Plantronics 2013 Annual Report Download - page 41

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis is intended to help you understand our results of operations and financial condition. It is
provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and related notes
thereto included elsewhere in this report. This discussion contains forward-looking statements. Please see the "Cautionary
Statement" and "Risk Factors" above for discussions of the uncertainties, risks, and assumptions associated with these
statements. Our fiscal year-end financial reporting periods end on the Saturday closest to March 31st. Fiscal years 2013, 2012,
and 2011 each had 52 weeks and ended on March 30, 2013, March 31, 2012, and April 2, 2011, respectively. For purposes of
presentation, we have indicated our accounting fiscal year as ending on March 31.
OVERVIEW
We are a leading designer, manufacturer, and marketer of lightweight communications headsets, telephone headset systems, and
accessories for the worldwide business and consumer markets under the Plantronics brand. In addition, we manufacture and
market, under our Clarity brand, specialty telephone products, such as telephones for the hearing impaired, and other related
products for people with special communication needs.
Our priorities during fiscal year 2013 were to win in Unified Communications (“UC”), improve our execution effectiveness, and
deliver strong financial results. We increased revenues from UC products, growing by 40% over the prior year to $130.8 million
and believe our innovation and breakthroughs in contextual intelligence and other product features and enhancements spurred this
growth and allowed us to maintain a premium position in the market. Our increased investments in Research and Development
versus a year ago yielded increased functionality for UC endpoints and successful launches of new consumer products in key
markets. We also continued to invest in our global sales force in order to bring these and other products to the marketplace. Despite
macroeconomic headwinds in some of our key markets, we achieved strong financial results, delivering $106.4 million in net
income, representing approximately 14% of our net revenues.
We believe UC represents our key long-term driver of revenue and profit growth, and it continues to be our primary focus area.
Business communications are being transformed from voice-centric systems supported by traditional PBX infrastructure to
communication systems that are fully integrated with voice, video, and data and are supported by feature-rich UC software. With
this transformation, the requirement for a traditional headset used only for voice communications continues to evolve into a device
that delivers contextual intelligence, providing the ability to reach people using the mode of communication that is most effective,
on the device that is most convenient, and with control over when and how they can be reached. Our portfolio of UC solutions
combines hardware with advanced sensor technology and capitalizes on contextual intelligence, addressing the needs of the
constantly changing business environments and evolving work styles to make connecting easier and by sharing presence information
to convey user availability and other contextual information. We believe UC systems will become more commonly adopted by
enterprises to reduce costs and improve collaboration, and we believe our solutions with Simply Smarter Communications®
technology will be an important part of the UC environment.
The contact center is the most mature market in which we participate, and we expect this market to grow slowly over the long-
term. Given the migration to UC by corporations globally, we also expect the market for headsets for non-UC enterprise applications
to grow very slowly, if at all. We believe the growth of UC will increase overall headset adoption in enterprise environments and
we therefore expect most of the growth in Office and Contact Center ("OCC") over the next five years to come from headsets
designed for UC.
In fiscal year 2013, we built on the traction gained during fiscal year 2012 in our Bluetooth product portfolio with the introduction
of several new models, including Legend, our next-generation Voyager mono Bluetooth product, which was successfully launched
in the second half of the fiscal year. We believe we gained share in both stereo and mono Bluetooth categories during fiscal year
2013 and intend to manage our portfolio to maintain or grow share going forward.
Integral to our core research and development in fiscal year 2013 were 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 development of
value-added software applications for business users. We believe our investments in strategic architecting may allow us to
differentiate our products and sustain strong long-term gross margins. During fiscal year 2013, we continued to strengthen our
strategic partnerships with platform suppliers to ensure that our products remain compatible with all major platforms as UC usage
becomes an essential part of a unified work environment.
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