Logitech's CEO Bracken Darrell on going beyond hardware

This week on The Vergecast interview series, Verge editor-in-chief Nilay Patel speaks to current CEO of Logitech Bracken Darrell. Logitech has acquired a couple of companies over the past few years, notably Blue Microphones and Ultimate Ears. Recently, Logitech acquired their first software company Streamlabs, a streaming software company used by almost half of all streamers on platforms like Twitch and YouTube. Nilay and Bracken talk about how acquiring this software company makes sense for Logitech, its own hardware that works with Streamlabs, and what it’s like making hardware for big companies like Apple, Microsoft, and Google. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

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• 0:54Nilay Patel?

  Hey, everybody. It's Dan from The Vergecast. On this week's interview episode, we have Bracken Daryl, the CEO of Logitech. I'm really interested in talking to the people who run companies that are important, but we don't think about. Logitech is absolutely one of those companies. They make so many peripherals that we all depend on. They own blue microphones. They own ultimate ears. They make the boom speakers. They make great headphones. They just bought a company called Streamlabs, which is basically the software product that half of the world's Twitch streamers use to get on Twitch and other services. This is a company that owns a substantial chunk of our user experience. They've been growing. They're doing really well. Bracken and I talked about how he structures the company, how he thinks about acquisitions. We talked about how he thinks of his divisions as startups and what the future is for a company that has to connect to platforms. It seems like they're getting more and more

• 1:39Nilay Patel?

  close over time. One thing that's true about this conversation, I just want to point it out. Bracken and I talked a while ago, but then they announced the acquisition of Streamlabs. So we called them up again, talked about that. Around 10 minutes in, you'll notice the audio shift ever so slightly. Shouldn't be a big deal. It's there. Just want to be transparent about it. But check it out. This is Bracken Daryl, CEO of Logitech.

• 1:58Nilay Patel?

  Brad Conderell, the CEO and President of Logitech. Welcome to the Vergecast.

• 2:02Speaker 03

  Hey, thank you very much. Great to be here.

• 2:04Nilay Patel?

  Yeah, thank you for coming on. You know, I go and make lists of people I'd like to talk to. And one thing that's always really interesting to me is companies that are just sort of the fabric of computing that really don't get moment, like big flashy moments. And Logitech is just like one of those companies at the top of my list. Everybody has Logitech stuff. Everybody has a relationship with Logitech or has had something from Logitech in the past. And it's so interesting to talk to you about where the company has been, where it's going, what you want to do next. So, thank you for coming on. I'm really curious how you see the scope of Logitech.

• 2:35Speaker 03

  Well, you tell me when you want me to jump into that. But it's really an honor to be part of Logitech for the reason you described. You know, it's amazing to me how often somebody will say, "What do you do?" And I say, "I work at Logitech." And they'll say, "Logitech?" They'll say, "You know, mice and keyboards." I'll say, "Oh, yeah. I've got one of your keyboards and mice. I love them." So, it is a, it has been part of the fabric of computing since 1981, October 2nd, to be exact. But we've always been this kind of soft spoken but hardworking brand that makes, humbly, makes great products and people appreciate that. So, I'm really proud to be here.

• 3:12Nilay Patel?

  So, you've been there for what, six, seven years?

• 3:14Speaker 03

  It'll be eight years in April.

• 3:16Nilay Patel?

  Oh, wow. And you were not, you were not immediately the CEO. You came in as President and you became the CEO later.

• 3:20Speaker 03

  That's right. I came in, it was an agreement that I would be, but I came in really so I could completely focus on product for the first year. So, I did nothing but, almost nothing, but sit there and go through product review after product review, you know, two days a week, three days a week. And then at the end of that year, I became the CEO. But my, the guy who was the CEO has been my chairman ever since. So, we've been business partners for eight years, almost eight years.

• 3:43Nilay Patel?

  So, when you come into Logitech, you're looking at the product roadmap, you're looking at what you've got in market. What are the, what are the challenges you faced? Where have you taken it? It just seems like the market for PC accessories, which is what I think most people think of Logitech as, mice and keyboards. That's growing and I want to talk about some of the gaming stuff you guys are doing, but you're in a bunch of other markets now. You've made some big acquisitions. I have a Blue Yeti microphone that I used to podcast with when I'm on the road. I had Ultimate Ears headphones. You're in all these other spaces. What was the kind of change you wanted to bring to the company over the past, I guess, eight years now?

• 4:21Speaker 03

  When I came to the company, it was kind of a dark time. It was the end of a four-year period where, you know, the PC, this was when the iPad had launched, the PC had started to decline. And everybody was sort of writing the epitaph for Logitech, you know? We had tried a few new things and we were learning how to do them. And you know, you usually learn by making some mistakes. So luckily, the collective learning of the company and those mistake areas happened before I got here. So I got to learn from them. So I came into a really tough period. I mean, our stock price was, it was about $8 when I got here. After my first year of working on all those products, I managed to get it all the way down to $624. So it went down my first year, which is, you know, not exactly great for my reputation or my confidence,

• 5:04Speaker 03

  but it was what it was. You know, our revenues declined that first year down. Again, it got worse from when I got here with the second year of decline. And our profit was, hold on to your hat here, a negative $200-plus million. So it was not a good, good period. So when I came in, that's where we were. And so people were still calling us the PC peripherals brand or company inside the company and outside, because that really was our strategy. So I came here because I was super excited about using design to serially enter new things. And that's what, that was our new strategy. So I can pause here and then kind of finish the story, where have we gone from then? But yeah, we were really a PC peripherals brand in the beginning and we needed to be more.

• 5:43Nilay Patel?

  So how do you think about being more? I mean, I think a lot about the accessory ecosystems primarily around phones. Rich Castle's friends will tell you I'm like obsessed with it. You know, Apple removed the headphone jack, which I get made fun of a lot of for pointing out over and over again. But that was sort of the last untaxed hardware connector on the phone, right? The Lightning connector, there's a whole accessory program, Apple charges a tax. Their headphone ecosystem now, they're sort of like, you know, Apple's got its chip that gives it special advantages. You can't get that. But then obviously there's Bluetooth, which has pluses, minuses. But as you try to build accessories around these products, it seems like manufacturers are pulling that stuff in a little bit tighter.

• 6:29Nilay Patel?

  And so as you expand your range, you expand your scope, how do you kind of navigate that growth as these ecosystems get a little bit more locked down?

• 6:36Speaker 03

  Well, you know, it's funny, when I started it, the key partners we had were Apple, Microsoft, and the PC makers, you know, and so, and as you just described, in the early days, I think the view was, wait, where do we go from here? We go into being the accessory, we'll be the Logitech of mobility, a Logitech of the cellphone. We'll surround the cellphone with phone cases and who knows what. And that was the very first set of steps we made. We actually, we took our ultimate years, we created a Bluetooth speaker, we used the design that I love to build a Bluetooth speaker that was turned into the first cylindrical Bluetooth speaker, so everybody could sit around it. We made it water resistant and later waterproof, and we were off to the races, we were in a new category. So that was the

• 7:20Speaker 03

  early days. But, but along the path, maybe in the second year, a light went on for us, which was, wait a minute, we're thinking too narrowly again. We're not the PC, we're not the Logitech of PC, we're not the Logitech of mobility, we're the Logitech of anything people want to interact with in the computing device. And the computing device is not just mobile, and it's not just on your desk, it's also in the cloud. So we decided, we're going to be the Logitech of, we're going to be cloud peripheral company. And so we really reconceptualized how we thought. That suddenly opened up a whole lot of other things. We said, man, we could, anything that's hosted on the cloud, we can be a peripheral for it. And so that's, that led us back into the gaming space where we'd always been, and you know, yeah, it's a mouse and keyboard, but it's a very different set of dynamics.

• 8:05Speaker 03

  So we got excited about that business. We got into video conferencing because we said, gosh, you know, really, what do you need? You need your computing power, and the primary computers in the cloud, and the services are moving to the cloud, so why can't we make the equipment used in a room, the interface for video conferencing? And so we got into that. And roll forward now, you know, it's really interesting. So eight years in, we now video enable more rooms than the biggest, the two biggest players combined. I mean, we're, we're coming at it from the bottom, so at a much lower price point with, but we can offer any size room now. So, so this is really where we're headed now. We're going to be able to peripheralize a whole lot of things, and we may even do that a little beyond hardware, and maybe even pure software.

• 8:45Nilay Patel?

  But you just bought a company called Stream Labs, I think it's 89 million is the number in front of me?

• 8:50Speaker 03

  Yes.

• 8:51Nilay Patel?

  That's a big investment. What attracts you to Streamlabs?

• 8:54Speaker 03

  Well, you know, we love this world, as we've already kind of talked about. We love this world of the democratization of content creation. We already kind of referred to this period when, you know, when I was growing up, when NBC and Disney and all these other big companies beamed things through your living room right into your eyes and they controlled the content and you were the viewer. Today, content is created by billions of people and it's getting bigger and bigger all the time. And so this is an area that we think with blue microphones, like the one sitting in front of me, our webcams, like the one sitting in front of me, our keyboards and our mice. You know, we belong in this space. We've been pulled into the space by people who are creating that content.

