Good morning. My name is Crystal and I will be your conference operator today. At this time, I would like to welcome everyone to the Logitech first quarter fiscal 2008 earnings conference call. (Operator Instructions) Mr. Hawkins, you may begin your conference.

I would like to welcome you to the Logitech conference call to discuss the company’s results for the quarter ended June 30, 2007, the first quarter of Logitech's fiscal year 2008. A press release, a live webcast of this call, and the company’s presentation slides are available online at Logitech.com. This conference call will include forward-looking statements that are being made under the Safe Harbor of the Securities Litigation Reform Act of 1996, including forward-looking statements with respect to future operating results. The forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from that anticipated in the statements. Factors that could cause actual results to differ materially includes those set forth in Logitech's annual report on Form 20-F dated May 25, 2007, and in the final paragraph of the press release reporting first 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 the management 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; the presentation slides accompanying this call are also available on our website. Joining us today are Guerrino De Luca, Logitech's President and Chief Executive Officer; and Mark Hawkins, Logitech's Senior Vice President of Finance and Information Technology and Chief Financial Officer. I’d now like to turn the call over to Mark.

Thank you, Joe. I’ll be -- Sorry, we had a little technical difficulty. Thank you, Joe. I’ll begin with an overview of our Q1 performance. Our sales grew by 9%, reaching an all-time high for Q1 with strong double-digit growth achieved across most of the retail product portfolio and in OEM. Our sales growth was negatively impacted by a steeper-than-expected decline in webcam sales, particularly in the European region. Our gross margins increased by 300 basis points compared with the prior year. This improvement was achieved despite a significant shift in our sales mix between video and audio. We ended the quarter with a strong net cash position and we delivered five days improvement to our cash conversion cycle compared to the prior year, so you are seeing a continued trend in that respect. Our comments during the call will be based on GAAP numbers that include FAS-123R costs in both periods. Let’s discuss the gross margin. Our gross margin was 33.7% and this is a substantial improvement over the 30.7%. The improvement was achieved despite a significant shift in the sales mix. Let me explain a little bit more. The retail video -- a relatively high margin category for us -- declined only 11% of our sales compared to 19% in the prior year, while retail audio, an improving but lower margin category compared to the video, increased from 17% last year to 22% this year. The gross margin improvement was broad-based with strong gains in audio, gaming, pointing devices, and keyboards, primarily driven by higher margins associated with many fiscal 2007 new product launches, combined with ongoing product costs reductions. We’re pleased to note that our PC speaker margins continued to improve both sequentially and year over year. Now, please note that our growth percentages that will follow…

Thank you, Mark. Thanks again to all of you for joining us today. I have mixed feelings about our Q1 results. I am not pleased with the single-digit growth in our retail sales caused by the webcam situation in EMEA or with the modest growth in our profit, which shows that the first quarter is characteristically the least leveraged of our quarters. But I am very pleased with several other aspects of our Q1 results. We achieved impressive growth in multiple retail product categories, including cordless mice, keyboard, PC speakers and console gaming. We had double-digit growth in the Americas, Asia, and OEM. And by the way, in Asia we returned to double-digit growth after quite some time. We delivered a substantial improvement in gross margin and we continue to demonstrate strong balance sheet management. Mark has covered the details for Q1 so let me now comment on our product and plans for the remainder of the fiscal year, starting with how we plan to address the webcam situation. Our strategy to reignite the webcam market growth has not changed from what I shared in our last earnings call. It is based on three pillars; new products, partnerships and marketing activities focused on the consumer. Last month, we announced our two newest webcams, the QuickCam Pro 9000 and the QuickCam Pro for Notebooks. Both of these premium webcams, which are now shipping, feature lenses designed in an exclusive collaboration with Carl Zeiss and establish a new standard for webcam image quality. There are more exciting new products lined up for the webcam space, specifically several new entry level webcams that we plan to introduce later this quarter to strengthen our offering in that segment, especially in Europe. The second pillar of our webcam strategy is partnership. We expect to announce…

(Operator Instructions) Your first question comes from the line of Ted Chung with Bear Stearns. Ted, your line is open.

