Hardware and the Internet of Things
The technology industry has in many ways sped up the rate in which companies must adapt to innovation, increasing competition and also making those whom can’t keep up more quickly redundant. In 2012, over 650 million smartphones were sold worldwide and 40-50% of those have touchscreens. The trend extends with tablet sales also at a high as Google, Samsung, Apple and others are increasingly integrating touchscreens into many of their products. Touchscreens are one of the more significant obstacles changing the landscape for companies like Logitech, who sell mice, keyboards, and other peripherals.
The Swiss company began selling mice in 1981 and over the next decades, expanded to offering webcams, speakers, and unified communications systems. The Swiss manufacturer excelled in niche but necessary high quality products and became a must-have partner for broader industrial processes and consumer goods. Leading up to the financial crisis, 2007 was a good year for Logitech. Their 2007 annual report stated:
“In our core business, we are driving innovation in PC navigation, notebook peripherals, Internet communications, gaming and digital music. We are pursuing opportunities in the digital home by offering our Harmony remote controls to tame the complexities of homeentertainment systems. And, with our October 2006 acquisition of Slim Devices, we are offering people the ability to enjoy Internet-based radio and their own digital-music libraries anywhere in their home”.
Shortly after, music consumption via smart phones arrived and the euphoria of 2007 looks very old indeed.
In 2010, sales began to decrease and Logitech said in its Annual Report to investors, “If we fail to innovate in our current and emerging product categories our business and operating results could suffer”. Recently in 2013, Logitech reported losses of $1.24 per share in the third quarter and has further plans to discontinue its non-profitable products. As the technology industry rapidly innovates, peripherals companies like Logitech must also adapt. The main challenge for Logitech is the decreasing importance of hardware and hardware accessories in the wake of the mobilization of computing. While the desktop is not looking to disappear any time soon, growth will lie in computers with no keyboard or mouse. As computing devices become more centralized, Logitech must set its eyes on mobile computing, move away from PC peripherals and towards smart phone and tablet peripherals. Other critics have doubts about the long-term consumer usage attributed to tablets.
Recently, the company’s numbers have been looking up again. As reported in the Wall Street Journal Online, accessories for tablets turned 2013 into black numbers. CEO of Logitech Bracken Darrell said to WSJ, “We are in a sustained growth mode”. In Logitech’s segment reporting for 2012-2013, personal peripherals made up 93% of total sales from 2012 to 2013 and video conferencing made up 7% of total sales. As one can see, personal peripherals sales are highly concentrated and pose a cluster risk.
Despite Logitech’s recent losses and subtle gains, it has a vast opportunity to reinvent itself as a hardware company for the virtual age and possibilities for peripherals remain plenty. How Logitech confronts this challenge will largely determine its survivability in the coming years. Facing the headwinds of an industry that is rapidly evolving, there are business opportunities in developing products that create solutions to key issues faced by the tech industry today such as net neutrality, data security, and data costs for content heavy industries. All of these issues imply a corrective technology to computers (smart phones, lap tops, table tops, tablets) that may function more like hardware that is providing app-like services. The advantage of a peripheral as opposed to an app is that the hardware separateness makes the peripheral more credible in comparison.
For net neutrality, Logitech may consider producing a device to visualize the loading speed users are getting on websites. In the realm of data security, a oneplug- fits-all peripheral could act as a key to all devices that enable the user to disconnect their user settings and identity at any moment and from any software. Peripherals will also be needed to deliver objective information on the energy use of consumer electronics. This measurement and resulting efficiency measures will be at the beginning of a drive to maintain low energy use of data centres. Finally, in terms of content costs, Logitech could set a standard by not allowing its devices to transmit illegal content. All of these hardware applications contribute to cutting costs while, combatting the major sustainability issues facing the technology sector.
The biggest growth opportunity might very well be in the wearables and Internet of Things space. Google’s recent purchase of Nest shows the movement toward a clear intersection between software and hardware and there is no reason why Logitech could not be one of the major outfitters of furniture, appliances, sports goods, toys for their connection to the Internet. Another personal connector device could be a measurement pod with which users can map the surroundings of their everyday life and companies could then sell this data. There are business opportunities in all of these for Logitech.
As is apparent, a company with the production facilities and experience like Logitech need not fear the fast change of the technology industry. The opposite is the case. Peripherals have potential to be the real world counterpart to apps and thus the connector of the material world in an Internet of Things. Logitech should not pursue short-term peripheral niches or quick modern design enhancements. Its innovation should not follow but rather enhance the product development of today’s global software leaders. The Internet of Things and the intersection of hardware and software presents a solid base in which Logitech can again be a real out performer in the hardware industry and there is no time better than now for Logitech’s paradigm shift.
Article by Elle Vanderwit