Rebecca Day

Logitech’s products “have never been more relevant,” said CEO Bracken Darrell on a Tuesday call, citing a 60% year-on-year jump in its video collaboration business for fiscal Q4 to $111 million. Shares hit a 52-week high, closing 1.5% higher Tuesday at $51.86. Videoconferencing, working remotely, creating and streaming content, and gaming are long-term trends driving business, Darrell said: “The pandemic hasn’t changed these trends: it has accelerated them.” Logitech products are playing a “small but essential role” in helping people stay connected, Darrell said, citing co-workers collaborating from home, remote teaching and kids’ online gaming ‘in lieu of physical contact.” Those trends will drive long-term growth in the company’s three largest businesses: gaming, PC peripherals and video collaboration, he said. Darrell downplayed the possibility that work-at-home trends requiring webcams and PC gear that hit dramatically in March are one-time spikes. He said long-term trends were already happening in gaming and video collaboration, and he expects them to continue. “If you do the math on how many people are now working from home -- and how many will continue to work from home on some level … it’s really a small fraction" of people that have bought a Logitech webcam, mouse or keyboard, he said. Revenue in the quarter ended March 31 rose about 14% to $709 million, with a 36% gain in tablet business to $31.9 million, 32% gain in webcams ($40.1 million), 12% rise in keyboards ($147 million) and 8% increase in gaming devices ($149 million). It had declines in smart home (28%), mobile speakers (7%) and other categories (59%). Darrell called Logitech’s supply chain “healthy” after it came to a "complete standstill" for three weeks in January and February: It’s back at “full throttle.” Revenue outlook for FY 2021 is mid-single-digit sales growth, Darrell said.

Arlo withdrew full-year revenue guidance, with CEO Matt McRae citing “considerable disruption and uncertainty across its distribution channels” due to the coronavirus pandemic. “As channels return to a more normal operational footprint and inventory model, we expect this destocking to reverse in future quarters” and shipments to improve, McRae said on the Q1 call Monday. The company is pinning hopes on a shift in its services business: Subscription conversion rates from the legacy business model were around 5%; early data for its new subscription model is about 50%. The company expects a “substantially lower churn rate,” said the executive. The jump in subscription attach rates will “transform the business as Arlo continues to end-of-life legacy products that include free storage and introduces new products that incorporate the new business model.” Q1 revenue grew 13% year on year to $65.5 million, said the company. Service revenue grew 31% to $14.7 million, paid account growth grew 57% and Arlo added 25,000 paid subscribers in the quarter. The company partnered with Kartchner Homes to integrate its video doorbell into homes built over the next 12 months, including a free three-month trial, said McRae. It introduced a wireless floodlight during the quarter with built-in 2K HDR video and two-way audio. Q2 revenue guidance is $50 million-$60 million; Q2 revenue in 2019 was $83.6 million. Shares closed down 16% to $2.31.

Consumer electronics sales are rising during the novel coronavirus pandemic, Adobe and NPD reported. Online electronics prices, deflating since 2014, are “flattening out for first time in years,” Adobe said Tuesday. “It’s unlikely that consumers will be able to continue to experience favorable pricing online, for electronics, as [they have] for many years.” Supply chain impact “may exacerbate these price changes,” the researcher said. April saw a 58% hike in electronics sales. CE prices increased 0.8%. U.S. e-commerce had a 49% increase in daily sales April 1-20 vs. March 1-10. Buy-online, pickup-in-store fulfillment spiked 208% April 1-20. Shoppers' baskets shifted toward items involving health, working from home and social distancing. Daily online book sales doubled in April. Online grocery prices increased but in line with Q1 2019 levels. CE sales for the past four weeks topped $6.6 billion, up $1 billion-plus, NPD analyst Stephen Baker emailed us. Technology sales, serving consumers’ needs for productivity, learning, employment and entertainment, have continued to grow throughout the pandemic “and notably during retail shutdowns,” Baker said: “No longer is tech a luxury good; technology is clearly now considered by consumers to be a necessity." As "online is absorbing the offline retail economy, some inflation is being observed for the first time in years, especially in categories that have consistently experienced online deflation,” said Adobe's Taylor Schreiner. Americans getting things cheaper online “may be ending, and online commerce may never be the same,” said the analyst: “It appears that COVID-19 has accelerated that process.”