• 9:34Speaker 03

  And now we're going one step further and Streamlabs is really the leading player in enabling, especially gamers who wanted to stream, to make money doing it or at least have fun doing it. And so it's a great fit for what we're up to.

• 9:47Nilay Patel?

  So that really connects to, right, like a platform like Twitch. How do you think about your relation? I mean, yep, you've got the setup. You've got all the hardware. You've got the gaming PC. You've got the microphone, the headset, the camera. Now you've got the software solution. The next piece of it is obviously, yep, there's Twitch, which is owned by Amazon. I doubt they will sell it to you. Like you can't integrate into that part of the stack. Are you thinking about, hey, we should build a competitor of Twitch? Hey, we should make it more efficient to use Twitch? Hey, there are other platforms like Microsoft's Mixer that, you know, maybe Ninja just went over. Maybe some people are going to be interested in that. We should be more collaborative across platforms. How are you thinking about the future of you own this part of the stack, but the distribution side seems very different?

• 10:30Speaker 03

  Well, we offered the $89 million that we were going to pay for Streamlabs to Amazon to buy Twitch, but they didn't think that was enough.

• 10:38Nilay Patel?

  Jeff Fezos was like, I got that in my boat.

• 10:41Speaker 03

  I think they didn't need that. Yes, so the answer is, to us, this is, this may feel like a leap to you, but it feels really the same to us. Where, you know, our mice, for example, connect to iOS. They connect to, you know, the Microsoft operating system. They connect to the Google Android operating system. So we've always been in this business of really supporting these large players and supporting their platforms and really trying to enable their platforms to do more. So when we looked at Streamlabs, we thought, God, this is another great example of that. They're basically 45% of the people who are going onto Twitch. And the primary way Twitch makes money is through advertising. And and what they want is they want more people creating content that people come to

• 11:23Speaker 03

  watch on there. So what they're basically doing, Streamlabs is is creating something that's supporting the platform of Twitch. And of course, they can also support all the other platforms. And so when including YouTube. And so we like that. We really like that space. We feel like it's kind of comfortably at home for us, although it's not hardware. It's comfortably at home for us in terms of really supporting multiple platforms, other platforms. And and it really works.

• 11:46Nilay Patel?

  So you got, I mean, you talk about, okay, you're a gamer. You've got this ecosystem of hardware that Logitech makes. Now you've got a software product that's important to a lot of them. We also talked about how all these are different brands, different startups, if you will, inside of Logitech. They like have their own maps. This feels like this could be an integrated offering, right? Where you're you could you could sell it as a kit, right? Here's the streaming kit, software, bundle of products. Is that stuff going to get more integrated? Are you going to get more out of a blue microphone if you run Streamlabs? Are you going to get more out of the the gaming peripherals if you use one of your headsets? Like, do you see that kind of value building out of having it all?

• 12:25Speaker 03

  Well, you know, it's possible, but I think the more the more likely path for us is we want Streamlabs to be successful in its own right. And so to be successful in its own right, it needs to work really well with everything. I mean, whether it's a competitor to us in our microphone business or our headphone business, we want you to whatever you whatever brands you believe in, you love, you feel like they're part of you, we want you to be able to come into Streamlabs and have an amazing experience. So I don't want to disadvantage. I would never want to disadvantage some other brands' product portfolio in using Streamlabs. But if there are things we could do that would make the experience better, we'll certainly try to go after them. But I hope that if we do that, we'll also try to make them better for everything.

• 13:06Nilay Patel?

  And then the other kind of big piece of it is, you're not attached to every PC in the world. So that's you could still grow. But the overall PC market is changing a lot. Microsoft just announced a bunch of new PCs, one of which runs Android. The other one runs an ARM processor. Like, the shape of PCs is like, obviously changing. Are you saying, okay, there's enough people streaming games on a PC that want the setup, that wants the Twitch experience, that want to be part of the creator community, that we can accelerate into that even as sort of the broader PC market is changing?

• 13:40Speaker 03

  You know, we've been in this broader PCs markets changing since 2008, you know, where it went from, you know, the PC market grew and grew and grew and grew, and then it suddenly went flat, and then it started to decline, and iPads were suddenly going to be huge, and then they kind of slowed down, and then it's going to all go mobile, and then that sort of is happening, but it's not, doesn't seem to be interacting. And then the PCs stabilized, and it's kind of growing again. Pause. Our view of the world is, you know, we've got lots of things to do for people who want to interact with things that are sitting in the cloud. Most of what we're talking about is actually not sitting on a PC or on somebody's phone. It's actually happening at the cloud. And it's somewhere in servers, you know, where millions of people can access, it can be updated all the time, and there's lots of capacity and lots of new things to do. So, our general

• 14:25Speaker 03

  view of the world is, all the hardware, including what is a PC, will keep changing, just like they've been changing since 1976 or 75. What we're going to do is try to enable and be a cloud peripherals company, whether it's hardware, or in case of Streamlabs, a service for software, that enables you to have a great experience. And I think that will just always be changing, but we'll have lots of opportunities underneath that.

• 14:51Nilay Patel?

  So I'll go through some mechanics of just an acquisition like Streamlabs. How did it come together? You approached them, they approached you, you noticed a bunch of your people are using their software. What's the genesis of a deal like that?

• 15:01Speaker 03

  Well, you know, we've worked with everybody who does things like Streamlabs does, and so we've kind of been working with those companies for the last, you know, few years. We worked a lot directly with Streamlabs. We really liked the team. We loved the two founders that we got to know. We thought they were just super smart, great people, and we were impressed by what they've been able to do, impressed by their agility and kind of speed. And so, as we got to know them, we're always looking at things we could be doing beyond the categories we're in. You know, it generated a discussion that started between me and you, just as I who runs gaming. And then I brought in our head of M&A. It makes it sound like a really big company. Our M&A department is three people.

• 15:44Speaker 03

  And so we, it started this discussion with us and then we said, you know, could this work? And then we talked to Ali about it and he said, you know, we don't really want to sell, but if we, if we did want to sell to anybody, it'd be somebody like you where you really leave us alone to be our own business, inside a business where you can clear the decks and enable us not to have to raise more money all the time and, and really maybe give us advantages we couldn't have another way. So that's really how it went down. And then you get into the discussion around how much do you pay and all that stuff. And that's always the, the, the, the steps that just naturally M and A goes through. But, but I'd say that was it. And, uh, and it started, it started with culturally, does this look like a pretty good fit?

• 16:21Nilay Patel?

  How many, how many, how many folks do they have?

• 16:24Speaker 03

  They have about 90 people. They're, they're in both San Francisco and Vancouver.

• 16:28Nilay Patel?

  And they're going to stay put in their offices?

• 16:30Speaker 03

  Absolutely. We're, they're staying right where they are.

• 16:32Nilay Patel?

  From a consumer perspective, what changes should you see sort of short, medium, long term?

• 16:36Speaker 03

  Well, I hope you don't see anything short term because it's, uh, we think what they're doing is great. They've got really cool roadmap that we believe in and, and we're going to support it financially and, uh, and, and kind of with any expertise we can bring to the table. Uh, medium and long term, I, I think will remain to be seen. You know, it's a, they're a startup that is growing rapidly and pivoting and moving in a couple of different directions. And we're going to, so I think you will naturally see Streamlabs do more things, but I wouldn't relate that directly to us. I think we're about really trying to be part of this ecosystem and make the, the gaming and the streaming experience better and better and available to more and more people in a super easy way. And so I don't have anything specific to say, except that, you know, I think they were doing great stuff and I hope we'll do a lot of great stuff together in the future.

• 17:19Nilay Patel?

  You mentioned support the roadmap financially. Often, you know, the, the larger company comes and buys a startup and says, we're just going to fund your roadmap. We're just going to go for it. You can go a lot faster than you were before. Was that one of the promises you made or you think they're operating through at speed?

• 17:33Speaker 03

  You know, actually they were really well funded. I mean, I, I brought, I said it, not you, but, but they were, they had a whole bunch of cash sitting on their, in their bank, you know, waiting for them to do what they needed to do. So they didn't really need us. I mean, they- They really did it because they said, you know what, we, we're thinking long term and we like the way you guys are thinking and you're really interested in, in enabling streamers to either, to at least have a lot of fun and be, and for it to be easy and maybe to make money and make a living doing it. So, so we were, we were both had a very similar point of view on this. I think that was probably more important than the funding of their roadmap. Uh, but, but I do think when you stretch it out longer, you, you know, if you're, if you're in the startup that does need money, you know, certainly we will, we want to make sure that they're well-funded, they're not,

• 18:17Speaker 03

  they're having to, especially the people who are running the business aren't out there trying to raise money all the time. But when I, I've met with probably, like you have, I've met with probably thousands and thousands of founders and it's just breaks my heart sometimes, most of the time, when I realize that, you know, these founders have this huge passion for their business, like in their case, streaming and are broadcasting. And, and then you realize, actually, they're spending 60% of their time talking to venture capitalists and angels and trying to sell their story and 20 or 40, 20% of their time, I know the math doesn't work, but I'll get to the other 20 in a minute, you know, really doing what they love. And then the other 20% is administering the business in ways that maybe we can help. So hopefully this will get them to 80 or 100% of the time doing what they're really excited about and love.

