Plantronics Inc. Fiscal 2005 Third Quarter Press Release

PRESS RELEASE

Plantronics Reports Record Revenues for the Third Quarter

of Fiscal Year 2005

FOR INFORMATION, CONTACT:	FOR IMMEDIATE RELEASE
Jon Alvarado	January 18, 2005
Investor Relations Manager
(831) 458-7533

SANTA CRUZ, CA. - January 18, 2005 - Plantronics, Inc. (NYSE: PLT) today announced record revenues for its third quarter of fiscal year 2005. Third quarter revenues increased approximately 40% to $150.6 million, in comparison to $107.6 million in the third quarter of fiscal 2004. Operating income increased to $31.8 million from $23.8 million, net income increased to $24.4 million from $17.6 million and diluted earnings per share improved approximately 30% to $0.48 from $0.37, in each case from the year-earlier quarter.

Ken Kannappan, President and CEO, commented, "Our results were within the range of the guidance we provided on October 19, 2004 which called for revenues of $147 to $152 million, and earnings per share of $0.45 to $0.48. As anticipated, revenues from our new gaming products contributed significantly to the sequential increase as did revenues from wireless headsets for office and mobile applications."

"Globally, demand for headsets has increased in more diverse markets, such as wireless and entertainment -- a fact underscored by the 40% growth in our revenues in comparison to a year ago. Revenues from our Office and Contact Center products were $92.5 million, up 38% vs. the year-earlier quarter. In comparison to the year-ago quarter, our CS50 and CS60 wireless headsets for office applications increased by $15 million and are now at an annual run rate of approximately $75 million," said Ken Kannappan, President and CEO. "Wireless and entertainment, and the convergence of those two trends, are factors that bode well for the long-term growth of the headset industry. We participated in that trend in a more meaningful way in the December quarter than we had historically with the launch of our new gaming products; specifically our Gaming and Computer products contributed $15.3 million to revenues in the December quarter in comparison to $5.8 million in the year-ago quarter."

PLANTRONICS, INC / 345 Encinal Street / P.O. Box 1802 / Santa Cruz, California 95061-1802 831-426-6060 / Fax 831-426-6098

At the recent International Consumer Electronics Show (CES) held in Las Vegas, Plantronics was recognized for innovation in design and technological advances and was the only headset maker to win a "Best of Innovation" award. "We were pleased with the recognition that our new Bluetooth headset system, the L510S, achieved. It is really the first wireless product that is truly a pleasure to wear. At about half an ounce in weight, it is comfortable, remarkably stable and looks good. It is very easy to use with either a Bluetooth enabled mobile phone or a land line phone, or both, and is scheduled to ship in Spring 2005. Beyond working to bring great new products to market, we are ever-vigilant about quality and are taking care to grow our infrastructure cost-effectively to meet the needs of the growing market for headsets. In that regard, we were thrilled to receive Mexico’s prestigious National Quality Award from President Vincente Fox for excellence in total quality management at our Plamex plant. In December, we also broke ground on our China facilities and expect to receive the keys by this time next year," Kannappan concluded.

Barbara Scherer, SVP and CFO, said "In terms of working capital, our inventories increased further in the quarter although we did achieve an improvement in turns, to 4.0 from 3.7 in the September quarter. The increase in inventory was primarily for products which experienced significant increases in demand, however we need to reduce inventory levels going forward. Longer term, we believe that owning our own plant in China will enable us to reduce lead times from our supply chain and increase flexibility while still meeting the needs of the consumer marketplace. On a more immediate basis, we have also made an organizational change to increase our focus and global teamwork on inventory management. Our goals are to reduce our inventory balance in the March quarter and get back to 5 turns in the December quarter of fiscal 2006 while keeping our on time delivery at high customer service levels."

"Given the increase in revenues, our DSO increased modestly to 54 days in comparison to 51 days in the September quarter and were flat in comparison to the December quarter a year ago. We generated $8 million in cash flow from operations in the third quarter and have generated $47.7 million on a year to date basis."

