Joe Greenhalgh - VP of IR and Corporate Treasurer Bracken Darrell - President and Chief Executive Officer Vincent Pilette - Senior Vice President, Finance and Chief Financial Officer.

Paul Coster - J.P. Morgan Tavis McCourt - Raymond James John Bright - Avondale Partners Andrew Humphrey - Morgan Stanley Michael Foeth - Bank Vontobel Andy Hargreaves - Pacific Crest Joern Iffert - UBS Andreas Mueller - ZKB.

Good day and welcome to the Logitech's second quarter financial results conference call. At this time, all participants are in listen-only mode. We will be conducting a question-and-answer session and instructions will follow at that time.

This call is being recorded for replay purposes and may not be reproduced in whole or in part without written authorization from Logitech. I would like to introduce your host for today's call, Mr. Joe Greenhalgh, Vice President of Investor Relations and Corporate Treasurer at Logitech..

Welcome to Logitech’s conference call to discuss the company’s financial results for the second quarter ended September 30, 2013. The press release, our prepared remarks and slides, as well as the live webcast of this call are all available online at logitech.com.

As noted in our press release, we published our prepared remarks on our website in advance of this call. Those remarks are intended to serve in place of extended formal comments today and they will not be read on the call.

During the course of this call, we may make forward-looking statements, including forward-looking statements with respect to future operating results that are being made under the Safe Harbor of the Securities Litigation Reform Act of 1995.

The forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated in the statements.

Factors that could cause actual results to differ materially include those set forth in Logitech’s Annual Report on Form 10-K dated May 30, 2013, and subsequent filings, which are available online on the SEC EDGAR database and in the final paragraphs of the press release and prepared remarks from Logitech reporting second quarter financial results for fiscal 2014.

The forward-looking statements made during this call represent management’s outlook only as of today, and the company undertakes no obligation to update or revise any forward-looking statements as a result of new developments or otherwise. Please note that today’s call will include results reported on both the GAAP and the non-GAAP basis.

Non-GAAP reporting is provided to help you better understand our business. However, non-GAAP financial results are not meant to be considered in isolation or as a substitute for or superior to GAAP results.

You should be aware that non-GAAP measures haven’t had limitations and should be used only in conjunction with Logitech’s consolidated financial statements prepared in accordance with GAAP. Our press release includes a table detailing the non-GAAP measures together with the corresponding GAAP numbers and a reconciliation to GAAP.

You can also find this information posted on our Investor Relations website. The slides that accompanying this call include both GAAP and non-GAAP measures, and they are also available on our Investor Relations website. We encourage listeners to review these items. This call is being recorded and will be available for replay on the Logitech website.

Joining us for the call today are Bracken Darrell, President and Chief Executive Officer and Vincent Pilette, Senior Vice President, Finance and Chief Financial Officer. I'd now like to turn the call over to Bracken..

Bracken Darrell:.

Thanks Joe, and thanks to all of you for joining us. With two quarters behind us, we are on track in our turnaround. We significantly increased operating profitability and the signs generally look good inside our growth businesses.

Total sales declined by 3% in Q2 and by 1% on a year-to-date basis, better in both cases and expectations at the start of the year. Our operating income doubled on a non-GAAP basis in the first half. We’re ahead of our own expectation so far this year, but it’s still early in our first turnaround year. A few comments before we open for questions.

The sales growth of our tablet accessories slowed in Q2, but don’t confuse that with the slowing in our underlying business at the consumer level. We’re looking very strong in market share around the world in tablet accessories.

As I mentioned it could be the case during last quarter’s call, our sales don’t reflect this growth because of the timing of our new product launches. Back in Q1, we launched the number of new tablet accessories. We held back in Q2 while we waited for what we expected to be a late quarter release for the next generation iPad.

When the iPad launch moved to Q3 so do our launches. Meanwhile we launched our [portfolios] for Samsung tablets. I am very pleased with the improvements we have made to accelerate our time to market in the tablet accessories category, and the benefits from those improvements will soon become visible.

We will be in market faster than we’ve ever been and I suspect you will find our products around the world surprisingly soon. I am also very pleased with sales of our wireless speakers which more than doubled in the first half of fiscal 2014 compared to the prior year. Our star performer has been the UE Boom which continues to generate strong demand.

Earlier this month we launched the UE Mini Boom which strengthens our portfolio of mobile speakers. Our gaming category also delivered double-digit sales growth to the first half of the year, with solid growth in the Americas and Asia pacific.

