Hanneke Faber: Yeah, great. Thanks for the question. So Logitech already is part of that AI ecosystem, and we look at it in three ways. The first way, of course, is to drive in-house productivity like every other company on the planet. So I won’t talk about that. The other two ways we look at AI is really to drive growth. First, that is in our software and a good example of this is what we launched on April 17 a couple of weeks ago, the Logi AI Prompt Builder, that sits in. I was going to grab my mouse. I’m so used to having my mouse here, but that sits in all our mice and keyboards, and it’s basically a productivity enhancer. I don’t know if you guys use, if you use Chat GPT a lot, but if you use it a lot for summarizing, for rephrasing, for translating, you have to go out of the work that you’re doing, go into chat GBT, copy paste, come back in.
So one of the consumer needs we identified early on was to make that faster and more fluent. So what the software, the Logi AI product builder, that’s now for free, by the way, across all our products, lets you stay in the flow. That’s pretty cool. With a half million active usage occasions already in less than two weeks, people really like it. That’s a way to make our products better and we firmly believe when you have superior products, you will grow faster. So that’s the one way working with the chat GPTs of the world to help people enhance their productivity. The other way is probably even more fundamental, which is improving audio and video based on machine learning and large language models with our own data models. I talked about this a little bit at our last call, but products like the Logitech site video conferencing tool are outstanding.
We used machine learning, fed all the data in. What happens in a big conference room normally, there’s ten of you on one site, one of you on the other side. The person on the other side can’t see who’s speaking, just sees little heads. It’s not a great experience. With the Logitech site, it recognizes who’s speaking, but thanks to the AI underneath, it also not just knows who’s speaking, but it knows when you’re opening a packet of crisps that it shouldn’t focus on you. It’s like having a really intelligent producer inside of the product. Same is true for audio, where in our headsets we’ve implemented, again the same machine learning to get perfect two way noise cancellation. So lots of way in which we’re using machine learning and large data models to make our products more superior and again, the more we can grow that superiority delta and delight our consumers, I think the faster we grow.
That’s why we see this as a tailwind.
Chuck Boynton: There’s one other angle too, I would just add, and that is if you’re tracking Dell or Lenovo or even HP in some cases, they’re talking about a pretty significant ship refresh and their fleet of PCs. And while we’ve talked about there’s not a huge correlation between PC shipments and the sell of our gear, there is a correlation. So as you see that PC refresh cycle happening with chips, AI chips going more local in the machine, that we think will have an attach rate that will be a tailwind to us over time as you see a large PC refresh happening. Q – George Wang Got you. Just a quick follow up, if I can, just in terms of China, you guys caught out some continued weakness in China, especially on the gaming side. You guys mentioned some competitive intensity and some potential share loss.
Just curious kind of whether you see that as a more sort of a continuous pressure in the next few quarters, and then maybe you can provide a bit more color on that, especially the gaming side in China.
Hanneke Faber: Yeah, absolutely. So the business in China on the gaming side is a little softer than I would like for it to be and it’s not all bad. When you look at the premium mice, we’re still doing well. We’re still growing. We’re still number one and I think what’s also reassuring is the brand is still very strong. It has strong awareness, a strong reputation that continues to be super important because there’s literally more than 1,000 other brands in peripherals in China. So to have the brand that is the strongest in the market is really, really key. That said, there is intense competition and we need to do better. So I’ve challenged my teams to come up with plans to compete more effectively in China. That’s one of our top priorities for the months ahead, and I’m confident that we will turn that around.
Nate Melihercik: Great. Let’s go to Joern Iffert at UBS.
Joern Iffert: Hi. Good morning. Thanks for taking my questions and Chuck, all the best to you in the future. Thanks for all your help and support. Three quick questions, please. The first one would be, please, on gaming. Can you share with us how strong the growth in simulation devices was, because I remember this can be cyclical and also why gaming is now dropping to the low end of the gross profit margin range, as we indicated in the shareholder letter.
Chuck Boynton: Sure Joern. Thank you for the kind words. Simulation is a great business and our team is crushing it. The results, we don’t break out the detail for you, but simulation margins are good. Businesses up, and we feel really good about the simulation business. So I think, more to come on that one, and we do feel good about that in general. In terms of margins dropping on gaming, I wouldn’t say that they’re dropping on gaming. Margins have always been challenging on gaming. If you think about our overall portfolio and in the showroom letter, we rank the different categories, but within gaming, which is one line, there are vastly different margins. Think of console headsets. Before our new product, the A50X, which is awesome and great margin, and a killer new product in that category, console headset margins are terrible.
They’re bad for our competitors. It’s a very, very competitive space. We have changed the game by offering a really unique, innovative, different product that no one else has that we think will change the margin profile and console headsets. Gaming mice were the market leader. Margins are quite good. Gaming keyboards a little more competitive. Simulation margins are quite good and there’s many other categories within gaming, but overall, it’s a fairly competitive business and therefore, it’s a little lower margin than our flagship products like video mice, keyboards, the area, the B2B ones especially. So all the businesses are great and the margins in gaming are up significantly year-over-year. So I will say thank you to you, Jesh [ph], the gaming team.