Cable’s 600,000 subscriber losses in Q1, down 4% year on year, look “positively gentle” compared with overall traditional pay TV's 1.8 million losses (7.6%), also a record, MoffettNathanson reported. Pay-TV penetration is at 1995 levels, with as many nonsubscribing households as subs in 1988, the analysts said Friday. More distressing is where those customers didn’t go, wrote analyst Craig Moffett. VMVPDs, once viewed as “the last line of defense for cable networks, imploded in Q1,” and Moffett estimates the vMVPD category lost about 341,000 subscribers. Sony’s half a million PlayStation Vue service customers appear to have gone “nowhere” after the service shut down in January; AT&T TV Now, Sling TV and fuboTV lost subs, he said. Disney’s Hulu Live TV appears to “have hit a wall” after price increases, growing by about 100,000, “an abrupt deceleration from their recent torrid growth,” said Moffett. Numbers will drop this quarter, with sports off the air and unemployment taking hold, Moffett said. Combined traditional and vMVPDs subscriptions are shrinking 5.3% yearly, also setting a new low. Q1's sub loss "was hardly a surprise. No one has tried harder to avoid this outcome than ACA Connects and" its MVPD members, emailed the association's spokesperson. "Programmers and broadcasters have only themselves to blame. They demanded untenable rate increases year after year, forcing MVPDs to provide their customers with dozens of programming channels they didn’t want." The cost for "pay TV programming is four times higher than local TV, even though broadcast ratings dwarf that of cable," emailed an NAB spokesperson. He cited SNL Kagan data. NCTA didn't comment on MoffettNathanson's predictions. COVID-19 is stoking the cord-cutting trend, said Moffett, and even the return of sports is unlikely to bring back pay-TV customers who left traditional or vMVPDs. “The underlying causes for the defections are not transitory,” he said, raising the possibility of a “rapid death spiral for the entire category.”

COVID-19 is “accelerating the shift to streaming,” said Roku CEO Anthony Wood on a Thursday Q1 call. The pandemic is slowing growth of its video advertising business, he said. The streaming device maker cited Nielsen data saying prime-time linear viewing March 16-April 19 among adults 18-34 was down 18% year on year, and that nearly half of TV viewing was streamed. Subscription VOD trials and transactional VOD purchases were up, but the ad business has seen “higher than normal cancellations” as overall advertising budgets were cut; part of that has moved to Roku from traditional TV budgets, it said. Roku believes its ad business will deliver “substantial” revenue growth, “albeit at a slower pace and lower gross profit” than projected. Wedbush estimates the ad drop-off at 20%, and Roku is “almost certainly gaining market share of overall digital advertising,” analyst Michael Pachter wrote investors Friday. Though he's “warming” to Roku’s story -- “streaming has a more favorable and flexible price point than cable” -- he sees the average revenue the company generates per user declining. Roku has 45%, 40 million, of U.S. connected TV homes, estimated Needham's Laura Martin. The stock closed down 7.9% Friday at $126.66.

TiVo and Xperi, on course for a June combination, got regulatory OK, their executives told investors on quarterly calls Wednesday. On the International Trade Commission’s latest limited exclusion order (see 2004280028) banning import of Comcast X1 set-top boxes, TiVo CEO David Shull called his firm's two victories against the cable operator, finding the cabler infringed on TiVo-owned Rovi patents, "significant." He said they confirm the ITC will continue to be a venue where the company can protect intellectual property. Comcast had to remove features and functionality from the X-1, Shull said. The administrative law judge's initial determination for a third ITC case is due by June 29; the commission's final determination is due by Oct. 29, he said. Comcast didn't comment Thursday. Chief Financial Officer Wes Gutierrez said TiVo is fortunate COVID-19 hasn’t had a significant impact on revenue. Most sales come from agreements with pay-TV operators and others in the video delivery industry, he said. The company expects Android TV-based IPTV deployments to drive footprint growth this year, said Shull. Eleven North American MVPDs agreed to deploy the self-install process, he noted. TiVo had a 58% boost in entertainment viewing across the TiVo platform beginning March 23, Shull said, regarding COVID-19. TiVo Q1 revenue of $160 million was up 1% over the year-ago quarter, it reported. Xperi Q1 billings were $112.8 million vs. $104.3 million. Materials for its latest quarter are here, including information on the conference call. For TiVo's call, see the event here.

