What is Logitech thinking in discontinuing this little money maker? It is easily the most popular wireless number pad and Logitech decided to get rid of it. Is the company not interested in making money?
Logitech was probably selling at least a few hundred thousand units of the N305 annually. Unit sales could even be in the low millions. After manufacturing costs and distribution expenses, contribution per unit is likely to be more than $20. So by discontinuing the N305, Logitech is actually depriving itself of a stable cash inflow of between $5 - 20 million every year. That is more cash flow than most companies report at IPO and more than many new issuances will ever achieve.
The N305 franchise is worth at least $150 - 200 million. Ask yourself what this company’s management’s intentions are if it so recklessly throw away such value.
I will offer three reasons:
1) Almost every person in the universe who needs one, has one, and since they don't break, they don't need a new one.
2) Because of (1) above, the annual revenue is likely in the low 10s of millions
3) Logitech doesn't make it and the Margins are squeezed because of the low Revenue.
Logitech is dead unless they can find a product segment they can dominate with the share they had with OEM and aftermarket Mice with similar margins.
They do break. People who would buy a number pad actually run through them pretty quickly. Unlike a mouse, the number pad gets hammered on and often needs to be replaced.
The margins on the N305 is likely to be in excess of 80% as it costs very little to manufacture. Even though the segment is unlikely to grow, demand and the cash flow associated with it is steady. Anyone who has tried to do data entry using their laptop would know why.
I really do not get it. Logitech is simply throwing away free cash flow by discontinuing this product line and not replacing it with anything else. They are actually surrendering one of their key strengths - the unified receiver - by turning away from the number pad segment because people who have a Logitech wireless mouse are likely to want to buy a Logitech number pad if they need it.