NEW YORK (AP) — Logitech's stock dropped more than 5 percent Tuesday, as a Credit Suisse analyst lowered the Swiss company's rating, saying it is having a hard time diversifying its business away from the personal computer segment.
THE SPARK: Analyst Felix Remmers downgraded Logitech International SA, which makes computer accessories, video conferencing equipment and other gadgets, to "Underperform" from "Neutral."
THE ANALYSIS: Remmers said in a client note that he believes Logitech doesn't have a feasible longer-term strategy in place to help it deal with its weakening PC-related businesses. While cost cuts may help a little, Remmers doesn't feel that action alone will be enough to spur a successful turnaround.
The analyst said that most of Logitech's gross profit is PC-related, but those profits will probably come under increasing pressure as tablets become more popular and demand for personal computers continues to soften.
Remmers said that Logitech could try using some of the cash on its balance sheet for research and development purposes or pursuing new opportunities in non PC-related markets through mergers and acquisitions.
The analyst also suggested the company could selling video conferencing unit, LifeSize, because it may help improve the company's overall profitability and free up resources that could either be reinvested or given back to shareholders.
SHARE ACTION: Shares of Logitech fell 40 cents, or 5.1 percent, to $7.40 in midday trading. The stock has traded between $6.59 and $11.47 over the last 52 weeks.