Plantronics 2005 Annual Report Download - page 69

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part ii
)Due to the lead times required to obtain certain raw materials, subassemblies, components and
products from certain foreign suppliers, we may not be able to react quickly to changes in
demand, potentially resulting in either excess inventories of such goods or shortages of the raw
materials, subassemblies, components and products. Lead times are particularly long on silicon-
based components incorporating radio frequency and digital signal processing technologies and
such components are an increasingly important part of our product costs. Failure in the future to
match the timing of purchases of raw materials, subassemblies, components and products to
demand could increase our inventories and/or decrease our revenues, consequently materially
adversely affecting our business, financial condition and results of operations.
)Most of our suppliers are not obligated to continue to provide us with raw materials, components
and subassemblies. Rather, we buy most raw materials, components and subassemblies on a
purchase order basis. If our suppliers experience increased demand or shortages, it could affect
deliveries to us. In turn, this would affect our ability to manufacture and sell products that are
dependent on those raw materials, components and subassemblies. This would materially
adversely affect our business, financial condition and results of operations.
)Although we generally use standard raw materials, parts and components for our products, the
high development costs associated with emerging wireless technologies permits us to work with
only a single source of silicon chip-sets on any particular new product. We, or our chosen
supplier of chip-sets, may experience challenges in designing, developing and manufacturing
components in these new technologies which could affect our ability to meet time to market
schedules. Due to our dependence on single suppliers for certain chip sets, we could experience
higher prices, a delay in development of the chip-set, and/or the inability to meet our customer
demand for these new products. Our business, operating results and financial condition could
therefore be materially adversely affected as a result of these factors.
We sell our products through various channels of distribution that can be volatile.
We sell substantially all of our products through distributors, retailers, OEM’s and telephony service
providers. Our existing relationships with these parties are not exclusive and can be terminated by either
party without cause. Our channel partners also sell or can potentially sell products offered by our
competitors. To the extent that our competitors offer our channel partners more favorable terms, such
partners may decline to carry, de-emphasize or discontinue carrying our products. In the future, we may
not be able to retain or attract a sufficient number of qualified channel partners. Further, such partners
may not recommend, or continue to recommend, our products. In the future, our OEM customers or
potential OEM customers may elect to manufacture their own products, similar to those we currently sell
to them. The inability to establish or maintain successful relationships with distributors, OEM’s, retailers
and telephony service providers or to expand our distribution channels could materially adversely affect
our business, financial condition or results of operations.
As a result of the growth of our mobile headset business, our customer mix is changing and certain
OEM’s and wireless carriers are becoming significant. This greater reliance on certain large customers
could increase the volatility of our revenues and earnings. In particular, we have several large customers
whose order patterns are difficult to predict. Offers and promotions by these customers may result in
significant fluctuations of their purchasing activities over time. If we are unable to anticipate the purchase
requirements of these customers, our quarterly revenues may be adversely affected and/or we may be
exposed to large volumes of inventory that cannot be immediately resold to other customers.
AR 2005 ⯗41