Plantronics 2007 Annual Report Download - page 23

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part i
19A R 2 0 0 7
• The potential loss of key employees of Altec Lansing and Plantronics; and,
• Cultural differences in the conduct of the business.
Mergers and acquisitions, particularly those of technology companies, are inherently risky, and no
assurance can be given that this or any future acquisitions will be successful and will not materially
adversely affect our business, operating results or financial condition. We must also manage any
acquisition-related growth effectively. In fiscal 2007, we incurred significant losses from the Altec
Lansing business. If the anticipated future results of our AEG business do not materialize as expected,
goodwill and other intangible assets which were recorded as a result of the acquisition could become
impaired and could result in write-offs which would negatively impact our operating results.
We have significant goodwill and intangible assets recorded on our balance sheet. If the carrying value of
our goodwill or intangible assets is not recoverable, an impairment loss must be recognized, which would
adversely affect our financial results.
As a result of the acquisition of Altec Lansing and Octiv, now Volume Logic, in fiscal 2006, we have
significant goodwill and intangible assets recorded on our balance sheet. Certain events or changes in
circumstances would require us to assess the recoverability of the carrying amount of our goodwill and
intangible assets.
The results of operations for our acquired Altec Lansing business have been negatively impacted by
intense price competition, particularly in the Docking Audio products, and our new product introductions
have not been as profitable as those in the prior year. We have also had significant losses in fiscal 2007
from excess and obsolete inventory and non-cancelable purchase commitments. If we are unable to
successfully introduce new, profitable products and align the cost structure to the revenue base, our
anticipated future cash flows from the Altec Lansing business could be negatively impacted.
We will continue to evaluate the recoverability of the carrying amount of our goodwill and intangible
assets on an ongoing basis, and we may incur substantial impairment charges, which would adversely
affect our financial results. There can be no assurance that the outcome of such reviews in the future will
not result in substantial impairment charges.
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
and speakers 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
consumer market has resulted in a growing portion of our products incorporating new technologies,
experiencing shorter lifecycles and a need to offer deeper product lines. We believe this is particularly true
for our newer emerging technology products especially in the speaker, 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 currently our focus is limited to audio
products.
We are also experiencing a trend away from corded headsets to cordless products. In general, our corded
headsets have had higher gross margins than our cordless products. In addition, we expect that office
phones will begin to incorporate Bluetooth functionality, which would open 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.