Plantronics 2005 Annual Report Download - page 55

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part ii
In comparison to fiscal 2004, our fiscal 2005 gross profit margins decreased slightly, which was primarily
due to a mix shift towards lower margin products, particularly our Bluetooth products within our mobile
products and a greater contribution of wireless products within our office and contact center products.
These were offset in part by continued component cost reductions, manufacturing efficiencies and
favorable exchange rates net of hedging losses.
In comparison to fiscal 2003, fiscal 2004 gross profit margin strengthened as a result of improved
manufacturing efficiencies on higher volumes, component cost reductions, and favorable foreign exchange
rates. A weaker U.S. dollar compared to the Euro and Great British Pound favorably affected revenues
and consequently gross profit, although hedging losses dampened this effect. Partially offsetting these
favorable factors was a higher percentage of sales coming from lower margin mobile and wireless office
products compared to the prior year.
Gross profit margin may vary depending on the product mix, customer mix, channel mix, amount of
excess and obsolete inventory charges, changes in our warranty repair costs or return rates, and other
factors.
Research, Development and Engineering
Fiscal Year Ended Fiscal Year Ended
March 31, March 31, Increase March 31, March 31, Increase
$ in thousands 2003 2004 (Decrease) 2004 2005 (Decrease)
Research, development and
engineering $33,877 $35,460 $1,583 4.7% $35,460 $45,216 $9,756 27.5%
% of total revenues 10.0% 8.5% (1.5) ppt. 8.5% 8.1% (0.4) ppt.
In comparison to fiscal 2004, our fiscal 2005 research, development and engineering expenses, reflect, our
substantial commitment to developing new products for all the markets we serve. The primary reasons for
the increases were as follows:
)Design and development of a new suite of Bluetooth products. These new Bluetooth products are
our third generation of Bluetooth technology and include not only a new chip set but also a
re-vamped style and design which is geared for the more fashion-conscious market.
)Substantial increase in the industrial design headcount and related expenses. The industrial
design team is focused on inventing new concepts to make our headsets more attractive and
comfortable for end users.
)Growth of the Plamex Design Center. We are in the process of adding headcount to our Plamex
Design Center located at our Tijuana, Mexico, manufacturing facility. We are moving the
project execution, build, and verification processes to be co-located with the teams, which are
responsible for the manufacturing in order to improve execution, efficiency, and cost
effectiveness.
We expect that our research and development expenses will increase substantially in fiscal year 2006 in
the following areas:
)Continued investment in the wireless office and wireless mobile markets, gaming products and
the small office and home markets.
)Establishing a new research and development center that will be co-located with our under-
construction manufacturing facility in Suzhou, China.
)Associated costs with new technologies acquired in connection with the recent acquisition of
Octiv Inc.
AR 2005 ⯗27