Plantronics 2015 Annual Report Download - page 16

Consumer
We believe the mobile headset category will continue to grow as individuals use the technology for both communications and
entertainment. The use of headsets designed for mobile phones represents a high volume opportunity and is our second largest
revenue stream. The use of mono headsets typically used with mobile phones has slowed while the use of stereo Bluetooth
technology has increased as individuals want to remain wireless without compromising on stereo sound quality. Our mono and
stereo Bluetooth mobile headsets merge technological innovations with style, because we believe that style has become as important
as functionality in shaping consumers' purchasing decisions in the wearable technology space. While growth in the mobile headset
market has slowed and continues to mature, we believe future growth will be driven primarily by demand for stereo Bluetooth
technology.
Gaming and computer audio headsets, whether used for interactive on-line or console gaming, or switching between music and
phone calls for multi-functional devices, represent an emerging opportunity for us. As devices providing these users' needs
converge, our headsets need to be compatible with PCs, mobile phones, tablets, gaming consoles, and various combinations of
these. We believe our product development roadmaps address the convergence brought about by these needs and we are currently
investing in this area to enable future growth.
Under our Clarity brand, we sell specialty products such as speakerphones, amplified captioned phones, amplified corded phones,
personal listeners, and alarm clocks, all designed to address the unique needs of various consumer groups, one of which is the
increasing number of people worldwide suffering from hearing loss. We offer a comprehensive range of communications products
that serve customers with mild, moderate, and severe hearing loss, as well as the deaf community.
FOREIGN OPERATIONS
In fiscal years 2015, 2014 and 2013, net revenues outside the U.S. accounted for approximately 44%, 42%, and 43%, respectively,
of our total net revenues. Revenues derived from foreign sales are generally subject to additional risks, such as fluctuations in
exchange rates, increased tariffs, the imposition of other trade restrictions or barriers, the impact of adverse global economic
conditions, and potential currency restrictions. In fiscal year 2015, international revenues were reduced by approximately $4.7
million, net of the effects of hedging, due to unfavorable foreign exchange fluctuations in the other foreign currencies in which
we sell.
We continue to engage in hedging activities to limit our transaction and economic exposures, and to mitigate our exchange rate
risks. We manage our economic exposure by hedging a portion of our anticipated Euro ("EUR") and British Pound Sterling
("GBP") denominated sales and our Mexican Peso ("MXN") denominated expenditures, which together constitute the most
significant portion of our currency exposure. In addition, we manage our balance sheet exposure by hedging EUR, GBP, and
Australian Dollar ("AUD") denominated cash, accounts receivable, and accounts payable balances. Excess foreign currencies not
required for local operations are converted into U.S. Dollars ("USD"). While our existing hedges cover a certain amount of
exposure for fiscal year 2016, long-term strengthening of the USD relative to the currencies of other countries in which we sell
may have a material adverse impact on our financial results. In addition, while our existing hedges cover a certain amount of
exposure for our fiscal year 2016, our results may be adversely impacted by future changes in foreign currency exchange rates
relative to original hedging contracts secured up to 12 months prior. See further discussion on our business risks associated with
foreign operations under the risk titled, "We are exposed to fluctuations in foreign currency exchange rates, which may adversely
affect our revenues, gross profit, and profitability" within Item 1A Risk Factors in this Form 10-K.
Further information regarding our foreign operations, as required by Item 101(d) of Regulation S-K, can be found in Note 17,
Geographic Information, of our Notes to Consolidated Financial Statements in this Form 10-K.
COMPETITION
The market for our products is very competitive and some of our competitors have greater financial resources than us, as well as
more substantial production, marketing, engineering and other capabilities to develop, manufacture, market, and sell their products.
One of our primary competitors is GN Netcom, a subsidiary of GN Store Nord A/S., a Danish telecommunications conglomerate
that competes with us in the office, contact center, and mobile categories and, on a limited scale, in the gaming and computer
audio categories. In addition, Motorola, Samsung, LG, and Bose are significant competitors in the consumer mono Bluetooth
headset category. Sennheiser Communications, Logitech, VXI, and regional companies are competitors in the computer, office,
and contact center categories, while Beats, Skullcandy, and LG are competitors in the Bluetooth Stereo headset category. In
addition, Turtle Beach, Skullcandy, and Razer are competitors in the gaming category.
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