MarketWatch  Mar 28  Comment 
Plantronics Inc. announced Wednesday a deal to buy privately held communication company Polycom in a cash and stock deal valued at $2.0 billion. Under terms of the deal, which includes about $690 million of net debt, Plantronics will pay $945...


Company Overview

Plantronics, Inc. (PLT) is a producer of lightweight communications headsets and accessories for the home and office. Founded in 1961, Plantronics is currently traded on the NYSE and is incorporated in the state of California. They design, manufacture and market all of their products themselves.

Their product line consists of headsets designed for use with mobile phones, cordless phones, computers, and gaming consoles. They are designed as hands-free communications tools allowing users in the business and consumers sectors the freedom to do what they need without being tied down to a chair.

Their major product categories include OCC (Office and Contact Center), Mobile, Gaming and Computer Audio, and Clarity. Clarity is a brand name under Plantronics, Inc. that specializes in telephone products for the hearing impaired and other communications products for people with special needs.

Plantronics, Inc. ships their products to a total of 70 countries worldwide. They use a network of distributers, original equipment manufacturers, and orders by phone. Most of their revenues come from the third fiscal quarter due to the holiday season.

According to Yahoo Finance[1], Plantronics, Inc.’s market capitalization is $1.7 billion with a price to earnings ratio of 16.09.


The market is extremely competitive for Plantronics, Inc. Some of their competitors are significantly larger and they have the financial resources to do things Plantronics, Inc. cannot. Their main competitors are GN Netcom, Motorola Mobility, Logitech[2], and Aliph in the consumer headset market. Sennheiser Communications is also a main competitor but in the business and office sector.

New competition has arisen from many big name cell phone companies such as Apple, Nokia, Sony, and Samsung.

Plantronics, Inc. believes that in order to be successful in this highly competitive market, they are going to need to address a number of factors. These include, but are not limited to, an understanding of emerging markets and new technologies, quality assurance, maintenance of brand reputation, outstanding customer support, and an efficient supply chain.[3]

Market share is constantly changing due to the highly competitive nature of this industry. What should be noted is that Plantronics, Inc. earns only half or less of the quarterly revenue growth of their competitors.

Plantronics, Inc. only really has one specific strategic advantage over their competitors and that is quality assurance. They produce some of the most sought after headsets in both the consumer and business sectors. Their products, the Voyager Pro and Discovery 975 are two of the highest rated headsets in the industry based on their excellent call clarity and overall reliability.


Plantronics, Inc. serves a large customer base. With distribution centers in Tijuana, Mexico, Etten-Leur, Netherlands, Suzhou, China, Melbourne, Australia, Sau Paulo, Brazil, and Tokyo, Japan[3], Plantronics, Inc. is able to reach all of their customers across all 70 countries.
Voyager Pro
Voyager Pro

A more in depth look at their market base is as follows:

Office and Contact Center

This is where Plantronics, Inc. makes most of their revenues. Their user-base includes corporate, small and home office workers. Growth depends on adoption of wireless solutions and a growing awareness of the benefits of wireless headsets. VoIP technology is growing and Plantronics, Inc. is depending on it.


Because of the large availability of cell phones today, the mobile Bluetooth headset is Plantronics, Inc.’s most widely used product category. Sales volume has grown significantly over the past five years but they expect the product to enter the maturity phase of its cycle soon. However, Plantronics, Inc. still plans to innovate and improve their products’ functionality in order to remain competitive in the marketplace.

Recent legislation regarding the use of cell phones while driving has helped boost sales even further in this category.

Gaming and Computer Audio

Demand is not as high in this market but Plantronics, Inc. sees these headsets as an emerging market as on-line gaming is becoming more and more popular. As the need for utility of VoIP and telephone calls used in various Internet applications emerges, Plantronics, Inc. plans to be ready with their full line of gaming headsets.


Clarity is a specialty brand under the Plantronics, Inc. brand name. Specializing in products for the hearing impaired, Clarity develops a wide range of products to cater to individuals with mild to severe hearing loss. [3]

Porters 5 – Forces Analysis

Threat of New Entrants – Here the threat is very high. Bluetooth and other wireless technologies are incredibly cheaper than they were ten years ago. Anyone with access to enough money can invest and create their own products similar to those of Plantronics, Inc.

The brand identity is not very strong in this market. Most wireless headsets do the same thing. So whichever company comes out with the most aesthetically pleasing products with enough features are bound to sell in this market. Also, a learning curve does not apply here. The technologies are old and there really are not many ideas companies can implement to innovate. Information on how to develop products like the ones Plantronics, Inc. offers are easily accessible.

