Santa Cruz’s Plantronics reports “healthy” Q1, bets heavily on emerging market

Santa Cruz Sentinel

SANTA CRUZ – Despite a 17 percent drop in sales in the mobile market, headset maker Plantronics reported “healthy” growth in its first fiscal quarter and continued to predict that the company’s biggest boom – unified communication – is still ahead.

“While our mobile business was down, this was anticipated and we actually did a little better than expected with some additional carrier business in the U.S.,” said Ken Kannappan, chief executive officer and president.

Unified communication allows users to integrate the way that they communicate electronically. This requires a headset that works with all devices.

Kannappan attributed the drop to losing some market share to competitors in the U.S. and “overall weakness” in the market.

“When the downturn hit, we prioritized the UC opportunity,” he said. “That left us a little bit more vulnerable with our consumer portfolio.” The company plans to increase investment in the mobile product market.

Improved economic conditions and a growing demand for products that allow users increased mobility to move between telephones, PCs and mobile devices, drove an 11 percent increase in sales in the company’s biggest market: office and contact center products. OCC net revenues were $131 million in the first quarter of fiscal 2012 compared with $117.6 million a year ago.

Kannappan said he was “very pleased with the overall progress in Q1, in particular, the adoption and deployment of UC compared to the year-ago quarter.”

Revenues of UC products were $18.8 million, nearly double from a year ago. Kannappan predicted that sales of unified communication products, which were about $53 million in fiscal 2011, will climb to a whopping $350 million of the company’s total revenue by fiscal 2015.

“Our strategy for UC is to lead the market with innovative products that make Plantronics the simplest solution to deploy,” he told analysts and investors during a public webcast call Monday. The company, which spent about $63.2 million last year on research and development in the UC arena, is spending nearly $70 million this year.

Barbara Scherer, chief financial officer, said the global market for office and contact center products was about $850 million and the projection for 2015 is $1.7 billion. “That’s a 15 percent compound annual growth rate” she said, calling UC the driver.

Executives said sales traditionally slow during the summer and pick up in September.

In other company news, Plantronics announced last month that it had hired North of Nine Communications, a San Francisco-based marketing firm to boost brand awareness. The agency, recently launched by Burson-Marsteller, “focuses on technology-based innovations, wherever they appear, and specializes in creative, memorable and sometimes unexpected campaigns,” according to its website.

“We have some really interesting, big stories that we are trying to tell and they will be a great partner to work with,” said Russell Castronovo, a new director of global communications at Plantronics.


Plantronics Inc.

WHAT: A publicly held telephone and computer headset manufacturer.

HEADQUARTERS: 345 Encinal St., Santa Cruz, CA 95060.

BACKGROUND: Founded in 1961, Plantronics introduced the first lightweight communications headset in 1962. The company maintains offices in 20 countries.

LEADERSHIP: Ken Kannappan, president and chief executive officer.

EMPLOYEES: Last quarter, the company reported about 3,323 employees, most of who work in manufacturing in Tijuana, Mexico. About 500 work in Santa Cruz.

INFORMATION: 426-5858;


PRICE: Shares trading on the NYSE under the ticker PLT were up 31 cents Tuesday to close at $34.54. The 52-week range is $26.10 to $39.23.

FINANCIALS: First fiscal quarter net income was $ 26.7 million, or 56 cents diluted earnings per share, compared with $25.9 million, or 52 cents EPS, a year ago. Net revenues were $175.6 million compared to $170.7 million a year ago.

Plantronics generated about $19 million in cash from operations and finished the quarter with $386.3 million in cash, cash equivalents and short & long term investments.

Plantronics also announced a 5 cent per share quarterly dividend payable on Sept. 9 to stockholders of record at the close of business on Aug. 19.

GUIDANCE: The company expects first second quarter 2012 revenues to be $172 million to $177 million and earnings per share of 51-56 cents


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