I’m just drilling down on your Harmony sales in Europe. Is there anything specific that occurred?

If you look at the comparable year over year, what happened a year ago, we placed very successfully the product in a few stores. We capture very quickly the bunch of early adopters that just were waiting for that but then we did not follow up properly in broadening that distribution and making the in-store support and training that we did in the U.S. We know that. We are working on it. We have a dedicated team that focuses on a subset of our portfolio, particularly Harmony, and we believe that that’s going to help us a lot in Europe. On the other hand, our sales in the U.S. continue to be very vibrant. We grew I believe more than 40% in the U.S. this category year over year, which proves that the offering is very compelling and the opportunity is great. So we’re working the European angle. We understand what’s happening and we are attending to it.

Would you still be targeting Harmony to be roughly around a $100 million business for the end of this year?

Well, first of all, Harmony was close to $100 million at the end of last year and we continue to believe that it is going to be a double-digit growth product substantially this year, yes.

Just focusing on the webcam slowdown, is there any particular reason -- can you explain more in detail what happened with the channel inventory?

Well, let’s look at this in -- we’ve seen in the April and May timeframe a decline of the webcam market in Europe. The beginning inventory of our channels, our partners were not expecting that level of slowdown. In fact, we were not expecting that level of slowdown either. So what happened is that the beginning inventory was matched to a flatness of the market. The market was worse than that and therefore they took a longer time to sell what they had which reduced our selling opportunities. As Mark mentioned, this situation also created a reduction in channel inventory sequentially which bodes very well for the future but it is the mismatch between the channel expectation of growth and the actual market growth that we experienced in several companies in Europe.

And within the U.S., you haven’t seen anything abnormal related to webcams?

Actually, I think that if you look at where the category was a quarter ago, there’s a substantial improvement there. A sequential improvement of more than 40% in Q1 is unheard of for any category. Of course, we come from a painful Q4 in webcams across the regions but it indicates that what we are doing in marketing in the U.S., we rolled out several point of sale initiatives which follow the account strategies I have tried to outline and they seem to be working, so I believe that the situation in the U.S. -- well, I look forward to the fact that the situation in the U.S. is an anticipation of what we will see hopefully in Europe over the coming quarters.

Thank you.

Your next question comes from the line of Matthew Yates with Merrill Lynch.

A couple of questions, perhaps one at a time. Just following up on the last point on webcams, just so I understand this right, have you been a lot more proactive in point of sale marketing in the U.S. than you have been in Europe over the last three months or so?

We have been more proactive in the U.S. than we had been in Europe but also the European market had a slowdown which the U.S. market did not, so there’s a combination of the two. I believe that the substantial reduction in channel inventory in Europe as well as with the increased rollout of our marketing actions at the point of sale in Europe, as well as the other elements that I mentioned, our new products as well as a new partnership that will come shortly, will help particularly there. We have a great new entry level webcam. Europe is more of an entry level market than the U.S. is and we believe that will help as well. There’s a combination of things that will happen in Europe that make us look forward to the coming quarters as a recovery period for that business there.

Second, perhaps for Mark, in light of some of the recent exchange rate movements, I know in the past you’ve always said that currencies is a relatively unimportant influence on your margins but would you just remind me what percentage of your cost base is dollar linked?

I think you’ve certainly got our view generally correct. The way we look at the foreign exchange is we try not to over-simplify the matter, first and foremost in the sense of never kind of stepping back and saying that we’ve got undue benefit or undue cost out of the whole equation, partly because we do so much new product introductions, we refresh so quickly and we have a chance to, with new products, re-price and keep our parity in the various exchange rates. So I think you understand it on the revenue side quite well and we’ve been very consistent on that approach. On the cost side, and again it’s a little bit of a different equation in terms of the cost, really it’s not a situation that we really disclose and detail. I mean, that’s pretty much the situation there.

Okay, and can you talk about why there was such a big increase of CapEx in the quarter?