• 18:59Nilay Patel?

  You don't really see that with the software business as much. With the software business, you know, you don't have inventory on the shelf. So like, this is your first software business. Uh, it's, it's an expansion for you, maybe not conceptually, but it's certainly an expansion in a different ecosystem, a different economy. How are you thinking about, okay, can, we can change the way we operate now that we're shipping software and not hardware?

• 19:20Speaker 03

  Well, the most important thing we're, that we need to be doing is learning because Yali and his brother, these two guys have a lot more to teach us than we have to teach them. So we're going into this with our eyes wide open, trying to make sure we learn. I, I keep looking on the shelf, trying to see stream labs and it's not there, you know, so, so there's a, there's nothing to see on the shelf because it's not.

• 19:39Nilay Patel?

  You're not going to ship some CD-ROMs?

• 19:41Speaker 03

  No, we're not shipping, we're, we're stream labs, you know. So, so, you know, kidding aside, we're, we're here to learn and, and they've got a lot to teach us. And, and we're going to be, uh, look more and more like this across most of our business. We've watched, we have watched software-only products, you know, we're Lodge Tech Capture, which is a, an editing software for, for things like what we're doing right now, video creation and content creation. So we're, we're increasingly getting into that space. And, uh, and I think we've got a lot to learn from them and, and, uh, and, and no inventory to carry, which we like.

• 20:12Nilay Patel?

  I mean, that's why people like making software.

• 20:14Speaker 03

  Yeah.

• 20:15Nilay Patel?

  Is there more software in your future?

• 20:16Speaker 03

  Yeah, yeah, we're, we're probably, I don't know the exact numbers, but we're probably hiring software engineers, you know, two to one over hardware engineers now. We still love hardware, but we're doing a lot of software and increasingly we'll be doing services. So yeah, there will be a, there's a lot more software in our future.

• 20:31Nilay Patel?

  But like consumer software products, not like Stream Labs, not software to support the hardware?

• 20:36Speaker 03

  Yes, exactly. Not, not just firmware. I mean, real software. And in our B to B business, which we haven't talked about, we're, you know, we're in the video conferencing equipment business there, but we're doing a lot of software there, too. We're writing software now where an IT department can actually track all the devices and all the rooms that they have and, and kind of know what usage looks like. And we've got AI built into those. That's, that's somewhere between firmware and, and traditional software. But yeah, we're doing more and more and you'll see a lot more software from us in our future over the next decade.

• 21:05Nilay Patel?

  So one thing I hear a lot, you know, we cover a huge range of companies. We obviously cover the big companies. We're really interested in small companies, especially small hardware companies. And we watch them come up. We watch them try to succeed. We watch a lot of, I'm, I'm a sucker for direct to consumer car chargers on Instagram. It's like, they're all targeted right at me because I'll buy every single one. And then we watch them collapse, right? They don't have the scale, the manufacturing is too hard. You know, updating a hardware product after its design and you go out and get feedback is, is really difficult. What's kept you above water? Is it just you've got one business that's pretty good and you can try all these other ones? Is it people trust your brand? What keeps you out of the sort of rocky hardware

• 21:49Nilay Patel?

  world where we, we see so many other people just fail to get to scale and either have to sell themselves or just collapse?

• 21:56Speaker 03

  Well, you know, so we, we've gone from whatever, when I got here, eight or nine categories to 27 now. So we're in 27 distinct categories, right? So first of all, we've got a portfolio and that portfolio is across a lot of different things. And some of them are stable. Some of them are slightly declining. Some of them are super high growth. So we've got that whole world of small company hardware, the startups that you described is sitting inside our company. We also run our business that way. So each of the individual businesses Operate almost like small companies and when we do buy something like you described earlier, they are literally a small company, they come in. We also create new businesses by hiring former entrepreneurs and putting them in charge of something new that we're not in yet, or that we don't even, the category doesn't even exist yet. And we protect them

• 22:40Speaker 03

  and we keep them, we keep them quiet, we give them just enough resources, a lot less than a venture capitalist does. And we say, let's go, let's try to create something. So we've got, we're doing all that, you know, and that's all inside our four walls. Where the typical hardware startup trips up is the same place that anybody in hardware does. It's really the supply chain. So the supply chain starts with, you know, I need a certain component from a supplier. And usually, if you're small, even if you're not, you have to make a six-month commitment to that. And then you've got somebody making it for you. So there's work and process inventory in the factory. And then it's got to be transported to a boat or to the plane. And then it's got to make it over here. And then it's going to go into Best Buy or Amazon into a warehouse. And then it's going to get to consumers home. And during the early growth phase, it's really exciting because everybody wants to give you money. Every venture capitalist is interested. You've got high growth. This

• 23:25Speaker 03

  is really sexy. Hopefully, your gross margins are good. So all that feels and looks a lot like the typical startup in software space. Where it all changes, and the music stops, and you've got to find a chair as fast as possible, is when the growth trajectory lowers. That's the dark moment. Because when that growth trajectory lowers, that inventory you've got, sitting throughout that chain, especially as it gets closer and closer to the customer, it ends up being a whole lot of times worth of inventory. And then, suddenly, you need money. And then you go back to those same people who are so happy to give it to you before. But I just need money because actually my growth is slowing, and I've got a whole lot of inventory out there. They don't want to give you money anymore. And so the music's really stopped, and there's not even a single chair there, and you have

• 24:08Speaker 03

  to sit on the floor, and then it's over. And that's, we've seen this so many times. And I've probably met with three or 4,000 entrepreneurs since I've been in this job. I spend more time with founders than I do with my peers by a factor of 100. Or a thousand, maybe. And I love them, you know, and when they start to get in trouble, you know, we've bought companies that were in trouble at times. Some were in great shape. But it's a tough road, hardware.

• 24:32Nilay Patel?

  So I'm looking at sort of the market of hardware startups and you're saying you bring in entrepreneurs, you give them startup like protection, you say, okay, go make a business. You've got divisions of your company, you're saying you run them like a business. But I look at sort of the explosion of direct consumer hardware startups, even medium sized startups that we really like, like ERO, they just like had to go to Amazon. They just had to sell themselves to Amazon. They didn't have a choice. How do you keep inside of Logitech, besides just saying, we got your back, don't worry about it, we're better at supply chain stuff and we can ride it out. How do you keep that curve going inside of the company for your individual startups that you're incubating?

• 25:11Speaker 03

  First, we're choiceful about where we play. We really try hard not to compete with those really big players, you know, where we can, because, you know, it's so much easier to win when you're fighting somebody who's much smaller than you are. So we tend not to be in battles where directly with, you know, Apple and Google and it, you know, it's just not our, it's not a choice we make. And often the startups have made that choice. And even if they didn't mean to in the beginning, that's what it turned into. So it's, so first of all, try not to be in that fight. The second one is, you know, one of the reasons they get in trouble is because they're usually burning cash, right? That's the way it works. You know, you burn cash, you invest, invest, invest, and at some point, the lights go

• 25:53Speaker 03

  on and everything's working. And in a great case scenario, like Beats or GoPro, you know, you just, it's, everything's great, you know. We, on the other hand, can really protect that and we can burn cash on businesses for a long time. And we balance that portfolio so we can give people, we can give a founder or somebody running a new business, real room and time and patience. And we are, we're super patient, maybe too patient sometimes. So I think that's probably the big difference. We can protect them from the market dynamic of having to raise money.

• 26:27Nilay Patel?

  So give me, walk me through an example. So you bought Ultimate Ears when Ultimate Ears was independent. I was a huge Ultimate Ears fan. This is when my hearing was better. But I was a huge Ultimate Ears fan. I had their fancy in-ear headphones. You buy them, now they're a mass-market consumer brand. They used to be a pretty high-end headphone brand. And then they put out the boom. They've really changed the category of Bluetooth speakers. What was that process like?

