Good day, ladies and gentlemen, and welcome to the Logitech third quarter financial results conference call. At this time, all participants are in listen-only mode. We will be conducting a question and answer session towards the end of this conference, 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 now like to turn the presentation over to your host for today’s call, Mr. Joe Greenhalgh, Vice President of Finance and Investor Relations. Please proceed.

Welcome to the Logitech conference call to discuss the company’s results for the quarter ended December 31, 2009, the third quarter of Logitech’s fiscal year 2010. The press release, a live webcast of this call, and accompanying presentation slides are available online at logitech.com. This conference call will include 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 June 1, 2009, and subsequent filings which are available online on the SEC EDGAR database and in the final paragraph of the press release reporting third quarter results, issued by Logitech and available at logitech.com. The press release also contains accompanying financial information for this call. 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. I would like to remind you that this call is being recorded, including the question-and-answer portion, and will be available for replay on the Logitech website. For those of you just joining us, let me repeat that presentation slides accompanying this call are also available on our website. Joining us today are Jerry Quindlen, President and Chief Executive Officer and Erik Bardman, Senior Vice President of Finance and Chief Financial Officer. I would now like to turn the call over to Jerry.

Thanks, Joe; and thanks to all of you for joining us. I am pleased to report that our Q3 results demonstrate we are making excellent progress navigating our way out of the downturn. Our sales, operating profit, and gross margin were higher than the outlook we shared at the start of the quarter. We returned to generating double-digit year-over-year operating income growth and we continued to demonstrate outstanding working capital management. A key driver in exceeding our Q3 outlook was better-than-expected consumer demand for our products across all regions and particularly in the Americas and EMEA. In fact, we returned to year-over-year sell-through growth in the Americas, which was a key factor driving our top line sales growth in that region. While overall economic conditions continue to be quite challenging, the demand environment in all of our retail regions showed a marked sequential improvement. A significant driver of our improved sell-through growth was the strong reception by consumers to our new products, launched in Q3 and prior quarters. Now during our last earnings call, we said we expected the channel reset in Asia would take one more quarter. This reset, which was completed as planned during Q3, was the primary reason for the decline in our sales in Asia. We returned to sell-through growth in the region during the quarter, demonstrating that consumers in the region continued to respond much more favorably to our products than our sales would suggest. In fact, Asia had the strongest sell-through growth of our three regions. There were several notable retail product category highlights during the quarter. We had said that we expected to return to strong growth in the Remotes category beginning in Q3. And we delivered 45% growth, reaching our highest sales level in the category in the last two years. We…

Thanks, Jerry. I will start with an overview of our Q3 sales performance. Please note that the growth percentages that follow are in comparison to Q3 of fiscal 2009. Our retail sales grew by 3% with units up by 6%. Looking at our regional sales in local currency, EMEA was down by 4% and Asia by 18%, compared to US dollar growth of 6% in EMEA and a 17% decline in Asia. Units were up by 11% in the Americas, by 5% in EMEA, and down by 11% in Asia Pacific. Our overall retail average selling price in Q3 was essentially unchanged from the prior year, down by just 2%, but it did increase by 6% compared to the September quarter. This is the second consecutive quarter where our retail ASP has increased sequentially. The primary drivers of the increase in Q3 were the Pointing Device and Keyboard categories. Sales of our products priced above $100 represented 17% of our retail sales in Q3, up from 15% in both the prior year and in Q2. The sequential improvement primarily reflected better performance in the Remotes category. Looking at our sales of our products at ASPs below $60, their share of the total was 67%, up from 61% last year and unchanged compared to Q2. In Q3, the Remotes category was our best performing product family, with sales up by 45% and units growing by 13%. Majority of the sales growth was generated in the Americas, although we achieved growth in EMEA as well. It was a strong quarter for several of our Harmony remotes, led by the Harmony One and a solid contribution from one of our newest remotes, the Harmony 900. We returned to double-digit growth in the Pointing Devices category, with sales up by 12% and units by…

