Fish Chokes on Fish: A Logitech – Plantronics Short Story

On November 8, Reuters reported that Plantronics was exploring options that included a potential sale of the company after attracting takeover interest.  This was just four short months after Plantronics acquired Polycom for ~ US $2 billion.

On November 23, Reuters reported (a rumor) that Logitech was in discussions to acquire Plantronics.

Two days later, on November 25, Logitech says it ended discussions.

The scuttlebutt is that Logitech was offering $2.2 billion for Plantronics + Polycom, but the asking price was $3 billion.  We cannot confirm these details, but they kind of make sense.  (Related note – the initial Reuters story mentioned a figure of, “more than $2.2B.”  However, several news agencies re-covered the Reuters story but listed the amount as, “as much as $2.2B.”)

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Digging deeper into the financials of the two players, we should note that at the time of the announced ending of acquisition talks, Logitech shares were ~ $32.  They are now ~ $33 giving the company a market cap of ~ $5.5 billion.

At that same time, Plantronics shares were at ~ $50.  They are now at ~ $40, giving Plantronics a current market cap of $1.6 billion.  Notably, this figure is below what they paid for Polycom, and below what Logitech was reportedly offering.  (This reminds us of when Yahoo decided not to accept an offer from Microsoft, and we all know how that turned out.)  Given this, it seems possible that this deal could be resurrected (mixing our metaphors), at least based on financial concerns.

Notably, within its article announcing the end of the talks, Reuters implied that the impetus for the merger was somehow related to tariffs on imports from China into the US, and competitive pressure from Microsoft and Google.  Perhaps we’re missing something, but we don’t see either of these as a major reason for or against the union of these two companies.

Acquisitions are always tricky, and cross-border deals are trickier still.  A more interesting question revolves around the product-channel (and overall) fit of these two companies.

On the audio front, Logitech has done quite well with its lower-end consumer and information-worker headsets.  However, the company has yet to enter the professional headset arena.  Acquiring Plantronics would give Logitech the product line, brand name, and street creds to compete in the upper-end headset space.  This would turbo-charge Logitech’s exposure to this market segment and would also help Logitech partners expand their reach further into the enterprise.

To be clear – we believe Logitech could develop its own professional (meaning high-end) UC headset portfolio and muscle its way into the enterprise.  But that would take time.  And Plantronics has already done exactly that, and quite well.

On the video front, Logitech is climbing up the ladder from small / huddle spaces and into the medium to large rooms traditionally dominated by Plantronics (nee Polycom) and others.  And it’s doing this all by itself, with a distinctly next-gen, software-codec first approach.  It’s hard to see how Polycom’s line of appliance-based, stand-alone video systems would fit into Logitech’s USB-centric ecosystem.

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On a related note, we also question the degree of synergy between the Logitech, Plantronics (and Polycom) channels.  We know of some resellers who sell both standards-based video systems and USB-add-on solutions like Logitech MeetUp.  But we know of many other traditional video resellers who continue to snub the entire concept of PC-based collaboration in the meeting room.  Suffice it to say, integrating these three channel networks would take time.

Some deals make perfect sense.  Others make you scratch your head a bit as you try to weigh the pros and cons.  And of course, everything eventually comes down to price.

From our perspective, given our knowledge of the players, their products, their channels, the audio and video market, and the rumored financials of the initial deal, this deal that didn’t happen (at least not yet) falls squarely into the scratch your head a bit camp.