Plantronics 2011 Annual Report Download - page 25

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If we are unable to stimulate growth in our business, if our costs to stimulate demand do not generate incremental profit, or if we
experience significant price competition, our business, financial condition, results of operations and cash flows could suffer. In
addition, failure to effectively market our products to customers could lead to lower and more volatile revenue and earnings, excess
inventory and the inability to recover the associated development costs, any of which could also have a material adverse effect on
our business, financial condition, results of operations and cash flows.
Our consumer business is volatile and failure to compete successfully in this business may have an adverse effect on our
financial condition.
Our consumer business, which consists primarily of Bluetooth headsets and computer and gaming headsets, is highly competitive.
The risks faced in connection with this include the following:
• interest in the consumer headset category may be lessening due to current weakening conditions in the consumer
market and reduced attach rates of headsets to many popular mobile smartphones in the U.S.;
• competition may increase more than we expect and result in product pricing pressures;
• our ability to meet the market windows for consumer products;
• difficulties retaining or obtaining shelf space for consumer products in our sales channel;
• difficulties in achieving or maintaining a sufficient gross margin and uncertainties in the demand for Bluetooth
headsets and computer and gaming headsets;
• the varying pace of global economic recovery creates uncertainty and unpredictability about the demand for consumer
products; and
• our focus on UC products may weaken our competitive position.
Our business will be materially adversely affected if we are not able to develop, manufacture, and market new products in
response to changing customer requirements and new technologies.
The market for our products is characterized by rapidly changing technology, evolving industry standards, short product life cycles
and frequent new product introductions. As a result, we must continually introduce new products and technologies and enhance
existing products in order to remain competitive.
The technology used in our products is evolving more rapidly now than it has historically, and we anticipate that this trend may
accelerate. Historically, the technology used in lightweight communications headsets has evolved slowly. New products have
primarily offered stylistic changes and quality improvements rather than significant new technologies. Our increasing reliance
and focus on the UC market has resulted in a growing portion of our products that integrate significant new technology. In addition,
our increasing participation in the consumer market requires us to adopt new technology and, thus, our consumer products
experience shorter lifecycles. We believe this is particularly true for our newer emerging technology products especially in the
mobile, computer, residential and certain parts of the office markets. In particular, we anticipate a trend towards more integrated
solutions that combine audio, video, and software functionality, while historically our focus was limited to audio products.
In the past, we have experienced a trend away from corded headsets to cordless products. In general, our corded headsets have
had higher gross margins than our cordless products, but the margin on cordless headsets is trending higher. In addition, office
phones have begun to incorporate Bluetooth functionality which has opened the market to consumer Bluetooth headsets and reduce
the demand for our traditional office telephony headsets and adapters as well as impacting potential revenues from our own wireless
headset systems, resulting in lost revenue and lower margins. Should we not be able to maintain the higher margins on our cordless
products that we recently achieved, our revenue and profits will decrease.
In addition, innovative technologies such as UC have moved the platform for certain of our products from our customers' closed
proprietary systems to open platforms such as the PC. In turn, the PC has become more open as a result of such technologies as
cloud computing and open source code development. As a result, we are exposed to the risk that current and potential competitors
could enter our markets and commoditize our products by offering similar products.
The success of our products depends on several factors, including our ability to:
• anticipate technology and market trends;
• develop innovative new products and enhancements on a timely basis;
• distinguish our products from those of our competitors;
• create industrial design that appeals to our customers and end-users;
• manufacture and deliver high-quality products in sufficient volumes; and
• price our products competitively.
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