Our results in the category in EMEA were the only disappointment in our Q2, driven by sales execution issues in Germany, our largest market in the region. While I believe it will take us several quarters to fully implement the improvements, we understand what need to be done and we began to make progress.

The pointing devices and keyboard and desktop categories both delivered sales growth through the first half of the year, before and better than we had anticipated when the year began. I am very pleased with these results, but we are not planning for sustained momentum in the coming quarters given our expectation for declining PC market.

While the first half performance of our LifeSize business has been a disappointment, we moved quickly indecisively to improve the situation. In Q2, we replaced the leader and brought back LifeSize's founder Craig Malloy.

In the past two months, he implemented an aggressive restructuring which included a broad-based reduction in staffing levels, a rationalization of the product portfolio and a refocusing of the developmental priorities. We took these actions with the primary goal of achieving sustainable profitability this fiscal year and I believe we'll get there.

Before wrapping up my comments, I'd like to let our new CFO, Vincent Pilette, provide a short introduction. I interviewed my candidates and Vincent brought the perfect combination of big company experience and a small company action mindset.

Vincent?.

Thank you, Bracken. I'm very excited to be part of this turnaround. In the first half of this fiscal year, we delivered better than expect non-GAAP gross margin of 36%, driven by product mix.

We took the right steps to lower our cost structure across all functions, reducing our first half non-GAAP operating expenses as a percent of sales by a 120 basis points creating operating leverage. As a result, we doubled our first half non-GAAP operating profit margin to 4.9% of sales with a 7% operating profit margin in Q2.

We are making good progress but more work lies ahead as we’re still in the early stages of our three-year turnaround plan. I'm looking forward to working with the Logitech team and with all of you within the shareholder community..

Thanks, Vincent. We are reconfirming our fiscal 2014 outlook of approximately $2 billion in sales and GAAP operating income of $50 million, which now includes $30 million of costs related to restructuring that were not anticipated when we first provided the full year outlook.

Our outlook is based on the prudent assumption that the sales performance of our PC peripherals will not be sustainable in the phase of a double-digit PC market decline. On a non-GAAP basis, our operating income is expected to be approximately a $100 million, an increase of $13 million compared to the previously expected non-GAAP operating income.

As I mentioned at the start, I am pleased with the progress we've achieved through the first half of fiscal 2014, both in transforming our P&L and in transforming Logitech as a company.

Although we have more work in front of us, I am confident that we're shaping a faster and more profitable Logitech as demonstrated by the increase in our outlook for fiscal year ‘14 profitability. I am confident we’ll first turn the company’s profitability and growth around and then turn this into a great company again.

Vincent and I are now available to take your questions. Please follow the instructions of the operator..

(Operator Instructions). Our first question comes from the line of [Alex Duval] from Exane. Please go ahead Alex..

I just wanted to ask about how you feel about your inventory level going into the current quarter considering significant product condition at Apples for instance that would be one.

And second also, I mean you've commented in the past that you’re willing to make Logitech more nimble and faster to react to new product introduction, how long do you think you may need to give new keyboards for new recently announced tablets that would be extremely helpful. Thank you..

Okay, thanks Alex. First, in terms of inventory level, I feel good about where we are as we go from Q2 to Q3 where we normally would have an inventory build going into Q3 ahead of the holiday season where, we normally would have an inventory build going into Q3, ahead of the holiday season and I think we’re in very good shape across the board.

We could go through by region but I don’t think there is probably need to do that, suffice to say I feel good about what where are. I do think we continue to have room and inventory to continue to get more efficient, but we’ll look at that overtime.

On the iPad, we’re not announcing anything today, but stay tuned, don’t confuse PR with real performance, I mean we will be in the market surprisingly soon and I will leave it at that..

Does this mean before Christmas, but in terms that’s target at least?.

I think it safe to say we’ll be in market very soon and certainly to be before Christmas..

Got you thank you very much..

Thank you. Our next question is from the line of Paul Coster from J.P. Morgan. Please go ahead Paul..

Yes, thanks for taking my question.

Bracken, I am maybe a little bit picky here, but in your prepared remarks you talked about the first turnaround, what does that mean? And when do you expect to return to growth?.

I don’t think you’re being picky and I think, it’s a fair comment. When we described first turnaround, we’re really referring to the Analyst and Investor Day of our three year kind of view, what we’re trying to accomplish financially.

And you were really anchored, we really talked about the first year which was this year and third year which is 2016 and then the fiscal year ‘15 was sort of just a placeholder in between. So this is our first year. And you can look at those, look at that set of projections as sort of what we’re trying to accomplishment from the turnaround..

