Plantronics 2006 Annual Report Download - page 52

on the construction of the facility in Suzhou, China and had a project-to-date spending of
approximately $23 million, of which $17.6 million was for the total construction costs of the
building.
)Development of a leading industrial design team and facilities. We recently expanded our design
team and are now adding a new design center at our corporate headquarters in Santa Cruz. Our
strengthened industrial design team is focused on enhancing the look of our Audio Communica-
tions Group products, which we believe is a key factor in the customer’s decision to buy. We
expect that the costs of the larger design team will increase our research, development and
engineering expenses in the next fiscal year.
Throughout fiscal 2006, we have remained focused on our overall long-term strategy for the Audio
Communications Group, which is to increase headset adoption in the enterprise markets through the
creation of new products that are appealing in functionality and design and combining these products
with marketing programs to increase awareness and interest. Through the acquisition of Altec Lansing
and the establishment of the Audio Entertainment Group, we moved closer to obtaining our long-term
goal of positioning ourselves to produce products that will meet the consumer needs in an increasing
convergence trend of communications and entertainment. The potential for future growth will depend on
our efforts to expand customer awareness and our ability to successfully launch new products.
Looking forward into fiscal 2007, we are focused on the following key corporate goals to maximize
corporate profits:
)Increase the adoption of our products in the office markets. Growing the office markets, through
the introduction of compelling, easy to use, wireless products and demand generation campaigns
will continue to be our top priority.
)Reduce manufacturing costs, particularly for our Bluetooth products. We have opportunities to
decrease manufacturing costs by improving supply chain flexibility, taking advantage of the low
manufacturing costs in China, improving the efficiency of transforming raw materials into
finished goods, decreasing our logistics costs, improving our design process for product
manufacturability, and enhancing tools that support and enable decisions and execution in these
areas. Achieving competitive advantage by reducing our cost structure, particularly in the
Bluetooth market, is a critical objective for fiscal 2007 and beyond.
)Improve efficiency in marketing and new product development. We plan to continue our brand
awareness and demand generation programs, targeting the wireless office market in order to
maximize revenues and to build on the awareness raised from our fiscal 2006 marketing
campaigns. The costs for the office wireless demand generation program, which are expected to
be approximately $19 million, will be reflected in the selling, general and administrative line of
our statement of operations.
We believe that our fiscal 2007 sales for the wireless office, our Bluetooth products for Bluetooth-enabled
devices such as mobile phones and other PDA’s, gaming and VOIP computer headsets, and our
entertainment products, especially the portable category, will continue to experience strong growth rates.
These growth opportunities, however, will be partially offset by an expected decline in our corded mobile
business and flat year-over-year results in our corded office and contact center products.
We intend for the following discussion of our financial condition and results of operations to provide
information that will assist in understanding our financial statements.
46 ⯗Plantronics