Thanks, Erik. I want to comment now on our outlook going forward. At the start of the quarter, we said we anticipated a return to profit growth starting in Q3. We delivered that, and now we are on track to return to double-digit sales growth starting in Q4. One of the key reasons for our confidence in delivering strong sales growth is the completion of the channel reset. With a strong product lineup across multiple categories, we believe our retail business is well positioned to deliver year-over-year sales growth in excess of 20% during Q4, with a potential for double-digit growth in all regions. Turning to OEM, the difficult comparable in OEM gaming is now behind us. While we are anticipating growth in our OEM sales in Q4, we believe our year-over-year performance will be significantly improved relative to the last four quarters. LifeSize is expected to make a meaningful contribution to our sales growth in Q4, as this will be our first full quarter including their results. Let me comment briefly on why I am excited about the addition of LifeSize. One of the hot topics coming out of this year's CES was videoconferencing. In addition to a growing focus on videoconferencing for the office, there were announcements from several vendors with plans to bring video communication to the living room. The growing awareness of and interest in video communication is right in line with one of our four strategic tenets of growth, riding the video wave. It is clear that video communication is at an inflection point, providing us with a significant growth opportunity. The acquisition of LifeSize allows us to leverage our combined strengths in high-definition, high quality webcams, ease-of-use, and inter-operability. We plan to capitalize on this opportunity by delivering disruptive price performance offerings to both…

(Operator instructions) And our first question will come from the line of Alexander Peterc with Exane. Please proceed. Alexander Peterc – Exane: Yes, thanks for taking my question. I would like you to expand a little bit on your growth opportunities in China, which the [ph] last Analyst Day and walk us through what has been achieved so far in terms of the penetration of Tier III to Tier V cities there. Thank you

Yes, what I would say about China, what we have talked about at Investor Day in New York is a couple of things. First, we are very happy with our business in China. We have been successful there, we have been doing very well. Our statement about China was really the potential that we see. One of the things that we said was we really believe that China can be and should be one of our top three markets sometime over the next – let us say, five years. And I would say that we are making very good progress to that. Our real focus is on the top, I will say the top five cities or the Tier I, II, and III cities as they are called, but part of the way, we will achieve the great potential we see in China is expanding beyond the Tier I, II and III cities, but that is a multi-year process, I mean, we are not trying to get that done all at once, and we will invest steadily and in a very stable way to get there. But that is a multi-year process and I am very happy with the progress we are making so far. Alexander Peterc – Exane: And this is just out of housekeeping. Could you share with us the level of 2009 sell-through with LifeSize that have been achieved, if you can confirm with us [ph] and eventually the year-over-year gross margin there if you can? Thanks.

Yes, Alexander. I think – let me make sure I got your question right. You are asking about LifeSize and their 2009. So in 2009, LifeSize achieved on a calendar basis, stand-alone basis, approximately $80 million of revenue. We will be disclosing revenue for LifeSize going forward, but we won't be providing any guidance definitely on LifeSize operating income or profitability. Alexander Peterc – Exane: Okay, thanks very much.

Thank you.

And our next question will come from the line of John Bright. Please proceed with Avondale Partners. John Bright – Avondale Partners: Thank you. Erik, I was looking at the gross margins and it looks like you called out largely due to a weaker US dollar, which gives the impact that that had on the gross margins and reconcile that with previous comments where we said that the gross margins usually would flush out versus expenses.

Yes, so to give you a little bit of a sense, we don't break out gross margin in that level of detail, but to talk about it a little bit more, as we said, there was a 400 basis point increase year-over-year, driven by FX primarily, but also to some extent our retail OEM channel mix as that has changed, but what I also focused on a little bit is the sequential improvement that we have seen in gross margins. So it was 340 basis points from Q2 to Q3, getting us to the 33.9 and that was driven primarily by our retail product mix as well as a little bit of FX benefit. So we are really trying to make sure we are focused on improving the gross margins over time and we feel good about what we have done over the last two or three quarters. FX will always be a factor, that is something we manage in terms of how we operate, but that is how we think about it. John Bright – Avondale Partners: All right. If I may, Jerry, typically, Logitech has been a top line growth story. Well, it looks like we are at bottom, returning to that, channel health has improved. When you talk about year-over-year double-digit sales growth, can you give us a sense of organically what you are expecting, either in the upcoming quarter or the upcoming year and then is this a statement that we can extrapolate beyond next calendar and fiscal year?

Yes, I mean at this point, John, on we are not saying anything about FY11, the first time we will talk about that will be the April cycle for earnings. What you can conclude from what we have said is I think the most important signal, the two most important signals are that we have talked about getting this channel reset behind us, which has weighed down our top line sales growth, that we have returned to sell-through growth in two of the three regions in Q3, and we expect all three regions to show sell-through growth in Q4, and that consumer demand is picking up and that our products in particular are performing well and our focus is on keeping that trend going and if we keep that trend going, I think the top line will take care of itself. So beyond that, we will talk about FY11 for the first time in the April cycle. John Bright – Avondale Partners: Last question. You mentioned in your prepared remarks about the separate sales force, a bit different on this acquisition. How is that going? What are the risks associated with this acquisition and the two different separate sales forces, particularly that you are focusing on the enterprise segment?