Supplier Power – Supplier power is low in this industry. There are many suppliers available with competitive pricing and a number with their own distributive networks. Differentiation of product features does not really apply here. Considering Plantronics, Inc.’s wide distribution network across the globe, it is easy to see why supplier power would be low. Certain parts can always be substituted and if Plantronics, Inc. sees another supplier as being a better fit, they can make the switch.

Threat of Substitutes – The threat is very high. Plantronics, Inc. has many multinational competitors, but even an individual with a fair amount of knowledge in electrical engineering can develop a product like this and sell it his/her self. There are thousands of different kinds of wireless headsets available worldwide and in this business, anyone can be a competitor.

Buyer Power – The buyer power is high in this industry. Brand identity barely an issue and buyers are more price sensitive these days due to global economic conditions. Substitutes are available and if someone wants to avoid paying a premium for wireless communications devices, they can easily find another seller. Plantronics, Inc. has to be sensitive to the needs of their buyers. Quality assurance has been one of their key advantages in dealing with buyer power so this is an issue they are going to need to persistently address.

SWOT Analysis

Strengths – Plantronics, Inc. has a strong brand reputation. Quality assurance comes standard with all their products and their customer service is superior. They offer a wide array of different products to cater to different price ranges and desired utilities. Overall, Plantronics, Inc. is a solid company with a lot to offer and it doesn’t seem their going anywhere anytime soon. Broad Product Portfolio: Plantronics develops a range of headsets for mobile phones with diversified wearing styles on the basis of new technological platforms such as Bluetooth, VoIP, Digital Enhanced Cordless Telecommunications (DECT) and DSP.

It offers mobile and cordless phones, computers and gaming consoles. These headsets are designed to support the requirements of communications and entertainment.

These are suitable for a range of applications including mobile phones usage in contact centers, in the office, in the home, for PC gaming applications like Voice over Internet Protocol (VoIP).

It has categorized the products on the basis of applications such as corded and cordless communication headsets, audio processors and telephone systems for office and contact centers; Bluetooth and corded products for mobile phones; PC and gaming headsets for gaming and computer audio; and specific tailored and specialty products for hearing impaired persons under the Clarity brand.

R&D Activities Plantronics has a dedicated department to conduct its research and development activities.

The company’s R&D activities are focused on UC products and on improving its existing products.

The company is also looking to improve its R&D efforts through strategic architecting, common platforms, better utilization of software tools and better training.

In 2010, the company spent USD 57.8 million in its R&D activities, which accounted for 9.42% of the total revenue.

The company’s research and development facilities are located in the US, Mexico, China and the UK.

Weaknesses – Plantronics, Inc. has a few weaknesses. Their main one however is their lack of financial resources. The company just isn’t as big as some of its main competitors and that may be a problem in the future. Recently it has been affected by the global recession more severely than its competitors. Also, one of their weaknesses is for a technology company, they only offer a few different product categories. All of their competitors do more than just wireless headsets. In fact, wireless communications headsets are only small sectors of what their competitor’s main focuses are. Plantronics, Inc. will need to expand their product line up a bit if they really want to start competing.

Opportunities – As was mentioned in the weaknesses, there are opportunities for them to expand their product lines. Wireless headsets are not the only product they should be offering. For example, Logitech, one of Plantronics Inc.’s biggest competitors offers a wide variety of products of computer accessories including webcams, keyboards and speakers. Plantronics, Inc. should look into offering more in their product line up.

Threats – There are a number of threats Plantronics, Inc. constantly has to address. The threat of substitutes is large. Their research and development needs to be in full swing to keep up with the competition. That or they will lose in this business. They already have a low market capitalization compared to that of their competitors. Also, the threat of the global economy is large. People sometimes consider wireless headsets a luxury when a corded version may be cheaper. Their strategy may also be a threat in the long run. Plantronics, Inc. does not offer a wide variety of low-cost strategy items. Mostly, they are differentiated products selling at a premium even though their products are not all that much differentiated.


Plantronics, Inc.’s total operating expense has run in the low to mid 30’s in terms of percentage of revenues. This is more than say Logitech who in 2008 only had 12% of their total revenue taken out for operating expenses. And that was the most in the past three years. Like any large company, Plantronics, Inc. has to spend millions of dollars each year to keep the company running. In Plantronics, Inc.’s case, these expenses came from research and development and general administrative and selling expenses. Research and development accounted for 9.4% of total operating expense in 2010, which actually came out to $57.78 million. The rest of operating expenses in 2010 came from general administrative and selling, which accounted for 23.4% of total operating expense.[4]

Motorola for a quick comparison only spent 4% of revenues on operating expense. There is a huge difference here between Plantronics, Inc. and their competitors Logitech and Motorola so there are major improvements to be made. One must also take into consideration however that Plantronics, Inc.’s competitors are larger both in terms of size and total revenues.


