Vtech 2003 Annual Report Download - page 17

Annual Report 2003 15
Review of Operations
99
472.7
549.0
823.8
670.0
609.8
900
750
600
450
300
150
00 01 02 03
TELECOMMUNICATION PRODUCTS
REVENUE IN LAST 5 YEARS
US$ million
New AT&T
and VTech
products
Exciting
new product
range
during the financial year 2004,though much
will depend on overall economic conditions
and consumer sentiment, particularly in the
United States, our largest market.We expect
that competitive pressures, especially with
regard to product pricing, will remain strong
and our largest competitors begin to supply
5.8GHz products to the market. According
to data of the first quarter of calendar year
2003 released by NPD, Market Intelligence,
however, the total cordless market in the
United States will experience moderate
growth in both units and revenue in the
calendar years 2003 and 2004. Having both
the AT&T and VTech brands, the Group is
well positioned to benefit from this organic
growth and to capture market share from
higher end segments of this market.
In April 2003, VTech launched a new range
of AT&T and VTech cordless phones that
have received enthusiastic support from
our retail partners. In addition to new
2.4GHz and 5.8GHz cordless phones, the
“Teen Phone”, a cordless phone designed
specifically for the teenage market with
programmable ringer tones and removable
faceplates, has created particular excitement
in the marketplace.Initial point of sales data
for the “Teen Phone”are encouraging.
Our customer-centric strategy continues to
position VTech well to win additional market
share in a competitive environment.The
comprehensive product range we offer
under two different brand names and our
track record of technology leadership
enable us to gain acceptance for additional
products as retailers continue to rationalize
the number of suppliers and the variety of
products they carry. At the same time,
continued improvements managing our
supply chain will reinforce the attraction of
VTech as a key supplier, and in some cases,
telephone category manager.
Another growth area for the financial year
2004 will be the European market.The size
of the overall European cordless phone
market is approximately two-thirds of the
US residential phone market. Since our
European sales accounted for around 5% of
the telecommunication products revenue
in the financial year 2003, we see enormous
potential for VTech in this market over the
medium term and have set a target of
raising the proportion of sales from Europe
to 15% by 2006.
To achieve this, we will deepen the
relationships we enjoy with some of the
best names in European
telecommunications, to which we are
already a key supplier.The Group will also
invest more in the research and
development of products specifically for
the European market and work to build our
alliance with Swissvoice Group, which will
market VTech’s DECT phones in a number
of European countries.
In addition to growth through geographical
expansion,we intend over the medium term
to drive revenue by entering the data
networking market.This is one of the fastest
growing product categories in
communications and the global market is
expected to reach US$3.0 billion by the
calendar year 2005.
In January 2003, we secured an extension
to our AT&T brand license that permits
VTech to use the AT&T brand on data
networking products.With its technical
expertise and distribution presence, VTech
is in a unique competitive position to take
the lead in this fast growing segment,which
will only expand further as voice and data
converge.We have created a unique identity
for these products, using the “Plug and
ShareTM”concept to offer high quality and
easy to use products. An initial range of
products will be delivered in the second
quarter of the financial year 2004 and we
believe the combination of VTech‘s
technology platform with the highly
respected AT&T brand, will make us a
powerful competitor in this exciting new
market.