Well, I would say, as I commented during the call that the integration is going very, very well and in some ways even though this is a larger acquisition for us, or the largest we have done, it is somewhat simpler in the sense that we are not completely integrating their product development efforts. There's a lot of areas there where we see synergies and we are working on that. But the sales force, we have left it intact and we have said to them, focus on going out and selling; and – because we are very focused on growing this business. So I would say the integration is going extremely well. I am very happy with that. In terms of your comment on enterprise, I mean, one of the things that we see as the long-term potential for LifeSize is that they give us a bigger footprint into enterprise. It is not the reason we bought them, our focus in acquiring LifeSize is really what we shared in New York, which is, we really believe that video is the killer app of the next decade and it is at an inflection point and the two companies together can really pursue that opportunity. But, in acquiring LifeSize, we do get a bigger footprint into enterprise and over time, I think that provides us a platform for growing ourselves of other Logitech products. John Bright – Avondale Partners: Thank you.

Thank you, John.

Your next question will come from the line of Jonathan Tseng with Bank of America. Please proceed. Jonathan Tseng – Bank of America: Just a question on LifeSize. I think when you talked to us back in November, you said you expected around $90 million in revenues, now $80 million in revenues is the expectation. I noted growth expectation is still the same. Just wondering, did anything change since you last spoke to us in that business?

No, Johnny. The real reason I would say that they came in a little bit shorter than what we shared in November I would say was the acquisition itself. They are still a fairly small company and managing through the complexities of being acquired by a much larger company like Logitech is quite a task for the senior management of a small company there. I am not worried at all about where they ended the year. You know, the strongest statement from us is that we still believe in that growth potential between 40% and 60%. You know, the other thing I would say about how they ended the year is that the customer reaction to some of their new products and you will get familiar with these products over time, just like you are familiar with the Logitech products, some of the new products like a product called Passport, the customer reception to that has been extremely good. This is a product priced under $5,000. It is one that we believe will be very disruptive in terms of really taking the market to the next level. But the customer reaction to those products has been very strong. And the other thing I would say is on the day we closed the transaction, I was in Austin for the closing. And in the afternoon, I spent the afternoon with the management team going through their product roadmap for the next year and it is spectacular, I am really excited about it. So I am not concerned at all how they finish the year and you can see that we still believe they will grow very strongly in calendar 2010. Jonathan Tseng – Bank of America: And you said before (inaudible) slightly accretive to operating income in the next year. Has anything changed on that front?

No we still believe that – ex-acquisition charges, which is what we said, that we expect them to be neutral to accretive for fiscal 2011. Jonathan Tseng – Bank of America: Are there anymore restructuring or acquisition charges to come or is all the exceptionals done on this thing?

No, actually Johnny, to give you a little bit of a sense of that, we talked to you about the amortization of intangibles. The other thing I would point out is in Q4, and this is baked into our guidance, is with any type of acquisition like this is you have purchase accounting rules that deal with things like deferred revenue. And in Q4, one of the things for us is there is about $5 million of deferred revenue from LifeSize that we won't able to recognize under accounting rules. So that would be the only other thing I would point out, but beyond that, you have got to schedule the amortization and the balance over time. Jonathan Tseng – Bank of America: So you say would that be another $5 million charged effectively in Q4, you are saying, or it just won't come into the top line so it will be slightly weak on the revenues. And is there any revenue guidance?

So it just won't exist. It won’t get recognized. It is not an actual write-off or charge. Jonathan Tseng – Bank of America: Cool. That was fine. Thanks very much.

Thank you, Johnny.

And our next question will come from the line of Michael Foeth with Bank Vontobel. Please proceed. Michael Foeth – Bank Vontobel: I have the first question on OEM. I mean, you talked about the impact of gaming consoles. Can you tell us what the dynamics for OEMs in general are and what the drivers for OEM will be going forward? Is there structural decline also in that number?