Business Outlook

The following statements are based on current expectations. Many of these statements are forward-looking, and actual results may differ materially.

We consider the trends in sell-through of our U.S. commercial distributors of office and contact center products an important indicator of demand. For the December quarter, this group of distributors reported to us an increase in sell-through of over 35% in comparison to the December quarter last year, and a 9% increase sequentially. We believe the number of weeks on hand of inventory in this channel was essentially unchanged.

We have a "book and ship" business model whereby we ship most orders to our customers within 48 hours of our receipt of those orders, and we thus cannot rely on the level of backlog to provide visibility into potential future revenues.

We remain cautiously optimistic about the overall economic environment and demand for our products.

Our current expectations for the fourth quarter of fiscal 2005 are:

Revenues to be in the range of $140 - $145 million, down sequentially based on anticipated seasonal slowdowns in mobile, computer and gaming products offset by anticipated growth in office and contact center products. Our current revenue expectations translate into revenue growth of approximately 15% to 19% versus the year-earlier period. With revenues in this range for the fourth quarter, full fiscal 2005 revenues would be in the range of $552 to $557 million in comparison to $417 million in fiscal 2004.
Gross margins to increase to 53% - 54% as a result of a more favorable overall product mix.
Operating expenses to be approximately flat in dollars and to increase as a percent of revenue in comparison to the third quarter. We expect to incur approximately $1 million of expense in the March quarter as a result of the advertising campaign we plan to launch in the first quarter of fiscal 2006.
Operating margins to be in the range of 22.5% - 24%.
Tax expense to be lower than normal as a result of changes we are implementing in our offshore tax structure. We expect to record a net benefit for the fiscal year as a whole of $2 to $3 million in the fourth quarter which will reduce our tax provision by that amount for the quarter. This benefit will increase earnings per share by $0.04 to $0.06 per share.
In FY06, we believe the net effect of this tax restructuring will be a small reduction in our overall tax rate from an anticipated 28% - 29% without this reorganization to approximately 27% - 28% with the new structure in place.
Earnings per diluted share for the fourth quarter to be in the range of $0.45 to $0.49 before the anticipated tax benefit, and $0.49 to $0.55 inclusive of the tax benefit.

Plantronics does not intend to update these targets during the quarter or to report progress toward these targets. Plantronics will not comment on these targets to analysts or investors except by its next press release announcing its fourth quarter and fiscal year 2005 results or by other public disclosure. Any statements by persons outside of Plantronics speculating on the progress of the fourth quarter of the fiscal year will not be based on information endorsed or supported by Plantronics, and should be assessed accordingly by investors. The statements do not reflect the potential impact of any mergers or acquisitions that may be completed after the date of this release.

Factors Expected to Influence Fiscal 2006

Branding and Marketing: Headsets are becoming mainstream. For example, in calendar 2004, we shipped approximately 22.5 million headset tops, up 64% from 13.7 million headset tops in calendar 2003. Unit growth is being driven primarily by consumer demand, especially for wireless and entertainment applications. Even after excellent growth, worldwide adoption of headsets in the office market remains below 10%. We believe the opportunity to expand adoption is at hand and that Plantronics heritage and quality resonate with people. Our expertise in mission-critical applications for NASA, the FAA and the U.S. military has been built over many decades and we are applying that expertise in new ways to delight consumers. To address these large consumer markets, it is important to build and extend our brand. We intend to launch a U.S. advertising campaign with an expected total cost of approximately $10 million, with the bulk of the cost and benefits to impact FY06. We intend to launch the campaign in the first fiscal quarter of 2006 and to run it for approximately six months. We have tested advertising campaigns over the last several years, and although the results of advertising campaigns cannot be predicted, we believe that this campaign will at least break-even and we are hopeful that it will be accretive to earnings per share. If we believe the results of the campaign are proving valuable, we may extend it past the September quarter. Even if the campaign is break-even for the year as a whole, it is possible that it could be negative to earnings per share in the initial quarter of advertising.