I can, Matthew. I’m actually glad you asked that. We made a significant investment in China and a surface smart technology capability that we now have there and so basically, that’s what is the major driver for our CapEx step-up in this particular quarter. But I still stick to the point, and I think you are well tuned to this, we say in our long-term outlook 2% to 3% of revenue is the target for CapEx. That’s still something that you should look toward.

Okay, and the last one for me; when you talk about realigning the rate of operating expense growth, are you primarily talking about the other expense line or are you also addressing marketing and R&D?

I’m talking about the entire op-ex structure, Matthew, from that standpoint. One of the things that you can count on for us is that we will continue to show the discipline that you expect from us, just like you saw in FY06 and FY07 where our op-ex will scale commensurate to our gross margin. Now, you might recall in FY06 there was lumpiness during the quarters but by the time we ended, even when the margin growth was slower in that year, we landed at about 14% dollar margin growth, our op-ex came in at 13%. In FY07, we had a more of an expansion in gross margin profits, good expansion at 24%. Our op-ex came in at 23%. You should expect that same, precision discipline over the course of the year for op-ex management aggregately, all op-ex included.

Thanks for taking the questions.

Your next question comes from the line of Yves Kissenpfennig with UBS.

Yes, hello, guys. I just wanted to get back to that last question. I mean, at what point this year do you expect to see your gross profit growth begin to outstrip the growth in your operating expenses?

If you are asking for detailed guidance by quarter, no, we don’t talk about it. But I would say that it’s going to be a gradual improvement spread all over and there’s also some comparable things here. We did some substantial infrastructure investment, and what I mean by infrastructure I mean people and systems, over the course of the last nine months and that hits the comparable, of course. We don’t expect to be at that level of an increase of those kinds of assets and infrastructure moving forward, so you will see that the yearly comparable will start to look different. So it’s a combination of a moving forward discipline, which we’ve always had, and of the fact that the effect of this ramp in headcount and systems will impact less the yearly comparable.

Okay, so it’s not as if you’re guiding that potentially, given the spending rate you saw in the Q1 that you may in fact see a gross margin for your full year that is above the 34%.

We didn’t say that. We didn’t imply that. We stick to what our goals for the gross margin. Remember the gross margin is asset for us and we can use it when and if necessary. But no, we will continue to be focused on top line growth and operating profitability.

Okay and then maybe one final question on the -- it’s clear in the video business that you are going to see a difficult comp. It’s going to get easier as the year goes on due to your efforts. Where do you see your market share sort of stabilizing key plus one out and what kind of growth do you expect for this market once -- given the drag that we may or may not see from integrated webcams or given the drag that we may or may not see from Microsoft being more active in this segment? Do you think you can still get up into the high double-digits or perhaps 20-plus? Or do you think we are going to see a structural down shift in terms of the growth rate for webcams?

That’s a very difficult question to answer when you look at the long-term. I believe -- let me do what I can. Market share, as we said, market share is stabilized. I think that the run-rate effect of the arrival of Microsoft in August last year is behind us. We maintained a strong market leadership position. We are fundamentally in the, depending on the regions, in the 50% to 55%, maybe 45% in some places or 60% in others, but that’s the kind of place where we are. Microsoft is in the 15% to 20% depending on the regions and the quarter and the week and the month in which you measure. We believe that’s -- of course, we cannot anticipate competitive actions from Microsoft and Microsoft will be as competitive in this business as they are in every business in which they compete with us and we have seen that in the past. But I believe that the structural impact, the fact that they weren’t there and now they are there, is behind us. In terms of long-term -- so as I said, we expected our own webcam sales will get to double-digit growth in Q4. The question is what is the market going to be at the time? I am a profound believer in the attractiveness of the application for which the webcams are used. The current problem with the market is that the market has -- the potential user base for webcams is the instant messaging user base of a certain number of platforms. We need to expand that by broadening the number of platforms and eventually by not necessarily associating its messaging and webcams. That’s a longer term proposition. In that case, the embedding of webcams into notebooks, it’s actually a great opportunity because if it is true that the issue of webcams is what do I do with them, once you have it in your laptop you may even try. And then, at that point the dynamic becomes the typical Logitech dynamic. You have a basic device in your computer. You know what it is and then you look for something that does it better as an after market -- better image quality, more flexibility, better software, and the many myriad other things that we have done in other product lines that are embedded in platforms. Will this generate high double-digit, below 20%, above 20% -- it’s very hard for me to anticipate. Structurally, this should be a pretty broad peripheral that everybody eventually will use but you know, it’s very hard to give you facts from that perspective.

