Plantronics 2007 Annual Report Download - page 27

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part i
23A R 2 0 0 7
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.
Headset markets are also subject to general economic conditions and if there is a slowing of national or
international economic growth, these markets may not materialize to the levels we require to achieve our
anticipated financial results, which could in turn materially adversely affect the market price of our
stock. In particular, we may accept returns from our retailers of products that have failed to sell as
expected, and, in some instances, such products may be returned to our inventory. Should product returns
vary significantly from our estimate, then our estimated returns which net against revenue, may need to
be revised.
Our failure to effectively manage growth could harm our business.
We have rapidly and significantly expanded the number and types of products we sell, and we will
endeavor to further expand our product portfolio. We must continually introduce new products and
technologies, enhance existing products in order to remain competitive, and effectively stimulate customer
demand for new products and upgraded versions of our existing products.
This expansion of our products places a significant strain on our management, operations and engineering
resources. Specifically, the areas that are strained most by our growth include the following:
• new product launch: With the growth of our product portfolio, we experience increased
complexity in coordinating product development, manufacturing, and shipping. As this
complexity increases, it places a strain on our ability to accurately coordinate the commercial
launch of our products with adequate supply to meet anticipated customer demand and effective
marketing to stimulate demand and market acceptance. If we are unable to scale and improve
our product launch coordination, we could frustrate our customers and lose retail shelf space and
product sales;
• forecasting, planning and supply chain logistics: With the growth of our product portfolio,
we also experience increased complexity in forecasting customer demand and in planning for
production, and transportation and logistics management. If we are unable to scale and improve
our forecasting, planning and logistics management, we could frustrate our customers, lose
product sales or accumulate excess inventory; and
• support processes: To manage the growth of our operations, we will need to continue to
improve our transaction processing, operational and financial systems, and procedures and
controls to effectively manage the increased complexity. If we are unable to scale and improve
these areas, the consequences could include: delays in shipment of product, degradation in levels
of customer support, lost sales, decreased cash flows, and increased inventory. These difficulties
could harm or limit our ability to expand.
We have strong competitors and expect to face additional competition in the future. If we are unable to
compete effectively, our results of operations may be adversely affected.
Certain of our markets are intensely competitive. They are characterized by a trend of declining average
selling prices, continual performance enhancements and new features, as well as rapid adoption of
technological and product advancements by competitors in our retail market. Also, aggressive industry
pricing practices have resulted in downward pressure on margins from both our primary competitors as
well as from less established brands.
Currently, our single largest competitor is GN Netcom, a subsidiary of GN Great Nordic Ltd., a Danish
telecommunications conglomerate. We are currently experiencing more price competition from GN
Netcom in the business markets than in the past. Motorola is a significant competitor in the consumer
headset market, primarily in the mobile Bluetooth market, and has a brand name that is very well known
and supported with significant marketing investments. Motorola also benefits from the ability to bundle