Accounting for Stock-Based Compensation (FAS 123) - On December 16, 2004, the FASB issued the final FAS 123 rule governing accounting for stock-based compensation. Plantronics is obligated to adopt FAS 123 in its September 2005 quarter (which will be the second quarter of fiscal 2006) and plans to do so at that time.

Conference Call Scheduled to Discuss Financial Results

Plantronics has scheduled a conference call to discuss the contents of this release. The conference call will take place today, Tuesday, January 18 at 2:00 PM (PST). All interested investors and potential investors in Plantronics stock are invited to participate. To listen, please dial in five to ten minutes prior to the scheduled starting time and refer to the "Plantronics Conference Call." Participants from North America should call (888) 301-8736 and other participants should call (706) 634-7260.

A replay of the call with the conference ID #2150280 will be available for 72 hours at (800) 642-1687 for callers from North America and at (706) 645-9291 for all other callers. The conference call will also be simultaneously web cast at www.plantronics.com under Investor Relations, and the web cast of the conference call will remain available at the Plantronics Web site for thirty days.

SAFE HARBOR

This release contains forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Specific forward-looking statements include our outlook for revenues, gross margins, operating expenses, operating margins, tax expense, tax rate, and earnings for the fourth quarter of fiscal 2005; the timing of completion of the facility in China and the impact the facility in China will have on lead times; that revenues from gaming and mobile products are expected to decrease in the March quarter; our goals to reduce inventory and improve inventory turns; the anticipated cost of the U.S. advertising campaign and our belief that the campaign will break-even; the impact of FAS 123 on our results for the second quarter of fiscal 2006; and that we are cautiously optimistic about the overall economic environment and the demand for our products. These forward-looking statements involve a number of risks and uncertainties, and are based on current expectations, forecasts and assumptions.

Among the factors that could cause actual results to differ materially from those projected are:

A slowing in national or international economic growth, resulting in a reduction in the overall level of demand for our products;
The demand for our wireless headset products may not develop as we anticipate and may lead to excess inventory and the inability to recover the associated development costs;
The actions of existing and/or new competitors, especially with regard to pricing and promotional programs;
Variations in sales and profits in higher tax, as compared to lower tax, jurisdictions; the results of tax audits; reassessment of tax reserves, and tax refunds on our effective tax rate; and the results, timing and execution of our tax planning strategies;
A softening of the level of market demand for our products within our core contact center market and/or in the newer office, mobile, computer and residential markets;
The entry of new competitors which could be spurred by changes in the regulatory environment, particularly laws requiring the use of hands-free devices by drivers when using cellular telephones;
The inability to successfully develop, manufacture and market new products;
Fluctuations in foreign exchange rates; and
Changes in the regulatory environment either as to headsets directly or as to the products, such as mobile phones, with which our products are used.

Additional risk factors include: changes in the timing and size of orders from our customers, price erosion, increased requirements from retail customers for marketing and advertising funding, failure to match production to demand, interruption in the supply of critical components, continuity of component supply at costs consistent with our plans, failure of our distribution channels to operate as we expect, failure to develop products that keep pace with technological changes, the inherent risks of our substantial foreign operations, problems which might affect our principal manufacturing facility in Mexico, further terrorist acts, our nation’s response to terrorist attacks and the effect of these activities on capital and consumer spending, and the loss of the services of key executives and employees. For more information concerning these and other possible risks, please refer to the Company’s Form 10-K filed on May 26, 2004, filings on Form 10-Q and other filings with the Securities and Exchange Commission as well as recent press releases. These filings can be accessed over the Internet at: http://www.sec.gov/edgar/searchedgar/companysearch.html

Financial Summaries

The following related charts are provided:

Summary Unaudited Condensed Consolidated Financial Statements
Summary Unaudited Statements of Operations and Related Data