Well, our OEM business going forward, we talked about the fact that – the comparables be more normal. We don't necessarily expect it to grow in the coming quarter. The OEM business will be much more tied to – you know, it is really focused around the PC and the desktop PC, and it is really the core business that you have known for a long time, which is really primarily mice. And so as PC shipments goes, so will our OEM business for the next several quarters. I think that is how you should think about it. Michael Foeth – Bank Vontobel: All right. And then just a question on the tax rate. Can you give us a sense of the tax rate for fiscal 2010 or Q4 for that matter?

So Michael, we are not going to be providing tax rate guidance, consistent with how we have operated in the past, but I can give you a little bit of sense of the tax rate that we actually saw in Q3, which was low compared to historical standards for us. The things that drive tax rate for Logitech is first, a geographical mix of income between lower and higher tax jurisdictions, and then also the impact of discrete events. In this past quarter, we actually had a number of discrete events and other things that benefited us. So the one thing that I would say that 7% is a below normal tax rate for us. I would expect to see that a little bit higher going forward. We can't provide specific guidance simply because of the variability of the environment and not being able to predict when discrete events happen, but that would give you a little bit of dimensionalizing around tax rate. Michael Foeth – Bank Vontobel: Okay, and then my final one on net working capital. I mean, you did a fantastic job in cash conversion. Just how should we think about net working capital going forward? I mean, it should be going up, as you start growing again.

No, I think the last part of your comment is right on the money there. As we grow the business, we would expect that our cash conversion cycle would be a little bit longer and that would be consistent with historical trends. But I would also add as we feel very good in terms of what we have done over the last two or three quarters operationally, because we have always said and Jerry talked about it earlier, our goal is to emerge stronger as the economy gets stronger, and we feel that the working capital things we have done have helped, but to your point, we would expect to see some growth in that number as we grow the business and grow the top line.

I think what you can expect, Michael, it will be tough to stay at 18 days, but I don't think 18 days is the point. We are very focused on continuing to improve our use of working capital. You can see it in the cash from operations that we generated this quarter, which we are very proud of. Wherever the CCC is next quarter and in the future, what you can bank on is that we are going to continue to do the right thing, the right operational decisions to continue to improve our working capital use. Michael Foeth – Bank Vontobel: You have always been cash flow positive in Q4 in the past. Can we expect that as well for this Q4?

We are not providing specific cash rate, cash flow guidance, but what I would say is, to Jerry's point, is we feel good about the things we have been doing from a cash flow perspective and we are going to be judicious in terms of the types of investments we make. Michael Foeth – Bank Vontobel: Thank you.

Thanks, Michael.

Our next question will come from the line of Chris Gretler with Credit Suisse. Please proceed. Chris Gretler – Credit Suisse: Good morning or good afternoon.

Good morning. Chris Gretler – Credit Suisse: Congratulations on the great quarter.

Thank you. Chris Gretler – Credit Suisse: I just had three questions essentially. The first relates to gross margins and I was a little surprised by your comments on currency, given the fact that in the past at least, it was said that currency didn't have an overly high impact on gross margins. I was just wondering if you look at the order of elements like now retail, product mix or product mix within the retail business and supply chain costs et cetera, how that now has evolved over the quarter. So that will be my first question. The second question is, with respect to the OEM retail sales mix going forward, how we should think of – I mean, you made some comments about the OEM in the question before I think, how that is basically and you are thinking going forward where we should see some burden on gross margins going forward. And the last question is, just I recognized if you compare sell-in and sell-through for the quarter, the US is basically the first time we see that sell-in is actually above the sell-through growth rate. So there must be some restocking taking place in the Americas and also the business that felt in our first time when it was the opposite. Do you see that systematically or is it just quarterly blip here?

Okay. I will try to take those one by one. On gross margins, there is always several things impacting our gross margins, including FX is one, product mix is one, input costs and the mix of retail and OEM. And what we said in the past is that we believe that over time, our long-term range is 32% to 34% and we will manage these various impacts, which sometimes they are good, sometimes they are bad and keep our gross margin in the long-term range. And you know, the stronger statement I can make is that as we go into Q4, we believe that our gross margin will remain at the high-end at 34% based on the outlook that we have provided. So I am very comfortable with where we are. We obviously don't control exchange rates, but we are one month into the quarter and we feel comfortable with providing that outlook. So that is what I will say on gross margin. And the other thing we said in the past is we try and price our products over time to try and address the impacts of gross margin, but we try to do that prudently. In a weaker demand environment we are not going to try and offset that, because it would weaken consumer demand for our products. So we are going to be smart about that. Relative to the OEM, I mean, I will really repeat what I said earlier, I think it was to Michael's question, which is we are past these somewhat historic comps because of the large microphone sales and our OEM business is really kind of returning to base course in the sense that it is really around the desktop PC, it is primarily around mice or system keyboard sales, et cetera. We…

Thank you, Chris.

