Plantronics Inc

PLANTRONICS, INC

Plantronics has followed its mission to provide a wide range of innovative audio devices to enhance business and personal communications and certain forms of home entertainment. Plantronics has maintained its growth in revenue and maintained its high profit margins because its strong market position in its office and call center (OCC) markets. Moreover, in the OCC market Plantronics controls the market with Netcom a division of GN Store Nord giving them a duopoly advantage. Plantronics other divisions Mobile, Gaming and Computer, Clarity and the Audio Entertainment Group contribute with 41% of the total revenue.

The Audio Entertainment Group (AEG) specifically contributes with 16% ($124M) of the total revenues of $800M of Plantronics in 2007. After the acquisition of Altec Lansing Technologies for $165 millions in 2005, which stated rationale for the deal was to expand PLT’s footprint into the big-box retail channel and retail markets, this division has focused on three product lines: Docking Audio Lines, PC Audio Lines and Corded Headsets, each product line contributed with 50%, 42% and 7% respectively to the revenues of the AEG division in 2007.

AEG industry has a strong growth prospect of 11-15% per year but gross margins for AEG have decreased 65% form 2006 to 2007 because of intense price competition, reduced market share, and inventory write downs in the docking audio segments. AEG’s sales (86%) are through retail channels were they face strong competitors like Bose, Harman Kardon, Logitech, and Labtec. The AEG market is a fragmented market with 5 competitors controlling the market. Moreover, there is a short life cycle for products since they are all accessories. This means that their target markets are customers that have already bought the main accessory, mp3 player’s, computer’s and game consoles and the technology and/or adaptability to these products changes rapidly. AEG has no negotiation leverage on manufacturers of theses...