Okay. The tablet accessories are now a major portion of your business at most.

So the concentration risk maybe is not that great, with respect to Apple, but maybe it will increase in time if you’re successful, can you talk just little bit about how you stay close to Apple and mitigate the risks of sort of missing out on a product cycle or misunderstanding their products?.

Our IQ has gone up exponentially since we started into this about a year and a little over year and half ago. First, Apple shares no information directly with us, they are as secretive you hear and we respect that and I think it creates a very fair and level playing for all the competitors in the market that create tablet accessories.

But we are working very hard to understand and predict what Apple will try to do with their next generation of products based on what they have done with the last one. And I would say our IQ is proven to be better and better and better. This is probably the best yet.

We feel like we really understood where this is going, but honestly they can always come in with a surprise. So there are no guarantees in this world, we are just going to keep trying to raise all the intelligence we have about what Apple and as well as other tablet accessory makers or tablet makers are doing.

And I think we will continue to improve there and therefore become faster and faster to market..

Okay.

And my last question is, what was the problem in Germany and is there any broader lesson regarding the rest of the regions?.

In Germany, I am not sure there is a broader lesson for the other regions. We just mis-executed on our gaming approach and we really took a good strong hit in terms of overall our distribution levels, our levels of promotions were too low et cetera.

So we’ve rectified that, as we go into Q3 I think we’ve got the right kind of plans in place and we’re doing other things to make sure that we are in a position in Germany that to get our gaming business back to where it really ought to be..

Got it. Thank you..

Thank you..

Thank you. Our next question is from the line of [Yousuf Isaaq] from Barclays. Please go ahead..

Hi, thank you for taking my question. Actually two of them and the first one is regarding the tablet business. So you were boosted in the first quarter by introduction of the new key mobile accessories but sales were up just 2% year on year, I meant fiscal second quarter.

But this quarter will benefit from the lower sales in your iPad in Christmas hopefully, but my worry is actually about the speed at which the cycle is starting and end, it seems like in just a single quarter, you are going to be launching your product and then you will be selling a little bit and then, it’s going to die by the end of the quarter.

So how do you expect the inventory management to this regards going forward? And my second question is regarding the restructuring charges, now you trying to get more inverse within results of the non-cash expenses. If you can help us with a little bit of timing for the sources in the second half of 2014? Thank you..

I will take the first and I am going to let Vincent have the second question. First of all in terms of inventory management and what is unquestionably a much faster cycle business in tablets than the ones we are used to.

I would say if you would ask that question a year and half ago, the answer was, we are treating this business like the rest of our business. The tablets are on a fast cycle but we are not. So that doesn’t work through a long term and therefore we have changed ourselves inside dramatically.

Now as we go through and look at what we think is a much faster cycle, what I can tell you is I don’t think it’s a quarterly cycle, I think it’s a six month cycle. I also don’t think every tablet will completely change shape and form in every six months. If it gets to that, we will do it but I doubt it.

So it’s not quite as accelerated as what you described. What I can say is we have learned a tremendous amount about how to transition in the contexts of this business, both in terms of phasing out the old and maybe more important in terms of bringing out the new fast and broad. And so, I feel quite good right now about what we have got into.

And I'm not worried by the transition process that comes with the tablet accessory business. .

Hey Yousef, this is Vincent and follow up on the GAAP, non-GAAP guidance. So we have confirmed our GAAP operating income guidance of $50 million which now includes $13 million of restructuring charges that were not planned when we initially reconfirm our guidance back in the spring.

And then on the non-GAAP basis, we have raised our full year operating income guidance 15% to $100 million and the delta between GAAP and non-GAAP as you know excludes stock base comp, amortization of intangibles and year-to-date restructuring. .

Thanks. Specifically for the restructuring, can you give a little bit more detail or I don’t mind if you prefer not to answer this..

Yes, no absolutely. Most of the restructuring is going to what Bracken mentioned around LifeSize, Craig Malloy to quick actions to reduce the overall cost structure, reposition the portfolio and $11 million of that $13 million is linked to the LifeSize activities to reposition the business. .

I'd like to think of what Craig did at LifeSizes very similar to what we did here several quarters ago, which was to really shrink the overall size of the G&A or the overhead to the size of the business. And I think he has done a great job and I think they are in a much better position right now. .

Thank you.

Okay. Moving on to our next question is from the line of Tavis McCourt from Raymond James. Please go ahead. (Operator Instructions). Please go ahead Tavis. Thank you. .