• 26:52Speaker 03

  Yeah, it started very early days, you know, my first year here. With the Bluetooth speaker category was working. We had a small team that was trying to figure out, how can we enter that category? And then what did we do? We did exactly what everybody else does. We created a, we tried to make a Bluetooth speaker that had good connectivity and sounded better. And I think we were about in our third or fourth one. And then we were at the, as I said, I'm a design nut. And luckily, the team was working on it, said, you know, we need to look at this differently. Let's put the consumer in the middle of this. Sounds obvious, but we did. And so when they did that, we said, okay, where are they going to be using it? How are they going to be using it? Okay, it's like, I'm sitting across from your sound engineer, who's holding a microphone right in front of my face. And

• 27:37Speaker 03

  imagine Krista sitting on the other side of us. So we're a little triangle. That's the typical group, the early days, that was listening to Bluetooth speakers. So we're three of us sitting around in a circle. Take one of those boxy little things that was out there at the time, and that we made too, and stick it in the middle of the table, and somebody's sitting on the edge. You know, whether you literally can't hear it as well, or you feel like you don't hear it as well. You weren't, it wasn't fair. Somebody got left out. So we said, it's got to be a cylinder. And of course, our engineering team said, that would be impossible. We won't be able to do good acoustics. So, okay, well, we're going to have to do it. So we spent the time, we made it into a cylinder. And that cylinder was inaccessible, equal opportunity from all sides. And that was, that was really the breakthrough in design. And then we made it waterproof, and all those things that

• 28:21Speaker 03

  we knew they were going to be sitting next to the pool. Occasionally, it might get knocked in. It'd be cool if you could actually throw it in, which of course you can. So that was the process. And once we had the product figured out, we were lucky that we had the Ultimate Ears brand, and that incredible heritage you mentioned, which is still amazing. I mean, and so unknown. We've done a terrible job telling everybody about it, but it is really amazing. And I'm happy to tell you on this, on this call, but I won't, I won't do that. It's not an advertisement. But, but you know, having that pedigree and having that little secret behind the scenes that we could bring into the brand was, was really a luxury and, and it did come through an acquisition, but the building of the, the building of the business, the building of the product was really organic.

• 28:59Nilay Patel?

  So that is you acquire ultimate ears and then you say, we need to enter this category. Do you just task that team with doing it and you're overlooking it? Or are you all sitting around saying, how do we grow the ultimate ears business?

• 29:10Speaker 03

  Uh, in that case, we really were saying, boy, we really want to be in this category. So team, go make it happen, you know? And luckily we had a great team and they made it happen. And we went from zero to, you know, 200, 200 plus million dollar business.

• 29:24Nilay Patel?

  And so now, and so ultimate ears is now its own division of, of Logitech.

• 29:28Speaker 03

  Yeah. I mean, that is really a standalone business and it's, uh, you know, it's almost eight years in. So they've done a, they've done a great job and the ultimate ears brand still has a lot of potential. You know, the, we've, we've barely scratched the surface in the earphone space. You know, we still are the leader by far in the, in the ear monitors that, you know, people like, uh, and I won't mention names because I don't think we legally can. But let's just say a lot of big name people who get on stage, you see wearing something in their ear or wearing ultimate ears. And, you know, one of them told me one day, uh, just a wonderful story. He said, I said, why do you like them so much? He said, you know, I'm, uh, he said, this is my life, you know? I'm getting ready all day for, to perform on stage and I can hear the crowd out there. And now I'm about to walk out and I put my ultimate ears in and it's my world.

• 30:13Speaker 03

  And I'll never forget that. I thought, God, it's so powerful. So we still haven't unleashed the power of the ultimate ears brand into other categories, which I think we can.

• 30:19Nilay Patel?

  So I mean, that, that raises a question, right? Like obviously the world has moved to Bluetooth headphones and Bluetooth audio. The market for headphones, depending how you look at it, it's either huge or it's been destroyed by AirPods, right? Like it's one or the other. I can't tell you which one it is. How, how are you looking at it?

• 30:36Speaker 03

  I think it's huge and it's just expanding. It's so fast. And the AirPods are a magnificent gift to humanity. They're helping us realize the future of, uh, always in, always on computing directly in your ear. And that's a wonderful thing to do. And it will open up new vertical applications within it, new broad scale applications like AirPods and a variety of price points and an endless unlimited number of brands. And this is very early days, so it's great.

• 31:04Nilay Patel?

  But so that to me is like the the problem, right, is AirPods are great and you know, there's all kinds of new, I don't think they sound any good, but they're they're super convenient, people love them. But if I wanted to come to you and say, okay, I want ultimate ears, truly wireless ultimate ears headphones, but I wanted to work just like AirPods. I want them to have, hey Siri, I want them to connect just as fast. You're kind of limited in what the platform allows you to do now as the company's starting to integrate. Or is that something that you perceive as as much of a problem as I do is just somebody wants to spend dollars on something that sounds better? Or is that a different kind of opportunity?

• 31:41Speaker 03

  You know, I think it's a different kind of opportunity. And, you know, I don't have anything to say too much about that right now. I just say, we're always working on on spaces around all the categories we're in. And that's a very interesting space. And I think there's plenty of room to innovate. You know, I think it's not just for us, but for lots of companies. You know, it's funny, you know, when back in, now I'm going to date myself, but back in 2000 ish, I was working at General Electric at the time. Remember that company, GE?

• 32:11Nilay Patel?

  Yeah.

• 32:11Speaker 03

  And I was, and I, and at the time, I thought, you know, man, there is just nothing left to do. I mean, you know, the the dot com bubble had burst or was bursting. And it seemed like GE was just getting into everything. And I thought, you know, there's no room for entrepreneurship anymore. Nobody can, nobody can get, it's all these big companies are going to do everything, you know. And I think sometimes people look at this now and they say, oh, my God, Amazon and Apple, and they're just soaking up all the opportunity. That's always wrong. You know, there's always new opportunity. There's always a way to innovate. Any small group of people can come up with a product that's better than what's already out there. You're right that you run into limitation, platform limitations, but usually you can work around those two or find a space around there where it's not as relevant. So I think there's just a tremendous number of opportunities, even around that

• 32:52Speaker 03

  specific space. And I think you're going to see him come if they're not already, I think you're going to see him come soon, but certainly over the next few years.

• 33:01Nilay Patel?

  I want to talk about your kind of, I think it's your most recent acquisition, which is Blue Microphones.

• 33:06Speaker 03

  That's right, with the famous Blue Yeti.

• 33:08Nilay Patel?

  Yeah, just walk me through that. I mean, obviously, they're a hugely popular company. You're on a podcast right now, like podcasts are exploding. We're like, we just need to be the peripheral for everybody doing a podcast. Was there, is there a bigger strategy or are you going to accelerate them in other categories? What's the thinking there?

• 33:25Speaker 03

  Yeah, there's always a bigger strategy for us. So the strategy was really simple. We, we said, God, you know, we're here, everybody wants to be, everybody's talking about Steam, you know, since I'm an art, I'm in a, a design kind of guy, so Steam, you know, science, technology, engineering, math, and the arts, you know. So everybody's talking about that and everybody's talking about you need to be coding and you do, I mean, for all those kids out there listening, please take coding classes. What's the counter thing to that? What is it? It's, it's the other side of it, which is actually, everybody wants to be a YouTuber. Everybody wants to be streaming themselves playing games. Everybody wants an audience. You know, so, so, so that's a very interesting place to go, you know, for us. So as we, as we started to really think about that, we thought, God, you know, actually, we're already in this. I mean, our webcams are used all the time for this.

• 34:08Speaker 03

  People use a mouse and keyboard if they're sitting at a desk while they're streaming. If they're playing a gaming online, they're streaming themselves gaming. Obviously, they're using our products for the market leader in, in the peripherals for gaming. So where else should we be in that space? And then we got, we said, you know, we started developing a seed, we called it, an internal startup on microphones. As we go into these internal startups, we have a very passionate team working on it. We said, God, you know what? Then we start to always look around outside and say, what's out there that could either accelerate or differentiate what we're doing? And we, we looked at Blue and then it was owned by a private equity firm, but run by a really passionate team. The CEO is a drummer. And so they got in touch with us, we got in touch with them and we fell in love and we ended up getting something done and now they're part of us, you know, and that's

• 34:51Speaker 03

  the way it worked. And it's a, it's a phenomenal addition to our company and it signals that we believe in the democratization of content and we want to enable all those millions of people out there who want to be YouTubers on some level or Instagrammers or, or whatever. And, and so this is a space we think we belong in.

• 35:10Nilay Patel?

  So when you talk about, you know, there's always a larger strategy, what does that look like for Blue? Because I mean, they do make the Snowball and the Yeti, and there's a new Yeti with an LED meter on the front, which is sitting on one of our desks over there, and I think it looks really cool. But how do you make that category as big as we took a bunch of smart Ultimate Ears people and said, we're going to reinvent the Bluetooth speaker?

• 35:32Speaker 03

  Well, you know, I think, first of all, it's not just a microphone category, right? And I'm not talking about blue per se, but what are all the things that go into? How do you enable somebody who wants to put themselves out there and create content for other people? How do you enable them to be successful? Maybe even to make a living doing it? First of all, they need a microphone. They need a camera. And they need other things. Some are virtual, some are physical. So that's the way we think about that whole space. It's not just about blue. It's about, gosh, that's a big, broad space out there. We're not going to play in every area, but we're going to play in the areas that make sense for us. But it's a big space. There are hundreds of millions of people and probably billions of people doing it. And that's the kind of place Logitech can play.