Amid COVID-19, Sonos' direct-to-consumer business is gaining. CEO Patrick Spence cited roughly 400% growth in the DTC business in April, tamping down the total company growth decline for the month to 5%. For the quarter ended March 28, DTC grew 32% said Chief Financial Officer Brittany Bagley on a fiscal Q2 call Wednesday. (See Q2 materials here that include the call and financial report). Revenue for Q2 was $175 million, down 17% from the year-ago quarter. Quarterly loss widened to $52.3 million from $22.8 million. The company withdrew February guidance of $1.36 billion-$1.4 billion revenue for FY 2020, 8-11% growth, saying, “We do not know when physical retail will reopen, or how the global economy will recover from the COVID-19 pandemic.” On DTC, Spence said in Q&A that “in times like these, I think what happens is trends that were already underway accelerate in a big way.” A takeaway from the surge in April DTC sales was that consumers are willing to buy audio products “in a big way online,” said Spence. He called Sonos Radio, launched last month (see 2004230067) with Entercom as a partner, a “toe in the water on services” for the hardware company. Sonos has always had a radio component, but “we hadn’t touched it in 15 years,” said the executive. It's using Radio to “showcase what’s possible” on the Sonos app, with an eye toward monetization through advertising.

Dolby is bracing for Q3 unit shipments 15-25% lower than previous models, said Chief Financial Officer Lewis Chew on the company’s Monday fiscal Q2 earnings call. For the June quarter, Dolby projects revenue of $225 million-$250 million; it expects most global cinemas to remain closed through the end of June. Revenue for fiscal Q2 ended March 27 was $352 million vs. $338 million in the year-ago quarter, below analysts’ consensus expectations of $361.4 million and Dolby’s $370 million-$390 million guidance. Management cited a lack of visibility into Q4. It will be looking at indicators such as how consumer spending rebounds, the rate of consumers’ return to the cinema and “what social distancing restrictions they might be under,” said CEO Kevin Yeaman. The company extended Dolby Vision technology to the iPhone SE and to Showtime and CBS streaming content, Dougherty & Co. analyst Steven Frankel wrote investors Tuesday. The stock closed down 5.8% at $55.15.

COVID-19 allowed no preparation for “spikes in demand,” said Amazon Chief Financial Officer Brian Olsavsky on a Thursday Q1 call. The stock closed down Friday 7.6% at $2,286.04. Customer demand remains high but “at a cost” -- for essential items with lower average selling prices, he said. It’s “up in the air” when Amazon will resume one-day delivery service for Prime members, Olsavsky said, saying it could be Q2, Q3, “or beyond.” The challenge is in speeding up warehouse operations. Q1 revenue increased 26% to $75.5 billion. Amazon shoppers focused on health and personal care, groceries and home office supplies, Olsavsky said. Wireless products were among the discretionary categories with lower demand. The platform spent more than $600 million in COVID-19-related costs in Q1 and expects to top $4 billion in Q2. Costs included outfitting and cleaning facilities for social distancing, onboarding 175,000 new employees, buying personal protective equipment for employees, paying hourly workers higher wages, and investing “hundreds of millions" of dollars to develop COVID-19 testing capabilities, said the executive. It built in another $400 million for increased reserves for “doubtful accounts.” The company’s investment in COVID-19 testing in Q2 will be about $300 million -- “if we’re successful,” the CFO said.

Apple's retail business had a record quarter, despite closed stores, said CEO Tim Cook on a fiscal Q2 call Thursday. He credited “phenomenal growth” in online sales. Revenue for the quarter ended March 28 grew 1% to $58.3 billion, “despite the extreme circumstances from the impact of COVID-19,” Cook said. Product revenue was $45 billion, and services revenue grew 17% year on year to a high of $13.3 billion, said Chief Financial Officer Luca Maestri. IPhone sales were $28.9 billion vs. $31 billion, said the company. Sales of wearables, home products and accessories grew to $6.3 billion from $5.1 billion. Asked whether strong sales of the new $399 iPhone SE (see 2004150049) could indicate a trend to lower priced iPhones amid economic uncertainty, Cook said he hasn’t seen that. “It appears that those customers are primarily coming from wanting a smaller form factor,” or switching from Android devices, he said.