Our next question will come from the line of Simon Schafer with Goldman Sachs. Please proceed. Simon Schafer – Goldman Sachs: Yes, thanks so much. My first question would be related to your thoughts on the longer-term margin structure and growth opportunities for the business. Now that you have had a few months to assess the growth and margin accretion of LifeSize, how are you thinking about the structural margin opportunity for the overall business?

Well, I mean, we haven't said anything different about our long-term business model, Simon, and we still believe – you know, we are not changing that and we believe that we can still deliver – we will get back to delivering double-digit growth on a consistent basis. We still believe that the 32% to 34% gross margin range is valid and we are still targeting to get back to long-term operating margins of 12% or better. And we certainly believe that LifeSize will support that long-term business model over the long-term, it may even help. We are not saying anything different now. If we do, we will obviously share that at an Investor Day, but I definitely believe that LifeSize fits in well with our business model. Simon Schafer – Goldman Sachs: Would I be mistaken to assume that perhaps it is the growth level that LifeSize is as you stay close to 50% and clearly the gross margin structure of that business at a substantial premium, once you have gone through the integration and so on, and you've created synergies, shouldn't it be providing you with an incremental margin uplift, the rest staying the same?

I think if you look at LifeSize today, it is a fairly small portion of our overall sales. It is less than 5% of our sales, but our focus, as you correctly pointed out is on growing that business aggressively and it does have higher margin structure than the core business. And we believe that they will be able to keep it there through product innovation. As it becomes a larger part of our business, yes, there is the potential that it could be accretive to our gross margins over time, absolutely. Simon Schafer – Goldman Sachs: Great, thank you. And my second question would be sort of a follow-up on a previous question. As you showed clearly, this differential between sell-through and sell-in is clearly suggesting that you are sort of in channel inventory rebuild mode now. When does that begin to normalize, when do they actually align with each other? So when does that whole reset – that whole cycle complete?

In our view, starting with Q4, sell-in and sell-through are going to move more – and I am talking about the absolute level of sell-in and the absolute level of sell-through, as opposed to thinking about the growth rates, that they will move together and that starts in Q4. There will be selective restocking by some retailers, because maybe they got their inventories too low on an individual product, but I would emphasize the word selective. We are not planning on and I would encourage you not to think about the idea that there will be a big restocking impact going forward. We are not encouraging retailers to do that, we are trying to operate at these new lower levels and there is selective restocking as I said, but in general, we believe that sell-in and sell-through are much more closely aligned now and will be going forward. Simon Schafer – Goldman Sachs: Thanks. Just as a clarification on that, in a period when channel sell-in is outpacing sell-through, is that margin accretive on the gross margin level?

I wouldn't say that, no. Simon Schafer – Goldman Sachs: Okay, thank you very much.

Thanks, Simon.

And our next question will come from the line of Ashish Sinha with Morgan Stanley. Please proceed. Ashish Sinha – Morgan Stanley: Just a couple of quick questions. If I may, firstly, congratulations on your wonderful quarter. My first question is relating to the competition. So if you could give us an update on that and what I hear – what I mean specifically is that at your Analyst Day, you mentioned a Chinese competitor, Rapoo. So while dropping out your China expansion strategy, what have you kind of taken into account over there and are you seeing any recent updates or any recent moves from this particular competitor? Secondly, my question is on the videoconferencing opportunity at the CES. I believe Skype announced tying up with a couple of HDTV vendors offering HD video communication on some enabled TV sets starting to ship later this June. So if we could have your thoughts on that, that would be great. Thanks.