• 36:14Nilay Patel?

  So I mean, that to me comes, I'm so interested in this. We have an entire team that just covers creators and the tools creators use, and the platforms and the relationship to platforms. But what strikes me is there's the first wave of being a creator. You're going to make a YouTube video using your phone. Then there's a second wave, which is I want a slightly better microphone. Maybe I want a slightly better camera. And then there's a third wave, which is like, now I'm a business. Like, I personally am a business. I need a bunch of Pro equipment. Where do you see your boundary? Where's the edge of what you won't do?

• 36:48Speaker 03

  None of that. I don't see a boundary around that. I mean, I think all that is fair game for us. I think, now, how effectively we play in each of those is a different question. But we're really intrigued by all those areas. I love it. There's a guy named Fabian Tausch, who's a young entrepreneur in Germany who has a video blog that he does, and he interviews me, and he's interviewed me a couple times. And he's a great example. He's just getting to the point where he's making a living doing this. And so he's stepped up his microphone. He's stepped up everything. He's more mobile. He's doing, so I love him. And then we've taught, we just... We obviously talk to people who are, you know, have, you know, hundreds of thousands, millions of followers, all the way down to somebody who's got, you know, like my kids who who might have 500 or 1,000.

• 37:33Speaker 03

  And we wanna, we wanna be, I believe there's an opportunity for us to help all those people to get their content out there and to make it better and make them feel better about what they're doing with it.

• 37:44Nilay Patel?

  But I don't see Logitech making a bunch of accessories for like the Sony A7S camera that all the pro YouTubers use, right? Like, that doesn't seem like a big enough market for you.

• 37:53Speaker 03

  I think you're right about that. I think we're not going to go really, really, really high end. We're talking it, you know, where you're selling hundreds or even thousands. We're gonna go low thousands. You know, we're gonna go bigger than that, more volume than that.

• 38:04Nilay Patel?

  So when you think about the gamer, and I think this is a big market for you that you're growing into.

• 38:11Speaker 03

  Yeah.

• 38:11Nilay Patel?

  You've got really high-end gaming peripherals, which I'm curious about the challenges of engineering those because that seems like a place where hardcore hardware engineering is still valued, which are some of my favorite places. And then you're saying, okay, well, you're doing that, you're streaming on Twitch, buy a Logitech webcam, buy a blue microphone, buy one of our headsets. We've completely outfitted you. And that's kind of your holistic strategy for all these categories?

• 38:35Speaker 03

  Yeah, I think that's where we are now. And I think, you know, to be able to do that, you gotta be able to say, and each one of those is the best in its class. So right now, I'd say each of those products needs to be the best in its class. It's not about how well they work together, at least not yet. It's about, it's each one of those, you know, you talked about our wireless mice for gaming. You know, we have the best wireless mice in gaming, period. I mean, I'll say it here. And, you know, and why do we? It's not because, you know, we hired somebody great yesterday. It's because we've been doing wirelessness in the PC peripheral space for 25 years. So we've been doing this a very long time. You know, we're working, we've been working on protocols across all that, getting battery, getting power management to the point where it's really an exact science

• 39:19Speaker 03

  and getting the most out of every click and in-between click that you possibly can. This is really what we do. So, so that is, that's a competitive advantage for us.

• 39:28Nilay Patel?

  So what do you think about what, I mean, are you a gamer? You play a lot of games?

• 39:32Speaker 03

  I don't, you know, my kids do. So I, I'm, I'm the best example. Somebody can talk a good game but doesn't play it. I play basketball.

• 39:39Nilay Patel?

  So when you think about where you need to spend your R and D dollars for the next generation of Logitech G keyboards, whatever, where's the big competitive advantage? What can you do that your competitors can't do there?

• 39:48Speaker 03

  Yeah, I think we think, first of all, across all three of the categories, we just have a lot of experience. We do have a lot of talented people. So I think our real competitive advantage is in our people and in our know-how. You know, we've been working on keyboards for, you know, literally, we launched our first keyboard in 1980, I'm sorry, 1998. So we've been in keyboards for quite a long time, and we have a lot of knowledge of switches and the lighting that goes into a keyboard and the, especially the power management that goes into a wireless keyboard, the protocols that enable zero lag or almost zero lag. So those are really where our advantages are. And there's a lot of know-how in that. A lot of people here who are super long-term and believe in it. So that's really, I'd say, where our technology advantage is. The rest, we're learning. You know, we're never going

• 40:33Speaker 03

  to stop trying to build capability, and we, and the categories keep changing. RGB lighting became really big three years ago. Now we're really good at it, but it took a while, you know?

• 40:42Nilay Patel?

  When you think about, like that, like RGB lighting, right now, you gotta, to get that right, you gotta write a driver for the PC, you gotta write a driver for the Mac. That's obviously a software challenge. I remember in my college years, there was like a raft of shareware drivers, like independent developers write drivers for the mouse. That seems to have gone away. Like, what's your software investment like to support these additional hardware capabilities? Because, you know, on mobile, it's, it seems really hard. You gotta keep up with the pace of mobile software updates. On the desktop, it seems very hard in a different way, because a lot of those people want their stuff to be as stable as possible and never change. How do you think about managing those kinds of development cycles?

• 41:23Speaker 03

  Well, you know, I think you started with the most important comment, which is, you know, we're no longer just a hardware company. You know, we were always a, I guess, if you can, if you call firmware a pure software, which, you know, it sort of sits between, we were always in firmware. But I think when I came to the company, I think we had about 59, or we had 59 software engineers, and that would be 59 firmware engineers. So we are a really hardware company. Now, I would say we're hiring more software engineers than hardware engineers. And that gap is increasing. So there's just more and more software requirement in our products. And we're starting to develop software that, Logitech Capture, for example, which is

• 42:08Speaker 03

  an editing software for, or capturing software for our webcams, is a pure software play, but it's attached to our webcams. And I'm sure over time, there'll be a point where we have a business that's only in software. So we're headed into the software world, which is a must. And we're going to need new alternative business models, and that's coming too. So Logitech's changing, and we're very different from where we were five years ago. And we'll be even more different five years from now.

• 42:35Nilay Patel?

  When I hear CEOs say "alternative business models in software," the only thing that means to me is a service subscription or recurring revenue model. Is that what you're getting at?

• 42:47Speaker 03

  Yep, absolutely.

• 42:48Nilay Patel?

  How do you think that looks? Like, is it, I don't know, five bucks a month to make your keyboard light up and 25 more colors than before? Like, is it added capability? There's a lot of ways to do it. What are you thinking about?

• 43:00Speaker 03

  Well, there's not one answer for that. So I think it depends on the category. And also, I'm super impatient for progress, but very patient for the end game for any of these. So I think we're going to find out. We're experimenting now on things, and kind of privately experimenting on things all the time. And we've got, we have practically no recurring revenue in our business today or subscription services. But you'll see a start to come. They'll probably come slowly, but they'll come. You know, when I came to Logitech, I went, don't tell anybody, but I went to up and down Silicon Valley, and I went to see people, because I was just trying to learn what this place is like. And I met with a couple of venture capitalists who were very nice, but they said, "You're doomed."

• 43:44Speaker 03

  Because we've, we've found hardware and we're gonna use our software and we're gonna eat your business alive. And you know, you don't really know how to do this. It'll be a long road. And I walked out kind of a little disillusioned. You know, I thought that makes a lot of sense. And I thought, we're really in trouble, but I don't know what to do. And so we doubled down on hardware. And it worked out pretty well. You know, our stock is up 600% and our profit has gone from that negative 220 to positive 375, 385 this year. So we've done pretty well. But they were right. They were just wrong on the timing. And so we've got to be in that game. So we've been working ever since, bit by bit, on building a capability to do that. And I think you'll see us come out with over time.

• 44:21Nilay Patel?

  So I want to push on that a little bit more.

• 44:24Speaker 03

  I'm hiding under the table because I'm afraid you're asking yet.

• 44:28Nilay Patel?

  Yeah. Tell me your exact product roadmap, please. No, but I hear, I hear you say they're wrong in the timing, right? And what, and this is true. When we talk to platform vendors, I'm constantly asking people from Apple or Microsoft or Google, how on earth are you going to support an ecosystem when you are competing in that ecosystem and giving yourself preference for capabilities inside that ecosystem? Right? I mean, and they all have different answers. And you know, like, the iPad has a smart connector. And you would, and that's an open connector. And Apple makes a keyboard for it. And you would expect there's an open hardware connector on the iPad to add the accessory people want the most, right? Which is a keyboard. You would expect there to be 5,000 keyboards for the iPad. There's

• 45:13Nilay Patel?

  like, three. There's the one Apple makes, and there's the two you make. And I just see that as no one wants to run up against Apple buying a keyboard. But you guys have the scale, you have the brand to do it. But how are you gonna, as you add more software and services to your hardware products, as you compete against the first party products, how are you gonna get over those ecosystem walls and present a more compelling offer to consumer, and present a more compelling offer to consumers that won't sort of immediately get folded back into the platform by the big vendors?

