UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

ST QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~December~~June 30, ~~2006~~2007

£TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________to _________

Commission file number 1-12696

Plantronics, Inc.

(Exact name of registrant as specified in its charter)

Delaware	77-0207692
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

345 Encinal Street

Santa Cruz, California 95060

(Address of principal executive offices)

(Zip Code)

(831) 426-5858

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes SNo £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer S

Accelerated filer £

Non accelerated filer £

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £No S.

As of ~~January 26,~~July 27, 2007, ~~47,893,344~~48,225,592 shares of common stock were outstanding.

~~Plan~~Plantronics, Inc.~~tronics, Inc.~~

FORM 10-Q

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION	Page No.

Item 1. Financial Statements ~~(unaudited)~~(Unaudited):

Condensed Consolidated Balance Sheets as of March 31, ~~2006~~2007 and ~~December 31, 2006~~June 30, 2007	3

Condensed Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~December 31, 2005~~June 30, 2006 and ~~2006~~2007	4

Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~December 31, 2005~~June 30, 2006 and ~~2006~~2007	5

Notes to Condensed Consolidated Financial Statements	6

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	2415

Item 3. Quantitative and Qualitative Disclosures About Market Risk	4629

Item 4. Controls and Procedures	4730

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	4831

Item 1A. Risk Factors	4831

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	6145

Item 6. Exhibits	6145

~~Signatures~~Signature	6246

Table of Contents

Part I -- FINANCIAL INFORMATION

Item 1. Financial Statements.

PL~~ANTR~~PLANTRONICS, INC.~~ONICS, INC.~~

CONDENSED CONSOLIDATED BALANCE SHEETS

(in ~~thousands, except per share data)~~

~~(Unaudited)~~

March 31,
2006

December 31,
2006

ASSETS

Current assets:
Cash and cash equivalents $ 68,703 $ 68,743
Short-term investments 8,029 --
Total cash, cash equivalents, and short-term investments 76,732 68,743

Accounts receivable, net 118,008 131,735
Inventory 105,882 134,263
Deferred income taxes 12,409 12,590
Other current assets 15,318 13,870
Total current assets 328,349 361,201

Property, plant and equipment, net 93,874 97,227
Intangibles, net 109,208 102,984
Goodwill 75,077 74,250
Other assets 5,741 6,190
Total assets $ 612,249 $ 641,852

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Line of credit $ 22,043 $ 6,011
Accounts payable 48,574 45,975
Accrued liabilities 43,081 59,129
Income taxes payable 13,231 7,224
Total current liabilities 126,929 118,339

Deferred income taxes 48,246 41,137
Long-term liabilities 1,453 1,263
Total liabilities 176,628 160,739

Stockholders' equity:
Preferred stock, $0.01 par value per share; 1,000 shares authorized, no shares outstanding -- --
Common stock, $0.01 par value per share; 100,000 shares authorized, 66,270 and 66,617 shares issued at March, 31, 2006 and December 31, 2006, respectively
663 666
Additional paid-in capital 316,863 334,303
Accumulated other comprehensive income 3,934 2,041
Retained earnings 509,563 542,429
831,023 879,439
Less: Treasury stock (common: 18,732 shares at March 31, 2006 and December 31, 2006) at cost
(395,402 ) (398,326 )
Total stockholders' equity 435,621 481,113

Total liabilities and stockholders' equity $ 612,249 $ 641,852

~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.~~

~~Table of Contents~~

~~PLANTRONICS, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS~~

~~(in thousands, except per share data)~~thousands)

(Unaudited)

Three Months Ended
December 31,

Nine Months Ended
December 31,

2005

2006

2005

2006

Net revenues $ 222,512 $ 215,435 $ 543,646 $ 605,438
Cost of revenues 128,486 134,099 302,469 370,741
Gross profit 94,026 81,336 241,177 234,697

Operating expenses:
Research, development and engineering 15,980 17,709 45,868 53,113
Selling, general and administrative 43,130 46,809 110,845 136,256
Gain on sale of land - - - (2,637 )
Total operating expenses 59,110 64,518 156,713 186,732

Operating income 34,916 16,818 84,464 47,965
Interest and other income (expense), net (596 ) 1,493 667 2,745
Income before income taxes 34,320 18,311 85,131 50,710

Income tax expense 9,279 3,121 24,685 10,704
Net income $ 25,041 $ 15,190 $ 60,446 $ 40,006

Net income per share - basic $ 0.53 $ 0.32 $ 1.29 $ 0.85
Shares used in basic per share calculations 46,834 47,409 46,968 47,256

Net income per share - diluted $ 0.52 $ 0.32 $ 1.24 $ 0.83
Shares used in diluted per share calculations 48,165 47,922 48,768 47,940

Cash dividends declared per common share $ 0.05 $ 0.05 $ 0.15 $ 0.15

	March 31,			June 30,
	2007			2007

ASSETS
Current assets:
Cash and cash equivalents	$	94,131		$	97,093
Short-term investments		9,234			13,334
Accounts receivable, net		113,758			121,705
Inventory		126,605			136,253
Deferred income taxes		12,659			12,874
Other current assets		18,474			18,264
Total current assets		374,861			399,523
Property, plant and equipment, net		97,259			98,653
Intangibles, net		100,120			98,080
Goodwill		72,825			72,825
Other assets		6,239			6,197
Total assets	$	651,304		$	675,278