Great, very comprehensive. Can I just have one follow-up on that? Did you say that you were looking to expand webcam sales into other platforms?

No, I said that I’m planning to expand the software platforms that we use and the user bases that we target. Today our core fundamental user base is MSN is the messaging user, Yahoo! is the messaging user and to some extent, Skype users. We want to go beyond that or deeper in that. That’s the first step. The second step is we want to look at the broader market -- not everybody uses instant messaging, right? But I believe everybody can be attracted by video and I will leave it at that.

Great, thank you very much.

Your next question comes from the line of John Bright with Avondale Partners.

Thank you. Good morning, Guerrino, Mark and Joe. I’m going to stay with the webcam question and guys, this is the second quarter in a row we’ve seen the difficult comps on the webcam. How much do you think this is the slow market growth versus Microsoft’s entry? Did you underestimate Microsoft’s impact or over-estimate what your expectations were on the market growth?

I would say the latter, definitely. We did not underestimate the impact of Microsoft at all. In fact, as you may recall, last quarter our biggest concern is that we were too much focused on Microsoft, on sort of fighting the market share battle with Microsoft and less focused on expanding the market. So definitely it’s a market situation and we’re addressing that specifically. I think that the competitive play is less relevant. I don’t -- no, I never underestimate Microsoft or any of our competitors, for that matter. But if you look at the general dynamic, it’s market ignition and not share. Share, we’re fine. We’re very fine.

In your slides, you mentioned that you’ve got some partnerships in the works to try to reignite the marketplace for webcams. Can you talk about those partnerships and what you are hoping to accomplish through those partnerships?

First of all, a new partnership is one of the elements of a strategy. Don’t forget the importance of new products at the high end because they will generate replacement into the existing base, which is quite wide, and at the entry level that will create new opportunities for people that are hesitating just to get -- so these two are very important and I would not underestimate those. As well, I wouldn’t underestimate the marketing actions and the point of sales that, for example, have had a tangible impact on our performance in AMR. You wanted me to tell you more about this partnership. It’s important. It’s major and I will leave it at that. It will allow us to target a broader base of potential users, both in terms of -- both technically as well as from a communications perspective, i.e. from a marketing perspective. But I cannot and I won’t talk more about this as it is pretty sensitive competitively. Thank you.

Do you think it’s going to be -- is this something that’s a global partnership or is it directed towards EMEA or the Americas?

It is a global partnership.

Global partnership -- one final question, if I may; Mark, you talked -- if you could talk again specifically about the operating expense leverage opportunities as we look out for the remainder of fiscal ’08. You mentioned I think in your slides increasing headcount through the calendar ’06, ’07 fiscal year. What is it that’s taking place that’s going to give specifically those leverage opportunities as we look out for the remainder of the year?

A couple of things here, John. As you know, this is the smallest quarter of the year. You’ve tracked our business for a long time. These investments that we’ve made in the prior three quarters, both systems wise, infrastructure wise, and people wise, basically that run-rate is now there in our base and as you would expect, this is the smallest quarter. As we go forward, I will obviously manage our run-rate sequential change in operating expenses and you’ll see a nice leverage, as you would expect. So I think it’s really a function that we’ve made these investments and that’s a good thing. Just to be clear, this is going to enable us to grow and take this business to the next level and now what we have to do is just go ahead and let the bigger quarters of the year, which are the next three, really help us get the leverage that one would expect. John, I think as you certainly have tracked this business for a long time, you should absolutely expect, as we always have done, that by the end of the year, we give the annualized kind of ratios, you are going to see op-ex growing less than gross margin dollars and that’s just what we do. And you know that it gets lumpy by quarter, so --

Thank you.

