Plantronics 2009 Annual Report Download - page 25

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Competitors in audio devices vary by product line. The most competitive product line is headsets for cell phones where we compete
with Motorola, Nokia, GN’s Jabra brand, Sony Ericsson, Samsung, Aliph’s Jawbone brand, and Belkin among many others. Many of
these competitors have substantially greater resources than we have, and each of them has established market positions in this
business. In the PC and office and contact center markets, the largest competitor is GN, as well as Sennheiser Communications. For
PC and gaming headset applications, our primary competitor is Logitech. In the Audio Entertainment business, competitors include
Bose, Apple, Logitech, Creative Labs, iHome, and Harman International.
Our product markets are intensely competitive, and market leadership changes frequently as a result of new products, designs and
pricing. We are facing additional competition from companies, principally located in the Asia Pacific region, which offer very low
cost headset products, including products that are modeled on or are direct copies of our products. These new competitors are offering
very low cost products which results in pricing pressure in the market. If market prices are substantially reduced by such new entrants
into the headset market, our business, financial condition or results of operations could be materially adversely affected.
If we do not continue to distinguish our products, particularly our retail products, through distinctive, technologically advanced
features and design, as well as continue to build and strengthen our brand recognition, our business could be harmed. If we do not
otherwise compete effectively, demand for our products could decline, our gross margins could decrease, we could lose market share,
and our revenues and earnings could decline.
The success of our business depends heavily on our ability to effectively market our products, and our business could be materially
adversely affected if markets do not develop as we expect.
We compete in the business market for the sale of our office and contact center products. We believe that our greatest long-term
opportunity for profit growth in ACG is in the office market, and our foremost strategic objective for this segment is to increase
headset adoption. To this end, we are investing in creating new products that are more appealing in functionality and design as well as
targeting certain vertical segments to increase sales. We continue to believe that the implementation of UC technologies by large
corporations will be a significant long-term driver of office headset adoption, and, as a result, a key long-term driver of revenue and
product growth. Despite weak economic conditions, trial deployments of UC solutions and headsets continue to grow, with some
evidence that the cost savings and productivity enhancements derived from UC are driving the expansion of existing deployments in
both the U.S. and Europe. We can give no assurance that significant growth in UC will occur during the recession or thereafter.
However, we believe that we are well positioned in the UC market and that our competitive position continues to improve.
Our ability to realize our UC plans and to achieve the financial results projected to arise from UC adoption could be adversely affected
by the following factors: (i) the risk that, as UC becomes more widely adopted, competitors will offer solutions that will effectively
commoditize our headsets which, in turn, will reduce the sales prices for our headsets; (ii) our plans are dependent upon adoption of
our UC solution by major platform providers such as Microsoft, Avaya, IBM and Cisco, and we have a limited ability to influence
such providers with respect to the functionality of their platforms, their rate of deployment, and their willingness to integrate their
platforms with our solutions; (iii) the development of UC solutions is technically complex and this may delay or obstruct our ability to
introduce solutions to the market on a timely basis and that are cost effective, feature rich, stable and attractive to our customers; (iv)
as UC becomes more widely adopted we anticipate that competition for market share will increase, and some competitors may have
superior technical and economic resources, and (v) UC solutions may not be adopted with the breadth and speed in the marketplace
that we currently anticipate.
If these investments do not generate incremental revenue, our business could be materially affected. We are also experiencing a more
aggressive and competitive environment with respect to price in our business markets, leading to increased order volatility which puts
pressure on profitability and could result in a loss of market share if we do not respond effectively.
We also compete in the consumer market for the sale of our mobile, computer audio, gaming, Altec Lansing and Clarity products. We
believe that effective product promotion is highly relevant in the consumer market, which is dominated by large brands that have
significant consumer mindshare. We have invested in marketing initiatives to raise awareness and consideration of the Plantronics’
products. We believe this will help increase preference for Plantronics and promote headset adoption overall. The consumer market
is characterized by relatively rapid product obsolescence, and we are at risk if we do not have the right products at the right time to
meet consumer needs. In addition, some of our competitors have significant brand recognition, and we are experiencing more
competition in pricing actions, which can result in significant losses and excess inventory.
If we are unable to stimulate growth in our business, if our costs to stimulate demand do not generate incremental profit, or if we
experience significant price competition, our business, financial condition, results of operations and cash flows could suffer. In
addition, failure to effectively market our products to customers could lead to lower and more volatile revenue and 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.