Sure. First, let me talk about competition in general. As we said in the prepared remarks, our market share across categories on a global basis is stable or growing in every one of our categories. So we are very happy with where that is that. When you see some of the things we talked about with success with various products in the quarter, I am encouraged that we will certainly be able to maintain that and possibly even improve it. We have faced competitors like Rapoo in China and other markets in Asia for our entire history, and we have always had the same philosophy, which is good competitors make you better. There is nothing particularly unique about Rapoo to report. We are competing with them and a lot of other companies in China. And as I said to I think one of the first questions, I am very pleased with the progress we are making in China overall. Relative to CES and Skype, I mean, a couple of things. Just to remind everyone, Skype is and remains a very important partner of Logitech's and by the way, they have been and remain a very important partner of LifeSize's. So we continue to work very closely with Skype and relative to some of the announcements at CES, all I can say is you didn't hear us announce anything at CES, but I would just say stay tuned for the next couple of quarters, you will definitely be hearing a lot from Logitech relative to this space. The announcements that were made at CES, what encourages us about that is we think it is an affirmation of something we said relative to LifeSize that video is the killer app of the next decade and it is a large market today and growing and it is an attractive market and attractive markets attract a lot of competitors and that is okay. I mean, we will be there and we will complete innovatively and you will hear some really interesting things from us over the coming year. Ashish Sinha – Morgan Stanley: Great, thanks.

Thank you.

And your next question will come from the line of Andy Hargreaves with Pacific Crest Securities. Please proceed. Andy Hargreaves – Pacific Crest Securities: Thanks. Just kind of an age-old question at this point, but I want to ask a question about attach rates on some of the new more mobile PCs because this is definitely an excellent quarter and you guys did a really good job of returning to growth in the big categories. But we had an incredibly strong PC environment and all of your PC categories seem to underperform what global PC sales were. So can you just kind of update us on what your thoughts are on attach rates and your ability to extract gross profit dollars on the attach.

Well, you know, I mean, Andy, I would go back to something we talked about in the call, which is in a quarter where the general economic environment is still somewhat subdued, we had our best quarter ever in cordless mice and we did well as both Erik and I pointed out at the high-end, with our new products like the MX Anywhere, that is the one that features the Darkfield technology, and at the low-end, with products like the V220, which is our best-selling mouse. And we took note of the fact there are a lot of netbooks sold in the quarter and we have maintained, as you know, from research that we have done that netbook owners want to go out and buy a cordless mouse and we believe a lot of them probably did. We think they were probably some of the drivers of all the sales of cordless mice that we had in the quarter. I think Windows 7 probably helped, PC sales in general helped. If you look at webcams, I mean 5% is not where we want webcam sales to be long-term, but we are very pleased with that number. And so, you know and we hit some very good selling keyboards in the quarter as well. And so I am very happy with how our core business performed and it is building momentum and I think it will be even better certainly in Q4. Andy Hargreaves – Pacific Crest Securities: Okay, thanks.

Thank you.

And our next question will come from the line of Tavis McCourt with Morgan Keegan. Please proceed. Tavis McCourt – Morgan Keegan: Thanks for taking my question. Jerry, I think the only thing I really want to dig a little more into is kind of the LifeSize expectations for this year. I want to make sure I have got it right in terms of 40% to 50% growth off that $80 million number and then also you expect to be neutral or slightly accretive, but that excludes the amortization. Is that correct?

That is correct. You are thinking about it correctly. Tavis McCourt – Morgan Keegan: Okay. And then, in terms of the sell-through, EMEA sell-through is still pretty weak, but you mentioned you would expect that up in March. Is that because just the EMEA region in general kind of entered the recession a little later, so there's easier comps or is there new specific products that are coming out for EMEA in this March quarter that gives you that confidence?

Well, two things. EMEA was weaker than the other two regions, but it also had the biggest sequential improvement versus Q2. So we really saw a big pick up sequentially in sell-through. You know, the biggest difference versus, say, the Americas is that you still have a bit of a drag in EMEA from emerging markets. And, they are stabilizing, but they were hit the hardest of all of our markets in EMEA. The larger markets, the UK, France and Germany, have actually performed better and stabilized more quickly. And I think the other thing you correctly pointed out is that EMEA kind of went into this global downturn a little bit later than the Americas, and we expect it to come out a little bit later, but I just see a general pickup of sell-through in customers and I do see that the emerging markets, they are not healthy yet, but they stabilize and they are starting to improve. You put all these things together and that is why we think EMEA will get back to growth in the quarter. Tavis McCourt – Morgan Keegan: Okay, and then on LifeSize compensation, is there any contingent payouts for performance this year for the LifeSize management team or are they under the same incentives that you guys are on?

Yes, to give you a little bit of sense of that, Tavis, LifeSize is under the same incentive plans that we run here at Logitech. You know, we are not disclosing anything more specific about things we do with them, but with all of our employees, we have got them aligned with where we want to grow and how we want to run the business. Tavis McCourt – Morgan Keegan: Okay, thanks a lot.