Your next question comes from the line of Simon Schafer with Goldman Sachs.

Thank you very much. I wanted to ask a question, a follow-up question about FIN-48. Perhaps you could be a little bit more precise as to what exactly got moved as part of this accrual to long-term liability. Thank you.

Well, what happens -- I don’t know how to address it a little bit more specifically here, Simon, because I don’t know how briefed everybody is on FIN-48, but effectively FIN-48 is geared toward the disclosure of reserves, okay? And reserves for tax in particular and they are geared towards tax positions. You have to make tax positions all over the world and so basically what happens is with FIN-48, it allows people to see clearer the size of your reserve, effectively. So that’s what’s happened very specifically. If you look at the difference between the liability sections, the movements there from the two areas that I talked about, you will see a very specific dollarization that’s intended to give you a little bit more visibility of our reserve. It’s as simple as that. It really didn’t impact our tax rate for the quarter in our particular case.

Should we expect the move or an additional portion to be moved in future periods or is this the only adjustment --

This is -- I mean, fundamentally, this is an adoption at this point and basically we’ve implemented it so I would not expect any material change at this point.

Thank you. I was wondering about your efforts in the headset industry, whether you could comment on your positioning there right now and how you are looking at the industry as far as growth prospects for your own business are concerned? Thank you.

I suppose you are referring to mobile headsets. We are the market leader in PC headsets. We think that this is a healthy category, it continues to grow on a steady base, voice over IP using the PC is great, so I assume you are not talking about that, and we are very excited about it. On the mobile headset, our efforts are absolutely minimal at this point. Two or three years ago, we thought we could get a position there. We realized that fortunately we were not successful, let’s put it this way, in the sense that that market is a bloody market in which the first party is the handset manufacturers have the upper hand big time, and so we believe that that’s not where our growth will be.

Thank you very much.

Your next question comes from the line of Manuel Recarey with Kaufman Brothers.

Good morning. Thanks. To go back to the webcam business, I’m not sure if you had spoke about -- you said that EMEA was, the market was weak. What was -- was there any particular cause for the weakness that you could identify?

It’s very hard to -- the fact is that the market was declining in some major regions in Europe. I believe that the effort of communicating the webcam proposition has never been as significant in Europe as it has been in the U.S. and therefore, what you capture is you capture the earlier adopter, so the challenge will be, as it is in the U.S., to go beyond that and you go beyond that by explaining what you do with webcams. That doesn’t mean that you have to spend a fortune in marketing, let’s be very clear. But it means that you need to focus your marketing much less on the functionality of the webcam and much more of a specific webcam model, if you want, and much more of what do we do with it? How do I use it? And that is what we have been doing in the U.S. recently but in general for a long time, we paid more attention to that kind of user avocation in the U.S., which I believe has had an impact on the market itself. I believe it’s absolutely possible and within our means to do that in Europe and we are working at it.

One more question; your revenue was up 9% but units were up 3%. Is that due to just product mix?

Manny, let me speak to that. A lot of times you see this. Number one, the answer is yes, it is product mix. Number two, we just had some really nice success in a number of offerings and let me reference a few because I know you track this business carefully: the diNovo Edge keyboard -- high-end, very nicely responded to; the Harmony 1000 -- very nicely responded to; the G25 Steering Wheel, where we didn’t have an entry we have a very high-end entry, very, very nicely responded to; MX Revolution, VX Revolution. So what we see is a really nice attraction in that particular case is one thing that I would call and I think it is very much mix. The only point that I want to call out to you is in our product lifecycle management. There’s different ways and when different things come in, you certainly should expect us to have other waves that come in so that we are competitive on all price points and that’s the only that’s more of a long-lasting point but you got it nailed in terms of your assessment.

Okay, thanks.

Your next question comes from the line of Tavis McCourt with Morgan Keegan.

I just want to follow-up real quick on the channel inventory comments. Mark, I think you mentioned channel inventories in EMEA for webcams were lower at the end of June than they were the previous quarter. I wonder if you could make any commentary as it relates to channel inventory in the Americas region. I think that was an issue in the March quarter.

