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VTech Holdings Ltd
6
Letter to Shareholders
One-stop
shop OEM
services
In telecommunication products, we have
already delivered some of the new 2.4GHz
and 5.8GHz cordless phones to sustain the
sales momentum created during the
financial year 2003 and capture more
market share in the United States. A large
number of new models were introduced at
the Consumer Electronics Show (CES) in
January 2003 that were very well received
by the industry and are expected to drive
sales and profits in the financial year 2004.
These continue the VTech tradition of
innovation and technology leadership,
including the TeleZapper®phones and the
“Teen Phone”.
Our telecommunication products business
will also expand aggressively in Europe.We
are deepening the relationships we have
already established with some of the best
names in European telecommunications, to
which we are already a key supplier. In
March 2003, we entered into an alliance
with the Swissvoice Group, a Switzerland-
based leader in the marketing of residential
fixed line telephones in Europe. Swissvoice
will market VTech’s DECT phones in various
European markets. Our aim is to raise
the proportion of the Group’s
telecommunication products revenue from
Europe to 15% by 2006, around three times
the current proportion.
In a more dramatic development, in January
2003, we secured an extension to the brand
license agreement with AT&T that permits
VTech to use the AT&T brand on data
networking products. Wireless Local Area
Networks are proliferating rapidly around
the world, as consumers seek the mobility
and convenience they offer.The global data
networking market, which is still in its early
stage is growing fast and the technology
used in data networking devices is a
common platform with the 2.4GHz cordless
phone technology.We have leveraged our
expertise to create a product range in this
area, which will be an important new
growth driver for our telecommunication
products business in longer term.
The ELP business will also turn around as
we implement our three-year strategic plan.
The immediate focus will be to rebuild
profitability.The ELP operation will be
altogether leaner and more productive in
the financial year 2004,following the actions
we have already undertaken to rationalize
the cost structure of the business.These
include allocating our advertising dollars
strategically in the financial year 2004 to
ensure that maximum impact will be
generated with fewer resources.The Hong
Kong, US and European operations were
also streamlined and reorganized to bring
the size of the structure into proportion
with the current scale of the business. As a
result, we are confident of much improved
bottom line results for the financial year
2004.
With profitability restored at our ELP
business,we expect to achieve solid revenue
growth in the financial year 2005 and
beyond, as new products come on stream.
A completely revamped product range for
Stable
profit