Thanks, Tavis.

And our next question comes from the line of Yair Reiner with Oppenheimer & Company. Please proceed. Yair Reiner – Oppenheimer & Company: Great. Thank you. Most of my questions have been answered. Just on the Remotes side, a very strong quarter. Can you talk about how sell-in differed from sell-through?

We don't give out the specifics by category, but one thing I would point to that Erik called out was, you know, we had a 45% growth in retail sales in the top line and a 13% growth in units. And the main reason for that – that tells you a lot right there – the main reason for that is that we sold a lot of the new Harmony 900, which is a $399 suggested retail price and it was received very, very well, but we also had good performance with Harmony One, which is a more moderately-priced product. So I was very pleased by that. Yair Reiner – Oppenheimer & Company: Got it. In terms of gross margin, I mean, you were able to rebound to kind of the higher end of your historical levels relatively quickly and impressively so. Is it time to kind of update where the long-term gross margin target is for the company, especially given the fact that LifeSize is going to be marginally accretive over time.

Yes, in answer to Simon's question, what I said was I do believe the potential is there for it to become accretive over time as it grows and becomes a bigger part of our mix. But we are not saying anything different about our business model. You know, if we get to the point where we really want to update our business model, we will certainly share that with you. But for now, we are focused on growing LifeSize and we are very comfortable that the long-term business model is still valid. Yair Reiner – Oppenheimer & Company: Great. Just one follow-up question from me. On the gaming side, are there any major new releases you are looking forward to this year or should we just think of that product line as basically being seasonal in the near future?

While we have had products out for Gran Turismo 5 for a long time, so we are still waiting like the rest of the world for the release of Gran Turismo 5. And we have a number of other things that we are working on, but there is nothing specific to share beyond GT 5. Yair Reiner – Oppenheimer & Company: Okay, thank you.

Thank you.

Our next question will come from the line of Nicolas von Stackelberg with Sal. Oppenheim. Please proceed. Nicolas von Stackelberg – Sal. Oppenheim: Thanks for taking my question. Just a housekeeping one is left for me it seems. Your cash flow statement shows an acquisition related cashout of $389 million. If you factor in the acquisition costs that you pulled through your P&L, still leaves about $10 million to $11 million gap versus the announced $405 million charge for the acquisition of LifeSize. Does this imply that on your liability side, there are some interest-bearing liabilities on your balance sheet now related to the acquisition?

So Nicolas, to answer your question, the last part, and I will come back to the first part, is that there are no interest-bearing liabilities on the balance sheet. At the time when we acquired LifeSize, they actually had some outstanding debt instruments that we repaid post acquisition. So it is net of debt from our perspective. Nicolas von Stackelberg – Sal. Oppenheim: So that explains the gap to the $405 million that is featured on your original press release.

Yes, that explains the gap between the $405 million and what we originally released. Nicolas von Stackelberg – Sal. Oppenheim: And what you are saying is that is something that you already paid out or paid back in the prior quarter?

Correct. So there is no ongoing interest-bearing liabilities related to the LifeSize acquisition. Nicolas von Stackelberg – Sal. Oppenheim: Okay. On LifeSize, you have mentioned at the capital markets day but also on today's call that we should stay tuned and lookout for new products. When do you think we will see the first combined product offerings, truly combined, fully integrated products from Logitech and LifeSize?

Well, we are already working on – we have been working since the day the transaction closed on R&D synergies and they will show up in areas like camera design, firewall traversal, things like that, LifeSize using our Logitech Vid software platform, particularly for SMB customers, small medium business customers. It is not that you would necessarily see a Logitech LifeSize product, you will see products where we have borrowed some of their technology in let us say webcam design, or they have used some of our technology in some of their products like the Passport, which is the product priced below $3,000. But those synergies have already been identified in terms of our overlapping roadmaps and I think you will just see them over time in the coming year. Nicolas von Stackelberg – Sal. Oppenheim: Okay, and then a final one on share buyback. I mean you have clearly managed your capital extremely well again in the third quarter. What was the rationale from not buying back any more shares in Q3, please?

Yes, to give you a little bit more sense, Nicolas, in terms of how we think about share buyback, it is very consistent with what we said at our Analyst Day and what we said in the past is with the cash flow that we generate, there is two primary things that we are going to do, is obviously we are going to repurchase shares at points in time and we will do acquisitions. We are going to be opportunistic on both of those and so going forward, not to provide specific guidance, but what I would say is that trend is going to be the same and you can see us come into the market to buy at different points in time, you will see us continue to find opportunities to do acquisitions when they make sense for us, so it will be a combination of both and that will be consistent.

