Friday, April 8, 2011

Zagg ( Nasdaq - ZAGG ) -- Logitech Licenses the ZaggMate

Zagg (ZAGG $8.15) licensed its tablet computer accessory, the ZaggMate, to peripheral manufacturer Logitech.  The company did retain rights to sell the product on its website, under the Logitech brand.  The ZaggMate generally carries a $99 retail price and comes with a wireless keyboard, screen protection, drop protection, and a viewing easel that lets users watch the screen in either portrait or landscape mode.  Logitech will assume all manufacturing and marketing responsibilities.  That promises to reduce production costs, broaden distribution, and allow the partners to respond quickly to unique design requests.  Zagg will earn an undisclosed royalty on Logitech's sales, which probably will be in the $50-$60 per unit range at wholesale.  We estimate the effect on Zagg's income will be neutral in 2011 compared to what the company might have done on its own.  Longer term, income could benefit as the tablet market grows, production costs decline, new distribution channels are penetrated, and other products are layered into the partnership.  Teaming with Logitech also will reduce Zagg's capital requirements, freeing up money for other initiatives.  Tax benefits are a possibility, too, if Zagg can steer royalty income through its recently established Irish subsidiary.

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