• 45:40Speaker 03

  Well, first of all, if you go back to your example, you know, the keyboard for the iPad, you know, there's a, you can use Bluetooth instead of the smart connector, let's say Bluetooth. Bluetooth is broadly available. If you went to CES last year, or you go to IFA, which is the equivalent in Europe, you know, the big electronic show, you will see, maybe not this year, but you would have seen a few years ago, you know, hundreds of people making keyboards, and there are probably thousands that weren't there. And maybe there were 10,000 companies that could have. And so it wasn't, it wasn't that it wasn't available, you know, they were out there, but you really have to have the technology capability. You've got to really build it, then you need to be able to bring it to market, and you just stand behind it, and people have to believe in it. So there are a lot of reasons why, you know, companies kind of struggle to get there. And, you know, we obviously have some of those advantages already.

• 46:25Speaker 03

  I mean, we're an existing brand, we've been around for almost 40 years. We have a lot of technology capability, and, you know, generally speaking, people trust us if we go into a category that they expect us to be in. So I think that's why we're able to do it. Now, in the second part of your question is, you know, how do you play in a world where, you know, the first-party companies are making some of these products? It's a great question. We generally try to avoid that as much as we can, if it looks like it's strategic to them. If it's a, if it's highly strategic, meaning, and my definition of strategic is their business depends on it, and they need, and they need to make money on it, or need it for some other reason, it's really central, then we generally kind of try to stay out of it, unless we feel like we can carve out... I think of it as, we like to be in small ponds, or we can be the leader.

• 47:10Speaker 03

  If it looks like a big ocean, and there's a gigantic shark in there, we'll try to find an idiot there, a little slot, little cove, that's a differentiated part of the market, there are needs, slightly different needs, and we'll try to be the best at that, and be the leader in that. And I think that's what we've done with the keyboard for the iPad. You know, we, we offer a different structure than Apple does, and their product is fantastic. Ours is fantastic for a different audience.

• 47:35Nilay Patel?

  So when you, it's funny, the way you're talking about it is, there's still opportunity in this market. So when you hear people complain about the size of these companies, that they shouldn't be allowed to put their own software in their stores and prioritize it, or, you know, on the far end of the scale, we should break up the big tech companies because they're destroying the market for consumer tech products. It doesn't sound like you think that's a great strategy.

• 47:58Speaker 03

  You know, I wouldn't even, I wouldn't even touch the whole area of regulation and big companies. You know, like I said, I just remember my GE days where it seemed like exactly what you were describing is exactly where we are now. And that was exactly wrong. I mean, I think there were lots of opportunities. You just have to think differently about them and try to find your own place where, you know, you can build something that the big, that big company won't, won't try to build for, maybe because the audience is too small for them. But it's the right size for you. And that's what we do.

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• 50:03Nilay Patel?

  Last 20 minutes here, do you want to get incredibly nerdy with me? I just want to talk to you about various interconnects.

• 50:09Speaker 03

  Okay.

• 50:10Nilay Patel?

  You depend a lot on Bluetooth, right?

• 50:12Speaker 03

  Yes.

• 50:12Nilay Patel?

  Many, many, many of your products rely on Bluetooth. Is Bluetooth any good?

• 50:15Speaker 03

  I mean, I think Bluetooth's been fantastic. I mean, it's been, you know, it's relatively easy for companies to develop that technology. And for us, it's been quite good. I mean, you're not, you're not necessarily going to get the same sound capability as you're going to get with a, with other protocols, but it's been very, very good and very accessible.

• 50:34Nilay Patel?

  But your own mice and keyboards, right? You ship your own proprietary RF transceiver with them.

• 50:39Speaker 03

  We do.

• 50:39Nilay Patel?

  Is Bluetooth ever going to be good enough to support a gaming mouse?

• 50:42Speaker 03

  It's a good question. I mean, it's not as good for us and we, we prefer not to go down that path for gaming. You know, between latency and reliable connectivity, it's been better for us not to go there for gaming where the stakes are higher for the typical user and certainly for the extreme users. So I don't know if Bluetooth will ever be there for gaming. You know, the users have decided and so far they're not there.

• 51:04Nilay Patel?

  Do you think it's there for your regular mice and keyboards? Cause I don't think you make a straight Bluetooth mouse. I think they all come with a little dongle.

• 51:11Speaker 03

  That's, that's true. Well, the dongle really gives us advantages and so we've used the dongle for, we've used dongles for a while and I, I don't think you'll ever see us go away from something, something proprietary like that.

• 51:22Nilay Patel?

  So the joke among sort of Vergecast listeners is like Bluetooth will be great next year. Do you think we've arrived at a point where it's actually great or is there, is there more that you want to see from the standard? I mean, it's just, I, just looking at your product portfolio, so much of your product portfolio depends on this one open interconnect being great and being supported by most of these platforms.

• 51:43Speaker 03

  Yeah, you know, it's interesting because in the gaming space, I don't think that's going to go away. I think, is Bluetooth great? Not great for all of our applications, but I think it's great for, for so many. You know, we love Bluetooth for Bluetooth speakers, obviously, and, and it works really well for that. It works really well for, for earphones and headphones and things like that. So we're in a lot of Bluetooth things now, a lot more than I think most people would have imagined here 10 years ago. But probably will never be perfect for everything. And so I don't think it will be something you'll ever see us go completely to.

• 52:16Nilay Patel?

  All right. Speaking of, I'm gonna stay on nerdy interconnects because very rarely do I get somebody whose business depends on the state of open interconnects. This is like my dream. Well, speaking of good for everything, it seems like USBC is sort of meant to be good for everything. It has been a messy, inconsistent rollout. Logitech has not raced towards USBC.

• 52:41Speaker 03

  Nope.

• 52:42Nilay Patel?

  Where do you think that status is? Where do you think your head's at on it? Do you think it's gonna get better?

• 52:47Speaker 03

  Yeah, I think it's gonna get better. I think we've been, we've been relatively slow, you know, and for choicefully slow, I'd say, but we've been relatively slow going into USBC. You're seeing it arrive now in more and more of our products. I think the rollout will get better and better. And I think it'll be very standardized over the next, you know, three to four years.

• 53:04Nilay Patel?

  Three to four?

• 53:05Speaker 03

  Yeah.

• 53:06Nilay Patel?

  I mean, that's, to me, that's, I mean, the first USBC Mac that came out three to four years ago. What has been rocky about this? I mean, compared to USBA is, I think, it's the most successful power connector in the history of the world, right? And it was an instant adoption of USBA. What has been the holdup with C?

• 53:24Speaker 03

  I don't know. You know, probably because it's just been a fragmented market. There's been so much USBA out there still, you know? So I think, you know, it's like, at what point is the, is the seesaw tipping so much for the other way that you just make the jump on everything? And so we've probably been a little slower. I don't think there's anything wrong technically. It's been really good, but I think we've just been slower to go there because there's been so much USBA still out there on our products, on the, the things we connect to. And so I think you're getting there though. And, and, you know, I, I think, like I said, over the next, you know, three or four years, I think there, it'll be virtually everywhere. So it'll be like the only standard.

• 53:59Nilay Patel?

  Is that a decision that you, as CEO, get involved in? You've got your team designing the next blue microphone. And someone's like, well, we're just gonna put... Micro USB on it again. We're just updating the design and do you swing in and say, guys, I've made the decision, this is the year we go all in on USB C? Or is it product by product or team by team? How does that work?

• 54:19Speaker 03

  Yeah, we're very, we run our business, small business by small business. I love the fact that we have 27 different, different small teams thinking about what to do. So I don't go in, I rarely go in and legislate a whole bunch of things. In the early, very early days, you know, we had fewer categories and I was having two or three product meetings a week. I was much more likely to get directly involved in those things, but it's a lot less now. So those teams are deciding team by team, but we've got great technology, people who sit across all those platforms.

• 54:48Nilay Patel?

  So when you think about, again, I told you I was going to get nerdy about internecks, but when you think about, when you think about the range of possibilities that USB C opens up to you, the iPad has a USB C connector, the Pixel phone has a USB C connector, Samsung can now turn its phone into a full-fledged computer with Dex over USB C. Are you saying, okay, hey, there's a new realm of product categories here, we gotta go chase it? Or are you waiting to see how it develops before you go after it?

• 55:15Speaker 03

  We're always chasing new product categories, new, new business opportunities like that. We're not necessarily relating them directly to that connector. I will say, you know, we've always lived this dream of, of I carry my phone around and I plug it in somewhere and it's my computer, you know, and this USB C connector on a Samsung phone, or maybe one day on an iPhone, or certainly an iPad, enables me to have a computer that's super mobile and light and I don't have to duplicate it on my desk. And so we, we do believe that's a future state that actually is an advantage for our existing products. So yeah, I think this is going to open up new things. It's just, I do think it's going to come choppily over time. And I think we're another three or four years away from having a really widely standardized USB C world.

