Plantronics 2014 Annual Report Download - page 23

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Our operating results are difficult to predict, and fluctuations may cause volatility in the trading price of our common stock.
Given the nature of the markets in which we compete, our revenues and profitability are difficult to predict for many reasons,
including the following:
• Our operating results are highly dependent on the volume and timing of orders received during the quarter. Customers
generally order on an as-needed basis, without firm, long-term purchase commitments, making forecasting difficult. As
a result, our revenues in any quarter depend primarily on orders booked and shipped in that quarter, which fluctuate for
many reasons beyond our control, including customers' sales promotions and campaigns, large customer deployments of
Unified Communications ("UC") infrastructure, general economic conditions, seasonality, customer cancellations, and
rescheduling.
• Our gross margins vary for many reasons, including customer demand, competition, product life cycle, new product
introductions, unit volumes, commodity and supply chain costs, geographic sales mix, foreign currency exchange rates,
and the complexity and functionality of new product innovations. Moreover, there are significant variances in gross
profit percentages between our higher and lower margin products such that small variations in product sales mix, which
are difficult to predict, can materially impact gross profit. Additionally, if we fail to timely introduce new products within
projected costs, product demand is less than anticipated or product pricing, marketing or other initiatives that we initiate
lower our margins, our overall gross margin will decrease. When the mix of products sold shifts from higher margin
product lines to lower margin product lines, to lower margin sales geographies, or to lower margin products within product
lines, our overall gross margins and our profitability may be adversely affected and create unanticipated fluctuations in
our operating results.
• We incur significant costs in advance of customer orders including research and development costs, cost of materials and
components, manufacturing costs, and sales, marketing and other operating commitments prior to obtaining orders. If
inventories for one or more products exceed demand, the risk of inventory write-downs increases. Conversely, if we
have inadequate inventory to timely meet demand for particular products, we may miss significant revenue opportunities
or incur significant expenses such as expedited shipping charges and other costs as we attempt to make up for the
shortfall. When a significant portion of our revenue is derived from new products, forecasting future demand is even
more difficult.
• We are increasingly incorporating software features and functionalities into our products, offering firmware and software
fixes, updates, and upgrades electronically over the Internet and developing standalone software applications. As the
nature and extent of software integration in our products increases or if sales of standalone software applications become
material, the way we report revenue related to our products could be significantly affected. For example, we are
increasingly required to evaluate whether our revenue transactions include multiple deliverables and, as such, whether
the revenue generated by each transaction should be recognized upon delivery, over a period of time or apportioned and
recognized based on a combination of the two in light of all the facts and circumstances related to each transaction.
Moreover, the software revenue recognition rules are complex and dynamic. If we fail to accurately apply these complex
rules and policies, we may incorrectly report revenues in one or more quarterly or annual periods. If this were to occur
and the error was material, we may be required to restate our financial statements, which could materially and adversely
impact our results for the affected periods, cause our stock price to decline, and result in securities class actions or other
similar litigation.
Fluctuations in our operating results, including the failure to meet our expectations or the expectations of financial analysts, may
cause volatility, including material decreases, in the trading price of our common stock.
The success of our business depends heavily on our ability to effectively market our UC products, and our business could be
materially adversely affected if markets do not develop as we expect.
Our OCC products represent our largest source of revenue, and we regard the market for headsets designed for UC as our greatest
long-term opportunity in the OCC market. We believe that the implementation of UC technologies by large enterprises will be a
significant long-term driver of enterprise UC headset adoption, and, as a result, a key long-term driver of revenue and profit growth.
Accordingly, we continue to invest in the development of new products and enhance existing products to be more appealing in
functionality and design for the UC office market; however, there is no guarantee that significant growth in UC will occur or that
we will successfully take advantage of any growth that does occur.