Plantronics 2011 Annual Report Download - page 14

During fiscal 2011, we developed and introduced innovative products that enabled us to better address changing customer demands
and emerging market trends. Our goal is to bring the right products to market at the right time and have best in class development
processes.
Our core research and development focus in fiscal 2012 continues to be on UC which will require incremental investments in
firmware and software engineering to enhance the broad compatibility of our products in the enterprise systems with which they
will be deployed and to develop value-added software application for business users. The products that we are developing require
significant technological know-how and may be protected by intellectual property. Separately or together this technological know-
how and intellectual property may create increased barriers to entry for many competitors. We are continually improving the
efficiency of our development processes through strategic architecting, common platforms, and increased use of software and test
tools among other factors.
The success of new product introductions is dependent on a number of factors including appropriate new product selection, timely
completion and introduction to the market, cost-effective manufacturing, quality, acceptance of new technologies and general
market acceptance. Traditionally, the technology of telephone headsets has evolved slowly, and our product life cycles have
historically been relatively long. The next generation products historically included stylistic changes and quality improvements
but were based on technology similar to the previous generation. Our newer emerging technology products, particularly in the
mobile and computer markets, exhibit shorter life cycles more similar to the consumer electronics market and are consequently
more sensitive to market trends and fashion. In addition, we believe that changes in technology will come at a faster pace; therefore,
to avoid product obsolescence, we will continue to monitor technological changes in telephony, as well as users' demands for new
technologies.
During fiscal 2011, 2010 and 2009, we incurred approximately $63.2 million, $57.8 million, and $63.8 million, respectively, in
research, development and engineering expenses. Historically, we have conducted most of our research, development and
engineering with an in-house staff, with limited use of contractors. Key locations for our research, development and engineering
staff are our facilities in the U.S., Mexico, China, and the United Kingdom.
SALES AND DISTRIBUTION
We maintain a direct sales force worldwide to provide ongoing customer support and service globally. We have a well-established,
multi-level distribution network in North America, Europe, Australia and New Zealand where use of our products is widespread
to support our customers' needs. Our distribution channels in other regions of the world are less mature, and while we primarily
serve the contact center markets in those regions, we are expanding into the office, mobile and entertainment, digital audio, and
specialty telephone markets in those locations.
Our commercial distributors include headset specialists, national wholesalers, and regional wholesalers. The wholesalers typically
offer a wide variety of products from multiple vendors to both resellers and end users. Our commercial distribution channel
generally maintains inventory of our products. Our distribution of specialty products includes specialized distributors, retail,
government programs, audiologists, and other health care professionals.
We use commissioned manufacturers' representatives to assist in selling through the retail channel. Our retail channel consists of
(1) consumer electronics retailers, consumer products retailers, and office supply distributors; (2) wireless carrier stores; (3) catalog
and mail order companies; (4) mass merchants; and (5) warehouse clubs. Our headsets are sold through retailers who sell headsets
to corporate customers, small businesses, and to individuals who use them for a variety of personal and professional
purposes. Revenues from this channel are cyclical with our third fiscal quarter typically being the strongest quarter due to holiday
seasonality. A portion of our retail partners manage inventories on consignment.
We have a broad, diverse group of customers whose businesses are located throughout the world. Our principal customers are
distributors, retailers, carriers, and OEMs. Our commercial distributors and retailers represent our first and second largest sales
channels in terms of net revenues, respectively. No customer accounted for more than 10% of our consolidated net revenues in
fiscal 2011, 2010 or 2009.
Our telephony OEMs, manufacturers of automatic call distributor systems and other telecommunications, and computer equipment
providers also resell our headsets. Contact center equipment OEMs do not typically manufacture their own peripheral products
and, therefore, distribute our headsets under their own private label or as a Plantronics-branded product. Wireless carriers do not
manufacture headsets but sell our headsets as a Plantronics-branded product or under their own private label. Telephone service
providers purchase headsets from us for use by their own agents. Certain service providers also resell headsets to their customers.
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