You are correct. The channel inventory dollars were definitely down and we’re encouraged in the EMEA range. Overall, let me just speak about channel inventory in aggregate. It looks fine in aggregate and when I look at the entire, the Americas, Europe, the entire world, I think we are overall in a good space for total channel inventory.

In terms of the OEM business, it’s kind of grown mid-teens here for a couple of quarters. You obviously have a lot more visibility into that than we ever could but in terms of the OEM opportunities you guys see out there, is that a sustainable level of growth for that business? I think in your analyst meeting you mentioned something about potential OEM opportunities for the Harmony remote line. I wonder if you could expand upon that, if you could.

We believe that double-digit is -- the rate we see today is on the high-end of the short-term opportunities in OEM because there’s an underlying weakness in the core OEM business of mice for desktops. However, we were very successful in complementing that with gaming and keyboards. We are broadening our portfolio volume offering as that’s what shows the 16%. It’s hard. Gaming is actually an important element of that, by the way, and so is video. It was not particularly significant this quarter but this is another additional video module and other additional elements of our portfolio for OEM. So I believe that OEM can continue to be double-digit. Maybe not at the level at which you’ve seen it at this quarter. On the Harmony opportunity, yes, we actually rolled out our first partnership with a service provider in Canada, a company called Telus. This company is actually providing both the product and the installation and support for Harmony when they roll out interactive TV set-top boxes in Canada. It’s a small thing for the time being but it is an indication of where we want to go with that kind of OEM. We want to partner with those advanced offerings in which the service provider sees an opportunity to complement or even stimulate its sales by using Harmony as a special or as an add-on to a basic configuration. We’re working on others but that’s the kind of OEM you should expect for Harmony.

Great, and then a final follow-up in terms of slim devices, should we expect in this holiday season pretty substantial distribution of that product?

I would say that the answer is only a mild yes. We are working on several opportunities in the U.S. and Europe. I would say the product will be probably fully distributed to our satisfaction in next year but I would say that from a comparable point of view, yes, you are going to see a lot of growth this year too but we would not be done in our channel expansion this year.

Thanks a lot.

Your next question comes from the line of Michael Foeth with Vontobel.

I have a question concerning your gross margin guidance. The 34% guidance that you are giving seems really conservative, given that in your weakest quarter you already achieved almost 34%, despite an unfavorable product mix. So I’m wondering what is going to drag that gross margin down in the coming quarters?

It’s a good question. I think one of the things that we’re actually -- I think one of the things you are pointing out to is we are actually very pleased with our gross margin for the quarter and especially, you and I we all kind of look at the mix of our product offering and the fact that we were able to deliver this with the product mix we had with video being down was actually quite encouraging and a point that we do recognize. But at the same time, we look at the entire fiscal year. We take our targets very seriously in terms of delivering that 15-15 that we talked about and therefore, we think it’s prudent to just continue to focus on the fiscal year, continue to focus on the targets that we’ve given you in terms of where you should expect gross margin for the year. But I do think it’s fair to say we were encouraged by Q1.

Let me add to that because you might say these people are dancing around this and they have a stratospheric gross margin in the making and they want to keep it for themselves. The truth is that we are not focusing on improving gross margin. We will use every opportunity to improve top line and bottom line by selectively utilizing the extra gross margin to compete more aggressively, to give incentives for the channel, to make us sort of a healthier growth engine. So yes, the gross margin is very healthy which means that we have a set of arrows on our back that we can use and we will use. So we are not going to waste money and leave money on the table but the nature of the competitive dynamics of our market give us this chance and we will certainly use it.

I would have another question on the operating expense side. You said that you will focus underlining this op-ex growth with gross profit growth but still you seem to be running slightly ahead of your business plan here. Is that correct and can you comment on that?

I don’t know exactly what you mean by ahead of our business plan.

Basically the guidance, the ranges that you gave.

