Plantronics 2008 Annual Report Download - page 20

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xalthough we generally use standard raw materials, parts and components for our products, the high development costs
associated with emerging wireless technologies permit us to work with only a single source of silicon chip-sets on any
particular new product. We, or our supplier(s) of chip-sets, may experience challenges in designing, developing and
manufacturing components in these new technologies which could affect our ability to meet market schedules. Due to
our dependence on single suppliers for certain chip sets, we could experience higher prices, a delay in development of
the chip-set, or the inability to meet our customer demand for these new products. Additionally, these suppliers or other
suppliers may discontinue production of the parts we depend on. If this occurs, we may have difficulty obtaining
sufficient product to meet our needs. This could cause us to fail to meet customer expectations. If customers turn to our
competitors to meet their needs, there could be a long-term adverse impact on our revenues and profitability. Our
business, operating results and financial condition could therefore be materially adversely affected as a result of these
factors;
xbecause of the lead times required to obtain certain raw materials, sub-assemblies, components and products from certain
foreign suppliers, we may not be able to react quickly to changes in demand, potentially resulting in either excess
inventories of such goods or shortages of the raw materials, sub-assemblies, components and products. Lead times are
particularly long on silicon-based components incorporating radio frequency and digital signal processing technologies
and such components are an increasingly important part of our product costs. In particular, many B2C customer orders
have shorter lead times than the component lead times, making it increasingly necessary to carry more inventory in
anticipation of those orders, which may not materialize. Failure in the future to match the timing of purchases of raw
materials, sub-assemblies, components and products to demand could increase our inventories and/or decrease our
revenues, and could materially adversely affecting our business, financial condition and results of operations;
xmost of our suppliers are not obligated to continue to provide us with raw materials, components and sub-assemblies.
Rather, we buy most raw materials, components and subassemblies on a purchase order basis. If our suppliers experience
increased demand or shortages, it could affect deliveries to us. In turn, this would affect our ability to manufacture and
sell products that are dependent on those raw materials, components and subassemblies. Any such shortages would
materially adversely affect our business, financial condition and results of operations.
Acquisition, integration, and restructuring of Altec Lansing Technologies, Inc., which comprise a significant portion of AEG, has
had and may continue to have an adverse effect on our financial condition.
There are inherent risks associated with our acquisition of Altec Lansing that could materially adversely affect our business, financial
condition and results of operations. The risks faced in connection with this acquisition include among others:
xdeveloping new product. We believe that the turnaround for AEG is largely dependent on the development of a new
product portfolio. We are currently working on the new portfolio which we are anticipating will be fully completed in
December 2009 although ongoing refreshes on a routine basis after that will also be required. The development of these
new products may not evolve as anticipated. There can be no assurance that these new products will be successful, and,
during the time we are developing the new products, our competitors and selling products to our customers and
increasing their market share;
xcontrolling costs in the AEG business and making business operations more efficient in order to increase profitability.
We are in the process of restructuring AEG’s China operations. During the last quarter, we closed AEG’s manufacturing
facility in Dongguan, China; initiated plans to shut down a related Hong Kong research and development, sales and
procurement office; and consolidated procurement, research and development activities for AEG in a new Shenzhen,
China site which we began to use in the fourth quarter. The selling, general and administrative functions of AEG have
been consolidated with those of ACG throughout the Asia-Pacific region. These steps are part of a strategic initiative
designed to reduce fixed costs by outsourcing the majority of AEG manufacturing to the network of qualified contract
manufacturers already in place. In addition, we continue to review AEG’s cost structure and may implement additional
cost-cutting initiatives in the future. There is a risk that the consolidation of the AEG Asian operations may cost more
than we currently expect. There is also a risk that the savings that we currently predict may not materialize and that the
timing of costs and benefits may be different than what we currently expect. If the cost of consolidation is more than we
currently anticipate or the savings that we currently anticipate from these activities do not materialize, our future
financial results may be adversely affected;
xthe potential loss of key employees of Altec Lansing and Plantronics. As a result of our restructuring, we are relocating
many of our research and development engineers and procurement staff from Dongguan, China and Hong Kong into a
Shenzhen, China facility. As a result of this change, we may lose key personnel which could negatively impact our new
AEG product portfolio refresh;