• 55:59Nilay Patel?

  And then by that time, there'll be another USB C connector. I mean, that's like the nightmare scenario is we got, we got to total USB A saturation and then, you know, USB C is here. We'd all standardized on, on mini USB for, for phones and for other products, most of the products in your portfolio, actually. And it's, okay, C's here, it's going to change it. By the time we, it just seems like that, it wasn't planned out well in that sense, that this is the connector that's going to last a long time. Do you think? These connectors should last longer than they have, or is that just the pace of technology?

• 56:33Speaker 03

  I sort of think it's the pace of technology. I think it's a world that, you know, there are a lot of players. They're operating, they're innovating in different paces. They have pretty strong audiences and I think people don't move in lockstep. And so the negative is you've got this choppy transition happening from a connector standpoint. The positive is you've got a lot of competition and that gives you better costs and better innovation and all those things that I think are better. So I think the net of that whole effect is better, but if you focus on the connector part, it's a negative.

• 57:04Nilay Patel?

  Speaking of connectors, I'm going to keep going. I'm really doing interconnects.

• 57:07Speaker 03

  You're really focused.

• 57:08Nilay Patel?

  Lightning, right? Apple's got the Lightning connector. It's one of the, it's probably one of the other most successful power connectors in history.

• 57:15Speaker 03

  Oh, definitely, yep.

• 57:16Nilay Patel?

  That one is really locked down, right? It's MFI, it's on the phone.

• 57:19Speaker 03

  Yeah.

• 57:20Nilay Patel?

  There does not seem to be a huge ecosystem of Lightning accessories. What, what keeps you away from making a bunch of wild Lightning stuff?

• 57:27Speaker 03

  You know, I remember when, I remember, I think it was Molex that made the Lightning connector initially. And out of Chicago, they then sold. And their stock price was driven by, you know, what, what, what Apple did, even though I think it was a small percentage of their business. But, you know, so Lightning connector was just an incredible innovation and really had, had a monster impact. We have, you know, the Lightning connector, like everything, you've got to look at the cost trade off for making, for, for using Lightning connectors and things. We do use Lightning connector for a lot of things, everything Apple related, of course, we need to, and we do. But we're not in the, we're not, we don't actually build, we don't actually sell the connectors. So, so there are companies doing that, but we don't. We made a choice not to do that. That's a category we've chosen not to be in for reasons that I probably wouldn't share publicly, but we have.

• 58:12Speaker 03

  But we, we use them where we think it really makes sense, which is in most of the Apple category. So we need to make the connection.

• 58:18Nilay Patel?

  But I, I mean, I look at that ecosystem and I see, it's mostly like battery packs, some wacky camera stuff. There's not the range of USB C ideas out there for Lightning. Maybe there's a microphone or two, right? Is there a reason that you don't see that ecosystem developing the same way?

• 58:35Speaker 03

  That's a good question. I don't know. I hadn't really thought about it. We're certainly, we're always looking at new categories and I don't think we viewed the Lightning connector as a constraint in that area. We didn't go into them because we just, for whatever reason, decided it didn't look either big enough for us or profitable enough for us, or we could add enough value to make it really different. But we weren't limited by the connector. So maybe other people are the same way.

• 59:00Nilay Patel?

  Well, I guess there's the physical reality of the connector, which I don't think anybody has ever told me they're limited by. But then there's the business reality of the connector, right? Which is that you have to pay to use it. You've got to be approved by Apple. Does that factor into your thinking?

• 59:12Speaker 03

  You know, every dollar counts, so of course that does factor into our thinking. But generally, the convenience angle on a connector related to if you're really working with something that totally integrates with an Apple device is so high that you hate the idea of not having one. I remember years ago when we first did our keyboard covers for the iPad, they'd be USB A. It was just like, it drove people crazy. Why do I have to use it? Now we don't. So I could really relate to that. I think that was a mistake for the user. And the question is, at what cost? Okay, it costs something to do it, but it was worth it. So now we're away from that.

• 59:54Nilay Patel?

  So I think a lot about how, basically in the new world, particularly with mobile, the sort of USB cable has been replaced by Wi-Fi and a cloud service. So I've got light bulbs at home. To turn them on with my phone, I push a button, a wireless signal goes up to a cloud service and like a server at the Philips headquarters turns on my light switch for me. It doesn't always work that way, but that's the way that works. That has created, right, I mean, like, if you've got HomeKit, it happens locally and so on. But broadly speaking, we've replaced the USB cable with Wi-Fi and cloud services. That's created a sort of massive amount of complexity. It's created a massive amount of privacy issues. You're sending data to other places, or people are storing it.

• 1:00:39Speaker 03

  Yep.

• 1:00:40Nilay Patel?

  How do you think that's shaking out? Do you think the value of that to consumers is changing? It seemed, you know, you're talking about CS. Two years ago, I went to CS, and that seemed like the most obvious thing in the world to me. Like, this is great. No more cables, Wi-Fi, cloud services. We can do, you can control it from anywhere. A couple of years later, in the sort of post-Facebook honeymoon phase that we're in, hey, I should not maybe have so many cloud services in my life, controlling actual hardware in my home. I should not have so many microphones that other people are listening to necessarily. Has that changed your view on what kinds of categories you might go into, and what things consumers might be receptive to?

• 1:01:20Speaker 03

  The idea of this is really a point, like you always do. You know, it's like a point in time, and it's hard for me to look at today without looking out. And yes, the answer is yes. You know, I think, I think, you know, it's splintering. You know, you've got, a lot of people are really, really interested in more privacy. You know, I think there are people more interested in more privacy to the point where they'd say, God, I really don't want this stuff leaving my home. I don't want this happening on the cloud. I'm OK if it's resident, but I'm not comfortable with that. And really, let's face it, there isn't, there aren't a lot of options for the kinds of things you talked about that are, that are convenient. You know, so, so I think, I think the security protocols continue to get invested in. The hackers keep hacking, you know, and they keep getting, they're, they're really good.

• 1:02:05Speaker 03

  And so, it's a cat and mouse game, as it's always going to be. And I think that's going to splinter the opportunities. And I think there are going to be people who want stuff in the home, and they don't want it to leave the home. There are going to be other people who are comfortable with, you know, as you said, you know, it's completely happening on the cloud, and stuff's bopping out. And I have two, or three, or four, or 10 different cloud services coming out of my home. Does that have an impact on the choices we'd make about what categories we'd be in? I would say no. It's just a different set of options. We we are super security conscious for for obvious reasons like everybody is now. We're also super convenience oriented because we realize how much people care about that. And how much, you know, I don't know about you, but I just I'm a I'm a convenience fanatic, you know, I really will will prioritize convenience over a lot of things.

• 1:02:49Speaker 03

  But not the not the really sensitive security stuff. So so I think you're I think there's just gonna be it's gonna be messy for a while. And I think looking out, I think it'll probably clear up a little bit, but there will always be the divide among people who really want to lock down. And people who really don't care as much about that.

• 1:03:06Nilay Patel?

  Well, it's funny because you you started by saying we've we reoriented the company to be a cloud peripheral company. That's a that's a big statement. It's obviously gone successfully. You you your numbers show it. But it there our relationship to the cloud, that the parameters are changing as we think about privacy more directly, or we think about. Yeah, how many how many companies do I want to have access to my data? How many companies do I want to have a user account with? Which sort of comes with data collection necessarily. Is sort of the privacy moment changed your thinking about being a cloud peripheral company?

• 1:03:39Speaker 03

  No, I think it's done two things. I think one is we're not we're we're we certainly want to peripheralize things that are whether the whether that. Computing device is in your home or on a server somewhere. And when I say cloud, that's a that includes the cloud, but also includes a very localized device. So we want to be a we want to be a peripheral company to. Whatever computing device it is, but certainly including the cloud. So no, it doesn't really change that. But I but it does it what what does change is it makes me think, gosh, there are more opportunities now that are going to happen. I think there will be. There will be a growing number of things that are probably happening in your home that will be able to peripheralize and and they won't be leaving. But it won't be look it won't look too much different for us because for us will be we'll be connecting to a computing device, whether it's in Arizona.

• 1:04:24Speaker 03

  On a server or it's in your basement somewhere in a closet.

• 1:04:28Nilay Patel?

  Do you think about making more integrated products? I mean, yeah, blue microphones, you still gotta plug it into a computer, a keyboard, a gaming. Keyboard, you still gotta plug it into a PC. Do you think about ever making things that more directly connect to the Internet and cloud services inside the home?

• 1:04:43Speaker 03

  Yeah, we do. We have a, we have a security camera that connects directly to a cloud service. So it's called Circle.

• 1:04:48Nilay Patel?