About Plantronics

Plantronics introduced the first lightweight communications headset in 1962 and is recognized as the world leader in communications headsets. A publicly held company with approximately 3,900 employees, Plantronics is the leading provider of headsets to telephone companies and the business community worldwide, Plantronics headsets are also used widely in many Fortune 500 corporations and have been featured in numerous motion pictures and high-profile events, including Neil Armstrong’s historic "One small step for man" transmission from the moon in 1969. Plantronics, Inc., headquartered in Santa Cruz, California was founded in 1961 and maintains offices in 20 countries. Plantronics products are sold and supported through a worldwide network of authorized Plantronics marketing partners. Information about the Company and its products can be found at www.plantronics.com or by calling (800) 544-4660.

Plantronics is a registered trademark of Plantronics, Inc. Bluetooth is a trademark owned by Bluetooth SIG Inc., and is used by Plantronics under license. All other products or service names mentioned herein are trademarks of their respective owner.

PLANTRONICS, INC / 345 Encinal Street / P.O. Box 1802 / Santa Cruz, California 95061-1802 831-426-6060 / Fax 831-426-6098

Summary of Unaudited Statements of Operations and Related Data

	Q103			Q203			Q303			Q403			FY03			Q104			Q204			Q304			Q404			FY04			Q105			Q205			Q305			FY05 YTD
Net sales	$	80,268		$	82,370		$	86,811		$	88,059		$	337,508		$	92,786		$	95,117		$	107,622		$	121,440		$	416,965		$	131,370		$	130,220		$	150,583		$	412,173
Cost of sales		38,810			40,735			44,290			44,730			168,565			47,319			46,351			51,381			55,944			200,995			61,703			60,719			75,150			197,572
Gross profit		41,458			41,635			42,521			43,329			168,943			45,467			48,766			56,241			65,496			215,970			69,667			69,501			75,433			214,601
Gross profit %		51.6	%		50.5	%		49.0	%		49.2	%		50.1	%		49.0	%		51.3	%		52.3	%		53.9	%		51.8	%		53.0	%		53.4	%		50.1	%		52.1	%

Research, development and engineering		8,250			8,164			9,004			8,459			33,877			8,605			8,247			8,834			9,774			35,460			10,044			10,838			11,989			32,871
Selling, general and administrative		19,606			19,763			20,939			20,297			80,605			21,153			22,984			23,649			27,970			95,756			28,920			25,305			31,642			85,867
Operating expenses		27,856			27,927			29,943			28,756			114,482			29,758			31,231			32,483			37,744			131,216			38,964			36,143			43,631			118,738

Operating income		13,602			13,708			12,578			14,573			54,461			15,709			17,535			23,758			27,752			84,754			30,703			33,358			31,802			95,863
Operating income %		16.9	%		16.6	%		14.5	%		16.5	%		16.1	%		16.9	%		18.4	%		22.1	%		22.9	%		20.3	%		23.4	%		25.6	%		21.1	%		23.3	%

Income before income taxes		14,535			13,980			13,144			15,101			56,760			16,201			17,676			25,170			27,452			86,499			31,038			34,271			33,947			99,256
Income tax expense		4,361			2,450			3,943			4,530			15,284			4,860			5,303			7,551			6,506			24,220			8,691			9,596			9,505			27,792

Income tax expense as a percent of income before taxes		30.0	%		17.5	%		30.0	%		30.0	%		26.9	%		30.0	%		30.0	%		30.0	%		23.7	%		28.0	%		28.0	%		28.0	%		28.0	%		28.0	%

Net income after taxes		10,174			11,530			9,201			10,571			41,476			11,341			12,373			17,619			20,946			62,279			22,347			24,675			24,442			71,464
Diluted shares outstanding		47,722			47,298			46,197			45,190			46,584			45,077			46,372			47,501			50,068			47,492			50,428			50,638			51,365			50,811
EPS	$	0.21		$	0.24		$	0.20		$	0.23		$	0.89		$	0.25		$	0.27		$	0.37		$	0.42		$	1.31		$	0.44		$	0.49		$	0.48		$	1.41

