Plantronics 2015 Annual Report Download - page 26

We face additional competition from companies, principally located in or originating from the Asia Pacific region, which offer
very low cost headset products, including products modeled on, direct copies of, or counterfeits of our products. Furthermore,
online marketplaces make it easier for disreputable and fraudulent sellers to introduce their copies or counterfeit products into the
stream of commerce by commingling legitimate products with copies and counterfeits; thereby making it extremely difficult to
track and remove copies and counterfeits. The introduction of low cost alternatives, copies and counterfeits has resulted in and
will continue to cause market pricing pressure, customer dissatisfaction and harm to our reputation and brand name. If market
prices are substantially reduced by new or existing participants in the headset categories, our business, financial condition, or
results of operations could be materially and adversely affected.
If we do not distinguish our products, particularly our Consumer products, through distinctive, technologically advanced features
and design, as well as continue to build and strengthen our brand recognition, our products may become commoditized and our
business could be harmed. 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 associated development costs, any of which could
also have a material adverse effect on our business, financial condition, results of operations, and cash flows.
The markets for our Consumer products are volatile and our ability to compete successfully in one or more of these categories
is subject to many risks.
Competition in the markets for our Consumer products, which consist primarily of Bluetooth headsets, gaming, entertainment and
computer audio headsets, is intense and presents many significant manufacturing, marketing and operational risks and uncertainties.
The risks include the following:
• The global market for mono Bluetooth headsets is shrinking or flat, which is at least partially attributable to the integration
of Bluetooth systems into automobiles. The market for stereo Bluetooth headsets continues to grow rapidly, although it
remains dominated by lifestyle brands. Our market share has been and is significantly larger in the mono market than
in the stereo market and it remains unclear whether we will be able to sufficiently increase share in the stereo market to
continue growing in the overall market for Bluetooth headsets.
• Reductions in the number of suppliers participating in the Bluetooth market has reduced our sourcing options and may
in the future increase our costs at a time when our ability to offset higher costs with product price increases is limited.
• Difficulties retaining or obtaining shelf space and maintaining a robust and compelling eCommerce presence for our
Consumer products in our sales channel, particularly with large "brick and mortar" retailers and Internet "etailers" as the
market for mono Bluetooth headsets contracts or remains flat.
• Relying on a dwindling number of retail customers that have significant market share in the shrinking mono Bluetooth
category increases our exposure to pricing pressure, unexpected changes in demand and may result in unanticipated
fluctuations in our revenues and margins.
• The varying pace and scale of economic activity in many regions of the world creates demand uncertainty and
unpredictability for our Consumer products.
• The need to rapidly and frequently adopt new technology to keep pace with changing market trends. In particular, we
anticipate a trend towards more integrated solutions that combine audio, video, and software functionality that we expect
will shorten product lifecycles.
• Our ability to maintain insight into, and quickly respond to, sudden changes in laws or regulations.
Failure to compete successfully in the consumer business markets may have an adverse effect on our business, results of operations,
and financial condition.
We cannot guarantee we will continue to repurchase our common stock pursuant to stock repurchase programs or that we will
declare future dividend payments at historic rates or at all. The repurchase of our common stock and the payment of dividends
may require us to borrow against our Credit Agreement or incur indebtedness and may not achieve our objectives.
In March 2015, we announced a new corporate return of capital policy with the goal of increasing the return of cash to stockholders
to approximately 60% of free cash flow, defined as total operating cash flow less capital expenditures. We intend to achieve this
goal primarily through stock repurchases and quarterly dividends. In conjunction with the March 2015 announcement regarding
our new return of capital policy, we increased our then-existing stock repurchase program from one million shares to four million
shares. Moreover, our Board of Directors has consistently declared quarterly dividends over the years.
Any determination to pay cash dividends at recent rates or at all, or authorization or continuance of any share repurchase programs
is contingent on a variety of factors, including our financial condition, results of operations, business requirements, and our Board
of Directors' continuing determination that such dividends or share repurchases are in the best interests of our stockholders and
in compliance with all applicable laws and agreements. Accordingly, there is no assurance that we will continue to repurchase
stock at recent historical levels or at all, or that our stock repurchase programs or dividend declarations will have a beneficial
impact on our stock price.
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