  I, I have a Circle. It's great. Watches the baby.

• 1:04:51Speaker 03

  Oh, wonderful. Thank you. We announced, actually, we have Circle version for your baby that's coming with a, with a new diaper from P and G soon. So that'll be really interesting. It's coming very soon.

• 1:05:00Nilay Patel?

  See, that's, that's the line. I'm happy to watch the baby. I'm not gonna put a Wi-Fi chip on the baby. Like, I, that's like very clearly my line, right? Like, I know where it is.

• 1:05:10Speaker 03

  Well, you have to implant a chip into the brain, but if you do that.

• 1:05:16Speaker 03

  Okay, well, I guess that product's not right for you, but surely somebody will want it.

• 1:05:20Nilay Patel?

  Yeah, yeah.

• 1:05:21Speaker 03

  Uh, no, the six million dollar baby. Uh, but anyway, yeah, so we're, well, we are, yeah. So that, that one is a, a really an integrated device with, as you know, it's got AI built in, a video AI and all much of the stuff. Cool. So, yeah, we, we, we don't view that as off limits at all. We think it'd be really cool, but, you know, we don't have to do that to, to have a good business in every area.

• 1:05:39Nilay Patel?

  So the last, the last question I want to ask is, Verchass listeners know this is a-

• 1:05:44Speaker 03

  It's a connector question.

• 1:05:45Nilay Patel?

  It's not a connector question. It's a, it's a, well, it's a connectivity question.

• 1:05:49Speaker 03

  Shoot.

• 1:05:49Nilay Patel?

  It's a philosophical connection question. There's an explosion in smart home stuff. There's an explosion in television streaming services that, the sort of TV rack is the last holy grail of the entire tech industry. No one has gotten it right. No one has ever developed an integrated product that, that works, as far as I can tell.

• 1:06:09Speaker 03

  You're right.

• 1:06:09Nilay Patel?

  You have the market leader in that space in Harmony remotes. What on earth is going on with Harmony remotes?

• 1:06:15Speaker 03

  Well, you know, Harmony is a phenomenal product, as you know, if you want to really simplify a complex living room stack of stuff. And, and get it down to a single remote and really simplify it. That is what it's, that's what it was originally conceptualized for. And it does that better than, I think, anything else. And we like that it does that. Now, now the future world is changing. It's really, you know, as you know, more and more is going through the internet. You know, you're, you're, you're getting, in a way, it's just as complex, but now you've got all these different streaming services and, which are exciting, you know, but you're getting more and more all the time. And so much of it's, uh, coming directly.

• 1:06:54Speaker 03

  You know, directly through the internet and it's moved on. So, you know, I think, I think Harmony has a place to play in that, but I, I also think we, we are not focused on, on trying to figure out how Harmony can solve all that, that problem beyond that. I think that's probably the domain of other people and we've got lots of opportunities beyond that, but we, we will continue to always take care of the Harmony customer because we believe in you and we really appreciate you.

• 1:07:16Nilay Patel?

  Is there a long roadmap for Harmony stuff? Is this as big of a business for you as gaming keyboards or ultimate ear speakers? Is it a small business? Is it, does it have a long future?

• 1:07:27Speaker 03

  It's a very small business. I mean, it's about, you know, six percent the size of our keyboard business, for example. So it's a really small business, but the, the cool thing about it and the thing that we appreciate is that the users of that business love it. I mean, really love it. And, you know, it's very, it's so rare to have users that love something as much as our, a lot of our Harmony users do, that, that we, you know, we'll, we'll always take care of them because we really believe in, you know, that that's part of the responsibility of the brand. So, so we do love Harmony for that reason. And how long it will be out there? I don't know. You know, I think that as the, as the living room continues to change, as you know, there's more and more activity in there. We'll see, you know, but we're certainly, we're certainly love the, the user base and the, and the commitment they've had to it.

• 1:08:09Nilay Patel?

  Do you think that the sort of streaming war that seems to be coming is gonna upend the idea that you need a universal remote?

• 1:08:16Speaker 03

  Yeah, I think it's gonna reduce the need. I really do. I think, you know, over time you'll have fewer and fewer people who feel like they really need that universal remote. The universal remote is solving a different problem than that. Now you kind of need a different, you have a different problem. You have 10 different streaming services and I want to watch Friends, you know, where do I watch it? So it's, it's less about different devices and more about different streaming services and how do I, how do I get to the one that's either the cheapest or the fastest or the one that I like the most or whatever it is?

• 1:08:42Nilay Patel?

  All right. Last, actual last question. My executive editor, Jay, really wanted me to ask this question. At some point in the last couple of years, the Logitech brand got shrunk to just Logi. And then it kind of, that plan went away and then it's back and it's on some device. Is that the consumer brand? We, I, he's like, I don't understand what Logi is. Just have him explain it to me.

• 1:09:06Speaker 03

  What is his name? I'll address him directly.

• 1:09:08Nilay Patel?

  Dieter, Dieter Bohn.

• 1:09:09Speaker 03

  Oh, Dieter. Okay, Dieter. Here's the answer, Dieter. So, we essentially envisioned a world where one day, when you say we're in the tech business, there are a whole bunch of different categories, like including clothing, that will be part of tech. So if you say you're, if you just, if you, if you're thought of as just, you know, a Logitech, you're gonna sound, might sound a little old fashioned. So what we've decided is we're keeping Logitech as it is, exactly as it is. You go look in a box and any of our products, you'll see it. What we did do though, is we, we dropped the tech and left it to put Logi on our products. First of all, it's fun to have a four-letter name on every product and it's shorter. And second, it's, it's, it's, a lot of people call us Logi today. So, so it's, it's, and on all of our Logitech products, except the ones for, for offices and things,

• 1:09:54Speaker 03

  for our video conferencing, you'll see Logi on there instead of Logitech. But the packages still say Logitech, just like Nike would have a swoosh on their shoes. I hope, Dieter, that answered your question. I'm available for calls anytime to explain that further.

• 1:10:07Nilay Patel?

  I mean, the

• 1:10:08Speaker 03

  And I love that Dieter cared.

• 1:10:10Nilay Patel?

  I mean, it's one of those things where if you're in it every day and you're looking at every company and their branding strategy and how they want to go out to consumers, how they want to be perceived, these are actually like, these questions have stakes and it's really interesting to see

• 1:10:23Speaker 03

  I agree.

• 1:10:23Nilay Patel?

  companies navigate the stakes of what is our brand. And I think the question mark for us is, Logi is, uh, it's a very friendly brand, but you make, you know, high-end gaming peripherals. Maybe you don't want those to sound so friendly. You make, uh, consumer webcams, you know, the circle. Maybe you don't want, maybe you want that brand to stand alone. So navigating those questions in a world where people encounter your brand not just in a store, but on Amazon, where it has to stand out amongst probably a lot of clones or against DTC consumer companies, that it seems like those stakes are actually getting ever higher.

• 1:11:00Speaker 03

  I agree with that. And I wasn't, I was, I was joking a little bit with, but Dieter and you are right that these branding decisions are more important than ever. It's, it's increasingly a reality that people don't even touch or feel your product when they buy it. So they're, they're influenced by a picture and, and your brand. And as you enter more categories, the ability to make sure your brand works in those categories is really critical. So we do take that really seriously. We rebranded our whole business about four years ago. And this is when we made this decision. We also changed a lot of the color scheme and things. And it's a big deal. It's a really big deal.

• 1:11:32Nilay Patel?

  All right. So what is next for Logi and Logitech? What's the next thing we should be looking out for?

• 1:11:37Speaker 03

  Okay, so we're really focused on three big areas, and then we're working on these little seed projects and a whole bunch of other ones. The old PC peripherals business is alive and going really well because of the explosion, the democratization of people creating their own content. So that's cool. The second one is gaming. You know, we're the leader in esports in the gaming space, and we're just pouring it on there. And the third one that a lot of people don't even know about is the fact that we've been in unable to conference rooms all over the world now. And that's such a big market. It's so exciting. All three of those are billion dollar plus businesses, either in reality or in potential. So those three are big, and then we're going to create secretly all the time, new stuff.

• 1:12:13Nilay Patel?

  Awesome. Well, Bracken Daryl, thank you so much.

• 1:12:15Speaker 03

  It's really been a pleasure to be on here. I've never had so many questions about connectors in my career.

• 1:12:20Nilay Patel?

  Well, that's what we're here for.

• 1:12:21Speaker 03

  Of course it is. That was fun.

• 1:12:23Nilay Patel?

  All right. My thanks to Bracken Daryl, CEO of Logitech. That was a great conversation. We'll be back later this week with the chat show. Next Tuesday, another big interview coming up. Casey Newton and I sat down with Kayvon Bakpor, who's the head of product at Twitter. We got into it. That's coming next Tuesday. But we'll see you on Friday for the chat show. You can talk to me. I'm Matt Reckless. Love your feedback. Let me know. Talk to you soon.