Net revenues from unaffiliated customers:
Office and contact center		61,568			59,742			58,644			64,404			244,358			62,080			64,192			66,776			80,840			273,888			82,815			86,204			92,469			261,488
Mobile		10,125			11,779			16,145			12,039			50,088			18,518			18,370			29,528			25,914			92,330			34,458			28,815			35,469			98,742
Gaming and computer		2,605			4,429			5,679			5,781			18,494			5,463			5,679			5,807			6,752			23,701			6,992			8,515			15,259			30,766
Other specialty products		5,970			6,420			6,343			5,835			24,568			6,725			6,876			5,511			7,934			27,046			7,105			6,686			7,386			21,177

Net revenues by geographical area from unaffiliated customers:
Domestic		55,614			57,426			57,013			58,889			228,942			64,924			64,929			66,484			80,880			277,217			89,088			89,375			100,587			279,050
International		24,654			24,944			29,798			29,170			108,566			27,862			30,188			41,138			40,560			139,748			42,282			40,845			49,996			133,123

Balance Sheet accounts and metrics:
Accounts receivable, net		44,714			51,303			51,927			50,503			50,503			49,852			52,033			64,425			64,999			64,999			68,521			73,892			90,260			90,260
Days sales outstanding		50			56			54			52						48			49			54			52						47			51			54
Inventory, net		37,695			35,659			34,884			33,758			33,758			37,510			37,764			39,178			40,762			40,762			47,418			65,940			75,074			75,074
Inventory turns		4.1			4.6			5.1			5.3						5.0			4.9			5.2			5.2						5.2			3.7			4.0

PLANTRONICS, INC.
SUMMARY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
	Quarter Ended						Nine Months Ended
	December 31,			December 31,			December 31,			December 31,
	2003			2004			2003			2004

Net sales	$	107,622		$	150,583		$	295,525		$	412,173
Cost of sales		51,381			75,150			145,051			197,572
Gross profit		56,241			75,433			150,474			214,601
Gross profit %		52.3	%		50.1	%		50.9	%		52.1	%

Research, development and engineering		8,834			11,989			25,686			32,871
Selling, general and administrative		23,649			31,642			67,786			85,867
Total operating expenses		32,483			43,631			93,472			118,738
Operating income		23,758			31,802			57,002			95,863
Operating income %		22.1	%		21.1	%		19.3	%		23.3	%

Interest and other income, net		1,412			2,145			2,045			3,393
Income before income taxes		25,170			33,947			59,047			99,256
Income tax expense		7,551			9,505			17,714			27,792
Net income	$	17,619		$	24,442		$	41,333		$	71,464

% to Sales		16.4	%		16.2	%		14.0	%		17.3	%

Diluted earnings per common share	$	0.37		$	0.48		$	0.89		$	1.41
Shares used in diluted per share calculations		47,501			51,365			46,305			50,811



UNAUDITED CONSOLIDATED BALANCE SHEETS
		March 31,			December 31,
		2004			2004
ASSETS
Cash and cash equivalents	$	180,616		$	219,345
Marketable securities		-			10,500
Total cash and marketable securities		180,616			229,845
Accounts receivable, net		64,999			90,260
Inventory, net		40,762			75,074
Deferred income taxes		13,967			8,544
Other current assets		10,283			9,919
Total current assets		310,627			413,642
Property, plant and equipment, net		42,124			52,455
Intangibles, net		3,440			3,137
Goodwill, net		9,386			9,386
Other assets		2,675			3,075
	$	368,252		$	481,695
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	$	19,075		$	24,318
Accrued liabilities		36,469			43,833
Income taxes payable		5,686			5,205
Total current liabilities		61,230			73,356
Deferred tax liability		7,719			8,154
Long-term debt
Total liabilities		68,949			81,510
Stockholders' equity		299,303			400,185
	$	368,252		$	481,695