Thanks very much for taking my question. I actually have three of them. For Bracken I’m wondering if you could differentiate this year’s audio launches from last year. So we had a bunch of audio launches last year and then they kind of petered out towards the back half of the fiscal year.

What kind of sell-through trends would give you confidence today that, that doesn’t repeat itself? Secondly, wonder if you could share any kind of tablet keyboard shared data, it certainly appears that whatever in pending competition had been out there since the beginning less relevant but I want to know if you had any shared data related to that? And then finally Vincent, as kind of working capital appears to be a focus here.

Remind us of what you believe kind of the cash position of the company needs to be and at what point does it start to make sense talking about redeploying some of the free cash flow beyond the current dividend payment? Thanks..

Okay. Let me, those are interesting questions. So first in terms of audio launch differences, one thing that the one of the most valuable things you can do in a company is make sure you’re learning aggressively from what you did before. And we learned so much last year from the way we executed.

The strategy we have in the music business you know that what we did last year as we launched across a whole, a wide array of music products from headphones to speakers and we have a lot of different items in them.

And what we learned was, it’s very difficult to win a war on so many fronts at the same time specially when you’re trying to invent a business there. So we took our lumps last year honestly and we learned, and we've really focused and we’re really focused on Bluetooth speakers this year.

And so far, you asked about the underlying consumption trend, consumer trends, they look very good. We have very, very strong growth there in real sell out consumption where consumers are walking out. So comparable better than what we’ve said we would do it at Analyst and Investor Day on year-in and year-out. So I feel quite good about that.

On the tablet keyboard share data, without being too specific although we could be, it’s broadly available. The tablet keyboard shares are starting to look a lot like our shares of so many of our other categories where we’re really moving into strong leadership positions and it varies by market around the world.

But generally speaking, it’s a, we have very strong shares and we feel very, very good about them so far. Now Vincent..

.

The company has a good cash position as always, being a very good cash generator from an operations perspective. We did over $15 million of cash commodities on an annual basis. We’re trending pretty much in line with non-GAAP operating profit. Well, in terms of the working capital needed, I just want to remind the strategy.

So the overall strategy is to keep somewhat around 15% to 20% of cash for, of sales for cash for just working capital. Secondly, the company continuously looks for M&A opportunity, tuck-in opportunity into our overall strategy and accelerate our move towards mobility.

And then third, as you know from the past, the Board has used almost all tools to return cash to shareholders, in fact they had a buyback program last quarter, we just paid a $36 million dividend. And I think on an ongoing basis, the Board will look at the overall cash balance to overall strategy and when it could be return to shareholders..

Okay. Thanks very much..

Thank you. Moving on to the next question is from the line John Bright from Avondale Partners. Please go ahead..

Thank you. Bracken relative to PC units your [My Sales] have performed well.

Is this due to increased purchases by businesses versus consumers? And if that’s the case, do you have a particular channel or channels that maybe are focused on the business consumer that are doing better for My Sales?.

Yeah John, there is no magic to this number right now. At the end of the day, our My Sales so far have been pretty correlated with PC sales. And PC sales have been weak and therefore as we look into the back half of the year, we don’t expect that we’ll continue to have this kind of sales growth and our sales performance in mice.

The PC market write-down is down 11% and we expect that the overall PC platform products will not perform like they did in the first half. That said, to answer your question very specifically, no there is no specific channel that’s there into the business channel that’s outperformed the consumer market, certainly it’s done a little bit better.

But I think overall, we’re certainly pleased with what we saw in the first half particularly given the weakness of the PC platform, we definitely don’t expect that to continue in the second half..

My second question is regarding LifeSize.

You’ve made some changes, brought back founder, when should we expect profitability at LifeSize?.

Well as I mentioned earlier, our goal is to expect profitability outside of the amortization that came with buying, with us buying the company and expect them to get back to breakeven of profitability as we exit the year..

Final question. Can you, this one’s a bit difficult. But can you talk about ideas within your new product pipeline for the tablet accessories, as well as smartphones. We’re able to unseen the league of that game boy type device that you had in place or that’s out here for a smartphone.

Are there other types of ideas that you could share with us for those two market segments?.

You know, naturally as you would expect, John it’s hard to share upstream ideas because that’s a great way to communicate directly with other people who might like them too who might want to introduce them. But we’re always looking at new things both in all of the segments that we’re in.

