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42 P l a n t r o n i c s
Audio Entertainment Group
Fiscal Year Ended Fiscal Year Ended
($ in thousands)
March 31,
2005
March 31,
2006
Increase
(Decrease)
March 31,
2006
March 31,
2007
Increase
(Decrease)
Revenues from
unaffiliated
customers:
Docking audio $ — $ 80,998 $ 80,998 $ 80,998 $ 74,551 $ (6,447) (8.0)%
PC audio — 46,136 46,136 46,136 63,066 16,930 36.7%
Other — 10,406 10,406 10,406 11,463 1,057 10.2%
Less revenue
reserves — (16,871) (16,871) (16,871) (25,440) (8,569) 50.8%
Total segment net
revenues $ — $ 120,669 $ 120,669 $ 120,669 $123,640 $ 2,971 2.5%
AEG offers computer and digital audio systems, digital radio frequency audio systems, and docking audio
products as well as headphones and microphones for personal digital media. Major product categories
include Docking Audio, which is defined as all speakers whether AC or battery-powered that work with
portable digital players, such as iPod or MP3 players; PC Audio, which is defined as self-powered speaker
systems used for computers and other multi-media application systems which includes interactive audio
(headsets) and personal audio (headphones). Currently, all the revenues in AEG are derived from our
Altec Lansing products. Altec Lansing products are primarily consumer goods sold in the retail channel
and sales are highly seasonal. The strongest revenues typically occur in the December quarter due to the
holiday period.
In fiscal 2007, our product portfolio was not sufficiently competitive, which resulted in a cumulative loss
of market share. While our year-over-year net revenues increased slightly, the fiscal 2007 results reflect
a full year of operations while the fiscal 2006 results reflect only net revenues from the time of acquisition
in August 2005 through fiscal year end, approximately seven and one-half months.
Docking Audio
In comparison to fiscal 2006, our fiscal 2007 Docking Audio net revenues decreased by approximately
8%, primarily as a result of intense competition in the MP3 accessories market, particularly in the U.S.,
and our reduced share of the MP3 accessories market.
PC Audio
Compared to fiscal 2006, fiscal 2007 PC Audio revenue increased approximately 37%, reflecting a full
year of sales compared to the prior year The products sold in fiscal 2007 were reasonably similar in
terms of features and functionality to products sold in prior years, with the exception of a 5.1 system
FX5051 and a high end 2.1 system FX4021. Including the period prior to the acquisition in fiscal
2006, sales on the replacement products in fiscal 2007 were lower due to higher competition. There
were also price reductions in the PC Audio products, particularly in Europe.
Going forward, we anticipate that AEG net revenues will be relatively flat with fiscal 2007 levels until we
are able to introduce new products. In addition, we expect that the intense competition in the U.S.
market for iPod accessories, which negatively impacted our fiscal 2007 results, will continue into fiscal
2008. We expect that we will continue to respond to the pricing pressures through promotional allowances
and credits, which will negatively impact average selling prices.