Well, the ranges are yearly ranges. You cannot look at our business model on a quarterly basis, particularly on a Q1, which is by far our smallest quarter. So if you take a yearly view, which is one of the reasons why we continue to focus on the fiscal year, you will see that what you see this quarter is fully within the ranges for sales and marketing, R&D, and G&A that we indicated. I would just caution you not to look too narrowly to this quarter because if you do the same in most of Q1s, you would find the numbers are outside the ranges of our long-term guidance for a yearly mix. So no, I’m not -- I don’t think that there is any anomaly in there. There is only the impact of the fact that over the last nine months, we’ve substantially added to headcount, systems and infrastructure. That’s what we wanted to do and we will continue, by the way, to support our growth and make additions but not to the extent that we have in the last nine months.

I was just saying that because the seasonal pattern seems to look somewhat quite different from the past but --

Let me say something that I should have said and I apologize for not having said that; we did sell less than we expected. It’s a fact. It’s a fact. We were not expecting to be 62% down in EMEA in webcams. That’s a huge swing. If you think about what it means numerically, we’re talking a substantial amount of revenue that we left on the table. So 21% growth of the rest of the portfolio tells you everything about what immensity was that 62%. So that created lower sales than we expected and of course adds some impact on the metrics that you referred to and on the comparable Q1 to Q1. Yes, you have a point.

Just a final clarification on the CapEx, you were saying at the investor day that, you know, a similar level to last year is what we should expect and I was just -- I didn’t really understand what your investment in China was. Could you just repeat that for me?

Certainly, Michael. It’s surface-mount technology. Basically it’s a capability that we have in-house in China that we’ve created and implemented and is now operational, so this is a good thing for manufacturing. It’s an investment we feel very good about. We think there will be a good return for this investment long-term as well and that happened this quarter. Again, I go back to the London investor day, go back to our long-term business model, I know a lot of people don’t give guidance on CapEx. We think 2% to 3% of revenue, you’ll definitely find us within that range and I think there’s a little bit of lumpiness but by and large, we feel good about the CapEx here.

Thanks a lot.

Your next question comes from the line of Luc Mouzon with Exane.

Good afternoon. Thanks for taking my questions. Just on the gaming business, could you just comment about the size of your console-related business? Could we anticipate an acceleration when it comes to the PS3 and as far as I understand, from the Wii product over the second part of the year?

First of all, we are very happy to see that our retail console business is growing in solid double-digits. We also are pleased to see that our OEM business is helped by some gaming OEM. We had said in the past that we anticipated the wave of console to come back and it actually is coming back. We have both announced and unannounced product for PS3. That is the richest platform for us to target and we believe that the recent price reductions that Sony implemented will help us. I think that the rumors of the death of PS3 are way, way overstated. On the other hand, we are very pleased to be the only licensed USB peripheral manufacturer for Wii. We have eight products for Wii today. We are considering a lot of opportunities there, working with Nintendo so that will certainly help, has the potential to help our overall console business. The short answer is that we believe we are at the beginning of a good cycle for consoles and we are looking forward to it.

Just as a brief follow-up, could you tell us when the QuickCam, the new product will come and reach the shelves? Is that already the case by early July?

The high-end product that we introduced are actually available. We had marginal sales of those products at the very, very tail-end of Q1 and I’m referring to QuickCam Pro 9000 and QuickCam Pro Notebook Pro. Those products are available so they are rolling. You may find it in the store nearest you or you will find it in the store nearest you in the coming days. The entry level products are going to come later this quarter.

Thank you very much.

We’ll take the last question, Operator.

Your final question comes from the line of Louis [Sabatia] with [Chevrelle].

No further questions, thank you.

Thank you, then. So let me close this call by thanking you for being with us today and of course, at this time of the year, it’s fitting that I close the call with a comment on our holiday lineup. The new product launch season that just started will once again demonstrate our ability to reinvent our categories and delight the consumer. Our channel partners saw the new products in June and gave it an enthusiastic reception. I could not be more excited by the opportunities this portfolio, our marketing activities and our track record of execution provide to Logitech in the coming months. Thank you very much.

This concludes today’s conference call. You may now disconnect.