As was mentioned above, Plantronics, Inc. has distribution centers in Tijuana, Mexico, Etten-Leur, Netherlands, Suzhou, China, Melbourne, Australia, Sau Paulo, Brazil, and Tokyo, Japan. These distribution centers get Plantronics, Inc.’s products out to all of their neighboring countries. For example, the distribution center out of Tijuana, Mexico distributes their products to the US, Mexico, Latin America, and Canada. Likewise, the Etten-Leur warehouse distributes products across Europe.

Plantronics, Inc. has a global sales force and they commission their manufacturers to sell the products as well.

Commercially, Plantronics, Inc. distributes their products through wholesalers and other headset specialists.[3]When distributing to retail outlets, their channel consists of consumer electronics retailers, consumer products retailers, office supply distributors, wireless carrier stores, catalog and mail order companies, mass merchants, and warehouse clubs.[3]


Plantronics, Inc. has a fiscal year ending March 31st. Their market capitalization is currently $1.64 billion with an EBITDA (Earnings Before Interest Taxes Depreciation and Amortization) of $150.62 million. Their Return on Assets (ROA) and Equity (ROE) is 12.59% and 18.26%, respectively. Return on Invested Capital (ROIC) is a mere 7%. Operating Margin (OM) is 15% and Asset Turnover (AT) is 1.07.

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Sales in the US account for roughly 37-38% of Total Sales (TS). Therefore, hedging activities are put in place to mitigate risks such as inflation, currency fluctuations, tariffs, and other trade barriers. Decreases in the US dollar value continue to have a negative impact on Plantronics, Inc.’s profits.

Their Average Days of Sale Inventory (DSI) is 272.26 and their Cash Conversion Cycle (CCC) is a high 402.44 days.

While the money may come in slowly, most of Plantronics, Inc.’s products are selling at somewhat of a premium. Their two highest rated items, the Voyager Pro and Discovery 975 retail at $99.99 and $129.99, respectively.

According to the chart under the Income Statement tab at the top of the screen, Plantronics, Inc.’s Net Income has been rising effectively over the past five fiscal quarters. However, that being said, clicking on the five-year tab under the same chart shows the company took a very serious hit in 2008-2009 with a total Net Income loss of 10%.

Quick Industry Comparisons

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The Ratios table shows five very important financial ratios for Plantronics, Inc. and two of its largest competitors. What can be derived is that Plantronics, Inc., which is distantly smaller in comparison, still holds well against their competitors. One of the drawbacks however is the 5 year PEG ratio (Price/Earnings to Growth), which indicates Plantronics, Inc. is not growing as fast as the competition and that may be a very serious problem later on.

The Income Statements of the three companies compared in the table show Plantronics, Inc. loses in all aspects versus the competition. Their Net Income is smaller and total revenues are not even in the billions of dollars. Of note, Motorola has a small Net Income compared to the $19 billion of revenue it acquired in 2010.

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Plantronics, Inc.'s Operating Cash Flows and Leveraged Free Cash Flows are smaller than Motorola's. This graph is pictured to capture the sheer difference in size of the two companies. It really is hard to imagine the two companies compete at all. Logitech on the other hand, is there to give a bigger picture of the industry as a whole.

As another quick comparison of the industry shows, Plantronics, Inc. actually has an excellent track record of Quarterly Earnings Growth. While still not on par with the likes of Motorola, Plantronics, Inc. seems to be growing faster than they have in past years. So, while the PEG (Price/Earnings to Growth) is not as high as the company would probably like, the Quarterly Earnings Growth is looking just fine. Quarterly Revenue Growth again is an area where Plantronics, Inc. is lagging behind the competition.


Ken Kannappan President, Chief Executive Officer and Director (Principal Executive Officer)

Barbara Scherer Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

Marv Tseu Chairman of the Board and Director

Brian Dexheimer Director

Gregg Hammann Director

John Hart Director

Marshall Mohr Director

Roger Wery Director

Ending Thoughts

Plantronics, Inc. has a long way to go. The company is almost 50 years old and compared to their main competitors they are only miniscule. A more diversified product lineup would help them greatly. While headsets will always be in need as long as there are customer service agencies, one must remember this technology is very cheap and the profitability will only be there as long as buyers are willing to pay. The quality of these products leaves little room for improvement.

Plantronics, Inc. is a solid company because of their brand recognition and overall brand reputation. But one major mistake could tarnish the company name and easily send them into bankruptcy. None of their major competitors rely solely on these headsets for their business and Plantronics, Inc. could learn a lesson or two here.


  1. Yahoo Finance
  2. Yahoo Finance - Competitors
  3. 3.0 3.1 3.2 3.3 3.4 Plantronics Inc. 2010 Annual Report
  4. Yahoo Finance - Income Statements
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