Plantronics 2012 Annual Report Download - page 8

Markets and Product Categories
Our products are designed to meet the needs of specific markets and applications such as offices (ranging from enterprise to home
offices), contact centers, mobile devices (such as mobile phones and smartphones), computer and gaming, residential, and other
specialty applications. These markets and applications are increasingly overlapping as work styles and lifestyles change, and
people use devices for multiple applications such as communication, music, and video entertainment. We serve these markets
through our product categories listed below.
Office and Contact Center ("OCC")
The office market comprises our largest revenue stream and we believe it also represents our largest revenue and profit growth
opportunity. We offer a broad range of communications headsets, including high-end, ergonomically designed headsets, audio
processors, and telephone systems. Our end-users consist of enterprise employees as well as small office, home office, and remote
workers. Growth in this market comes from three main factors:
• increasing deployment of UC systems;
• employee turnover; and
• growing awareness of the benefits of using headsets, including the benefits of wireless solutions.
The contact center market is our most mature market, and we expect this market to grow slowly over the long-term. We expect
that contact centers will also adopt UC to help improve productivity and reduce costs. We develop audio endpoints tailored
specifically to UC, and as UC adoption continues to increase, we will continue to lead in new product performance by creating
solutions that combine hardware and software for improved customer solutions.
Mobile
We believe that use of headsets with mobile phones has grown worldwide. Mobile represents a large unit volume market and is
our second largest revenue stream. Use of headsets with mobile phones has grown due to factors such as continued Bluetooth
technology adoption and hands-free legislation regarding the use of mobile phones while driving. As headsets become more
widely used, users are becoming more fashion conscious and style has become as important as functionality and technology. Our
mobile headsets merge technological innovations with style. Growth in the mobile headset market has slowed in the United States
("U.S."), and we believe this market is likely to grow more slowly in the future than it has in the past as it continues to mature.
Gaming and Computer Audio
Gaming and computer audio headsets, whether they are used for interactive on-line or console gaming, or switching between
music and phone calls for multi-functional devices, represent an emerging market opportunity for us. We believe that a number
of fundamental factors are likely to increase our customers’ needs for PC-compatible headsets in the future, including the
convergence of telephony and entertainment, Internet multimedia applications such as streaming audio and video, increasing use
of softphones, gaming, and video conferencing. As devices providing these users’ needs converge, our headsets need to be
compatible with PCs, mobile phones, MP3 players and various combinations of these. We believe our product roadmaps address
the convergence brought about by these needs and we are currently increasing our investment in this area to enable future growth.
Specialty Products
Our specialty products sold under our Clarity brand address the unique needs of various consumer groups, one of which is the
increasing number of people worldwide suffering from hearing loss. We offer a comprehensive range of communications products
that serves customers with mild, moderate, and severe hearing loss as well as the deaf community.
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FOREIGN OPERATIONS
In fiscal years 2012, 2011 and 2010, net revenues outside the U.S. accounted for approximately 43%, 41%, and 38%, respectively,
of our total net revenues. Revenues derived from foreign sales are generally subject to additional risks such as fluctuations in
exchange rates, increased tariffs, the imposition of other trade barriers, and potential currency restrictions. In fiscal year 2012,
we continued to engage in hedging activities to limit our transaction and economic exposures, and to mitigate our exchange rate
risks. We hedge our economic exposure by hedging a portion of our anticipated Euro and Great Britain Pound denominated sales
and our Mexican Peso denominated expenditures, which together constitute the most significant portion of our currency
exposure. In addition, we hedge our balance sheet exposure by hedging Euro, Great Britain Pound and Australian Dollar
denominated cash balances, accounts receivable and accounts payable. There have been fluctuations in the value of the U.S.
Dollar relative to the Euro and Great Britain Pound. While our existing hedges cover a certain amount of exposure for fiscal year
2013, any long-term weakening of the Euro and Great Britain Pound relative to the U.S. Dollar may have a material adverse impact
on our financial results.
Further information regarding our foreign operations, as required by Item 101(d) of Regulation S-K, can be found in Note 19,
Geographical Information, of our Notes to Consolidated Financial Statements in this Form 10-K.
COMPETITION
The market for our products is very competitive and some of our competitors have greater financial resources than we do, as well
as production, marketing, engineering and other capabilities to develop, manufacture, market and sell their products.
One of our primary competitors is GN Netcom, a subsidiary of GN Store Nord A/S., a Danish telecommunications conglomerate,
that competes with us in the office, contact center, and mobile markets and on a limited scale, in the gaming and computer audio
market. In addition, Aliph, Motorola, Logitech, Blue Ant Wireless, Samsung, and Turtle Beach are significant competitors in the
consumer headset market, and Sennheiser Communications is a competitor in the computer, office, and contact center
markets. There may also be increased competition from the major mobile phone and accessory device makers such as Motorola,
LG Electronics, and Samsung.
We believe the principal factors to be successful and competitive in each of the markets we serve are:
• our understanding of emerging trends and new technologies, such as UC, and our ability to react quickly to the opportunities
they provide;
• our ability to bring products to market that deliver on performance, product design, style, comfort, features, sound quality,
simplicity, price and reliability;
• maintenance of our brand name recognition and reputation;
• superior customer service, support and warranty terms; and
• effective and efficient distribution channels that allow us to market and sell our products.
We believe that our products and our strategy enable us to compete based on these factors.
RESEARCH AND DEVELOPMENT
We believe the future success of our business depends upon our ability to enhance our existing products, to develop compelling
new products, to develop cost effective products, to have our products qualified by our technology partners and customers, to
successfully introduce these products to existing and new markets on a timely basis, and to commence and sustain volume production
to meet customer demands.
During fiscal year 2012, we developed and introduced innovative products that enabled us to better address changing customer
demands and emerging market trends. Our goal is to bring the right products to market at the right time and have best in class
development processes.
Our core research and development focus in fiscal year 2013 continues to be on UC which will require incremental investments
in firmware and software engineering to enhance the broad compatibility of our products in the enterprise systems with which
they will be deployed and to develop value-added software application for business users. The products we are developing require
significant technological knowledge and may be protected by intellectual property. Separately or together, this technological
knowledge and our intellectual property may increase the barriers to entry for many competitors. We are continually striving to
improve the efficiency of our development processes through, among other things, strategic architecting, common platforms, and
increased use of software and test tools.
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