We call it mobility for a reason, because mobility is, today mobility for us is just tablets and mobile speakers, Bluetooth speakers. But we’re always looking for other things and we’ll continue to look for them. And regarding any league that came out, I cannot reply to or respond to it right now..

More optimistic or less optimistic on the new product portfolio as you look into next year?.

As I look into next year, I’m more optimistic about what we’re doing overall. I feel really good about the transitions we have made in innovation and new product designs. So as I look into next year, I feel very good about it. I feel as good about it as I did when I stood up at Analyst and Investor Day in May.

And I expect to feel better and better about it overtime..

Thank you.

Moving on to our next question is from the line of Andrew Humphrey from Morgan Stanley. Please go ahead..

Hi. Thanks for taking my question. You’ve mentioned that you don't view the outperformance that you’ve seen in mice and to some extent cables this quarter as sustainable given secular declines in the PC market.

I can understand a level of portion there, but can you maybe go into a bit more detail on to what extent do you expect to continue outperforming that market and maybe some other factors led to that outperformance this quarter?.

The outperformance we've had has been largely driven by very nice share gains. As you look around the world, we have very strong share performance. There is a point where you can’t expect that to continue.

And so as we look back into the back half, we think it's prudent to assume that our PC platform will be proportional to the decline in the PC market. And the PC market continues on a strong decline..

Okay. Thank you..

Thank you. Next question is from the line of Michael Foeth from Bank Vontobel. Please go ahead..

Yes, hi. I have just one question basically. You are increasing your underlying operating profit guidance for this year and I was trying to understand what the impact of restructuring and also the guidance increase what kind of impact that has on your 2015 and ‘16 targets which you shared with us at the Investor Day.

Are you sticking to those $90 million and a $150 million target or is there any change for that on the back of this year's increase?.

Yeah. We're not changing anything about our targets going forward right now, we're sticking to them. And remember, it’s really the 2016, we really anchored this in 2016 and we call 2015 a bridge year and I continue to say that. So yeah, I wouldn’t expect anything to change there right now..

[Expected] earlier this year, is not having any incremental positive impact on what you were expecting at the time?.

We missed the first part of your question there for some reason..

Yeah. The question is basically the restructuring you had not planned that restructuring six months ago.

And now you’re implementing that and so as far as I see there is no incremental benefit in the future from that restructuring?.

Hey Michael, this is Vincent. We were able to raise our underlying, as you mentioned, operating income by 15% to $100 million for this year. At this point, we're only going to guide the FY14 and then on the next one probably at that point in time we come to refresh the overall model.

But for now we stick to our three year plan, it’s great that we are able to raise our EBIT ahead, but we would not want to run before we get really comfortable. Remember the restructuring is really to get large size profitable by the end of this fiscal year and that’s why we delivered that before we do anything for future years..

Okay. That’s fair enough. I totally appreciate. Thanks and congrats for the good results..

Thank you..

Thank you..

Moving on to our next question is from the line of Andy Hargreaves from Pacific Crest. Please go ahead Andy..

Hey, just a couple of questions. One on gross margin now I’ve seen that you gave us a target.

But just wondering, maybe this is for Vincent, are you targeting an actual margin percentage as you think about the business or are you just going after overall gross profit dollars? And then my second question is just on the tablet peripherals, can you give us any sense for, and obviously I am assuming touch and stylus are pretty high, but can you give us any more granularity on how much the variance there is in your attach rate by price band?.

Let me first start with the first question and then Bracken will address the second one. So, on the gross margin GAAP basis, last quarter we delivered 35.2% and then this quarter 34.5%, which includes some restructuring, in the first half on the GAAP basis we deliver about 35%.

In the back half of the year, in the second half we’re going to go back to our normal overall target margin, which is around 34% and that's really coming from a mix perspective.

As Bracken mentioned, it’s prudent not to assume that we’re going to continue to have an over performance in the light of the double-digit decline in the PC market, and then obviously we’re going to [double down] on the mobility part of the portfolio that will bring the margin (inaudible) approximately at 34%.

But to answer your question, we’re really focusing on the bottom line creating operating leverage across the whole P&L and delivering the $100 million non-GAAP operating profit that we now guided to..

Related to your second question on the attach rate by price band, I think maybe the easier way to think about these attach rates for small versus big iPads and right now the attach rate for the small iPad is significantly lower than the attach rate for the large iPad, but growing.

So it’s a good attach rate already, and it continues to grow, but there is a long way to grow ahead of it and it really depends on how much consumers decide they want to use that for productivity but more and more seem to be choosing to do that..

Okay. Thank you..