So I think if I heard your question right, you asked why we didn't do it in Q3 and the answer quite simply is that we were focused on LifeSize and we knew there is a strong chance we would be buying this company and so our primary use of cash or our priority for cash was LifeSize. Erik answered our philosophy going forward and we will continue to use our cash to buy shares when we think they make sense. Nicolas von Stackelberg – Sal. Oppenheim: Thank you.

You are welcome.

Ladies and gentlemen, our final question will come from the line of Andreas Mueller with ZKB. Please proceed. Andreas Mueller – ZKB: Yes, good morning. I have a question on OpEx progression going forward, excluding the LifeSize intangible amortization, looking at China and LifeSize, what will change in the marketing and sales, R&D and G&A items, and when do you think the long term goals are really in the cards for these items?

I am not sure if this is what you are asking but here is how I am going to answer the question. Let me talk about what our focus is going forward in terms of financial priorities. If you kind of look at the past year, we used this term about emerging stronger from the economic downturn. You know, we have steadily and systematically focused kind of quarter by quarter on addressing certain things, starting a year ago with our cost structure. As you know, we have reduced it, we think dramatically and appropriately to help us get through the downturn. Our second focus was on resetting the channels, in cooperation with our channel partners. Our third focus financially was to get our gross margin back in the long-term range, which we did this quarter. Our focus for Q4 is on reigniting top line growth. Q4 would be the first quarter in six quarters where we have grown; and so our focus going forward will really be on rebuilding operating leverage. And what that means is that – and we are going to need several quarters to do that. I mean, Q4 is the first quarter in six quarters where we will have shown top line growth and obviously, for operating margins to start expanding again, we are going to need the OpEx line, and this is how I am trying to address your question, the spending line to grow less quickly than the top line growth to start to rebuild that operating leverage and get op margins back towards their long term goal. So in the context of these various investments, we will prioritize the ones that we see having the potential for the greatest returns, and it means we will be extremely tight on other things, like headcount. And we will be adding the headcount in certain areas like China and areas like the digital home, where we see a lot of growth potential and we will be very severely restraining for example headcounts and other spending in areas where we see less growth potential. But we are very focused over the coming quarters to rebuild operating leverage and that means we have to contain the growth of operating expense relative to revenue. Andreas Mueller – ZKB: And on the promotional pressures which hampered you in the last couple of quarters, are they completely gone now with the channel reset or are there still some promotions out which could ease going forward?

Here is how I would encourage you to think about that. I mean, there is always a certain level, even in what I would call very normal healthy economic times, there is always a certain amount of promotion in the marketplace. Retailers use promotion to bring people into the stores. The retail environment is still I would say somewhat promotional in general. I think it is definitely less – I know that it is definitely less promotional for us for two reasons. One is, we moved quickly to get this channel reset behind us, that was the biggest thing, putting promotional pressure on our products and on our margins. It is completely behind us now with the APJ, the Asia-Pacific reset. And the other thing is, we were anxious to get it behind us in the largest markets, as we have been saying to you, so that our new products made it to the shelf and you saw how well they performed in Q3. There is less need for a retailer to promote a brand new product. And so, we clearly believe we are seeing less promotion on our products because we have more new stuff out there than a lot of other companies. So I would say, in general, the environment is still somewhat promotional, it is less so for us for the reasons I just described. Andreas Mueller – ZKB: Thank you. And my last question on gross margin as well, the guidance was 34%, are there the same factors at work that affect mix and so forth in Q4, or is there a change within these factors?

So Andreas, to answer your question, the same factors are all at play in any given quarter, right. And Jerry talked about that a little bit earlier, but also when we go out and put together our guidance, we take into account everything that we currently know about FX, what we anticipate related to the retail OEM mix as well as product mix and then that is all factored in. So, nothing different as we look forward to Q4.

The only other thing I would add, Andreas, is obviously we don't control them, we don't know where FX is going. You know, the dollar could strengthen rapidly, we don't know. But you know, we are one month into the quarter and we are comfortable giving you an outlook of 34%, so that tells you how we feel about it. Andreas Mueller – ZKB: Okay. Thank you.

Ladies and gentlemen, that concludes our conference call today. You may all now disconnect.