktops” (unsure what “Desktops” means). So that 42% of revenue from categories that are likely to be in secular decline over the coming years.

2. The investor day presentation says to expect 10% long run growth in PC/Mobile, 25% in LifeSize and 25% in Digital Home. We will need to do more research into the the latter two segments but it seems the company is betting big on video conferencing (a feature that Apple/Android are building into devices) and GoogleTV (a product that to date has been flop and will remain as such until Google purchases content.

Much research still to do but seems like a compelling short opportunity based on the broad themes.

The stock is trading at $18 per share


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