(Operator Instructions) Our next question is from the line of Joern Iffert from UBS. Please go ahead..

Thanks for taking my questions.

And the first one would be how successful are you with your peripherals for Android? And the second question would be, would you share with us your non-GAAP operating profit target for 2015, i.e., what you see for the potential amortizations here? And the last question would be, would you also share with us what is your assumption for the current quarter as you did in the conference call for the Q1 results, can we expect then seeing sales to be down between 5% to 10% if it’s a fair assumption overall for the Group? Thank you very much..

Let me start with the first and then I am going to let Vincent handle the second and then I’ll come back into the third. On the Android and how we are doing so far, it’s little too early to say. We’ve just launched something for Samsung. It’s too early to draw any conclusions about it.

We feel really good about the product and everybody we show it, it seems to love it, but I don’t have any specific numbers I can share with you right now to tell you how we are doing. I think one thing for sure I really don’t think anybody has done a great set of Android keyboard covers yet, I think ours is very good and so we’ll see.

The attach rate, undoubtedly attach rate for Android is lower than the attach rate for Apple product so far, and including Samsung, but I suspect that’s going to change because the platform is the platform and I think we’ll see over time and there just haven’t been products available.

I am going to let, can you handle the next one Vincent?.

Yes. So in terms of guidance, at this point of time we are only going to comment and we guide if you want for the full fiscal year or so.

We told you that the $50 million initially assume for this year on a non-GAAP basis meant $87 million when we excludes stock based comp and amortization of intangibles and we’ve not just raised this non-GAAP operating profit guidance, 15% to $100 million.

For monitoring purposes you can easily take this year stock based comp and amortization together if you want and take that flat over next year. Maybe stock based comp will be a bit higher depending on what stock price does and amortization will continue to trend slightly down..

Sorry, if I may quickly follow up on the 2015 amortizations, when will these amortizations be finished, in three years or four years just as we get a rough feeling here?.

Yeah. Sorry. So we won’t give that level of details now and then at our next Analyst Day when we refresh our overall three year model we give both GAAP and non-GAAP translation..

Okay.

But these amortizations are not CapEx related right? Amortizations, contracts?.

Correct..

Okay, thank you..

This is related to acquisitions and therefore will disappear at one point in time I don’t have the scale in front of me. .

Thank you..

Related your last question, what guidance are we giving for Q3 are not really giving guidance for Q3. What I would say as we look into the back half, I think we feel about the same now as we do as we were in the Q2. Our expectation is that this PC platform decline is deep enough and we don’t see anything underlying that that’s changing right now.

So we think it’s prudent to assume if that that’s going to continue and we don’t think it’s prudent to assume that we are going to be outperforming that to the level that we have in the past.

So if you can do your own math, we held the guidance at the top line level which would say, we would be down kind of mid single digits in the back half if that prudent assumption plays out. .

Thank you very much. .

Thank you. (Operator Instructions). Next question is from the line of Andreas Mueller from ZKB. Please go ahead.

Yes, thanks for taking my question. Good afternoon gentlemen.

A question on what are the factors behind the sequential decline in marketing and selling expenses? And can you discuss these factors also for discuss that we are in as well?.

Yeah. So, hey Andreas, this is Vincent. So, overall as you mentioned right all factors as a percent of revenue will continue to trend down by functions slightly different and that company took some action to reduce the overall staffing level a few quarters ago and obviously we will benefit from that.

On the sales and marketing line, there is a lot of valuable cuts that’s linked to boost product launches and overall sales. So that will obviously move along with the product launch schedules and the overall sales. But as a percent of revenue, you'll continue to see Logitech becoming more and more efficient. .

Okay. Thank you.

Thank you. .

Thank you. I would now like to turn the conference back to Mr. Darrell for closing comments. .

Well. Thank you very much. Let me just remind you a few things. You know that we have better than expected sales and operating income in the first half and we feel very good about that, that despites some pretty tough headwinds on the PC markets and persistent tough market conditions in Europe.

We continue to expect net sales of $2 billion and we have raised our non-GAAP operating income expectations to $100 million. I'd just close by saying, we're making good progress building a faster and profitable Logitech. As Vincent said, we're going to continue to optimize our operating expenses going forward.

We're driving profitably improvements and you can see them now as you look at our outlook for fiscal year ‘14 profitability. And I guess I close on saying our improvements in tighter market on the key product launches will become visible soon. With that I'll close and say thank you all very much. .

That concludes our conference call for today. You may now disconnect. Thank you..