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	49,956		$	46,922
Accrued liabilities		54,025			58,858
Income taxes payable		12,476			3,847
Total current liabilities		116,457			109,627
Deferred tax liability		37,344			34,746
Long-term income taxes payable		-			14,377
Other long-term liabilities		696			691
Total liabilities		154,497			159,441

Stockholders' equity:
Common stock		666			668
Additional paid-in capital		340,661			346,768
Accumulated other comprehensive income		2,666			2,906
Retained earnings		550,165			562,733
		894,158			913,075
Less: Treasury stock, at cost		(397,351	)		(397,238	)
Total stockholders' equity		496,807			515,837
Total liabilities and stockholders' equity	$	651,304		$	675,278

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

~~PLA~~PLANTRONICS, INC.~~NTRONICS, INC.~~

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~OPERATIONS

(in ~~thousands)~~thousands, except per share data)

(Unaudited)

Nine Months Ended
December 31,

2005

2006

CASH FLOWS FROM OPERATING ACTIVITIES

Net income $ 60,446 $ 40,006
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 16,118 21,824
Stock-based compensation 665 12,617
Provision for doubtful accounts 938 618
Provision for excess and obsolete inventories 4,353 11,149
Deferred income taxes (1,716 ) (5,939 )
Income tax benefit associated with stock option exercises 1,401 519
Excess tax benefits from stock-based compensation - (637 )
Loss (gain) on sale or disposal of property, plant and equipment 46 (2,571 )

Changes in assets and liabilities, net of effect of acquisitions:
Accounts receivable (23,684 ) (14,345 )
Inventory (23,135 ) (39,396 )
Other current assets (468 ) 31
Other assets 1,114 (448 )
Accounts payable 7,343 (2,599 )
Accrued liabilities 1,472 13,301
Income taxes payable 1,632 (5,966 )
Cash provided by operating activities

46,525

28,164

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from maturities of short-term investments 517,760 222,424
Purchase of short-term investments (353,344 ) (214,395 )
Acquisitions of Altec Lansing and Octiv, net of cash acquired (165,020 ) -
Proceeds from the sale of land - 2,667
Capital expenditures and other assets (31,350 ) (18,739 )
Cash used for investing activities

(31,954
)

(8,043
)

CASH FLOWS FROM FINANCING ACTIVITIES

Purchase of treasury stock (69,631 ) (4,021 )
Proceeds from sale of treasury stock 2,507 2,723
Proceeds from exercise of stock options 8,408 2,676
Proceeds from line of credit 45,000 -
Repayment of line of credit (12,943 ) (16,032 )
Payment of cash dividends (7,089 ) (7,140 )
Excess tax benefits from stock-based compensation - 637
Cash used for financing activities

(33,748
)

(21,157
)
Effect of exchange rate changes on cash and cash equivalents (1,030 ) 1,076
Net (decrease) increase in cash and cash equivalents

(20,207
)

40

Cash and cash equivalents at beginning of period

78,398

68,703

Cash and cash equivalents at end of period

$
58,191

$
68,743

SUPPLEMENTAL DISCLOSURES

Cash paid for:
Interest $ 701 $ 366
Income taxes $ 24,341 $ 22,681

	Three Months Ended
	June 30,
	2006			2007
Net revenues	$	195,069		$	206,495
Cost of revenues		119,470			122,949
Gross profit		75,599			83,546
Operating expenses:
Research, development and engineering		18,659			19,488
Selling, general and administrative		44,453			46,111
Gain on sale of land		(2,637	)		-
Total operating expenses		60,475			65,599
Operating income		15,124			17,947
Interest and other income, net		985			1,334
Income before income taxes		16,109			19,281
Income tax expense		3,818			4,306
Net income	$	12,291		$	14,975

Net income per share - basic	$	0.26		$	0.31

Shares used in basic per share calculations		47,157			47,835

Net income per share - diluted	$	0.25		$	0.31

Shares used in diluted per share calculations		48,268			48,681

Cash dividends declared per common share	$	0.05		$	0.05

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

PLANTRONICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	Three Months Ended
	June 30,
	2006			2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	12,291		$	14,975
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		7,206			7,102
Stock-based compensation		4,436			4,113
Provision for (benefit from) doubtful accounts		436			(213	)
Provision for excess and obsolete inventories		3,300			5,388
Benefit from deferred income taxes		(1,179	)		(3,472	)
Income tax benefit associated with stock option exercises		182			120
Excess tax benefit from stock-based compensation		(108	)		(380	)
(Gain) loss on disposal of property, plant, and equipment, net		(2,619	)		7

Changes in assets and liabilities:
Accounts receivable, net		(4,130	)		(7,734	)
Inventory		(33,260	)		(15,037	)
Other current assets		814			196
Other assets		657			291
Accounts payable		12,478			(3,034	)
Accrued liabilities		1,708			4,675
Income taxes payable		2,293			6,128
Cash provided by operating activities		4,505			13,125

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales and maturities of short-term investments		106,999			66,185
Purchase of short-term investments		(98,970	)		(70,260	)
Proceeds from the sale of land		2,667			-
Restricted cash held in escrow		(2,667	)		-
Capital expenditures and other assets		(9,135	)		(6,596	)
Cash used for investing activities		(1,106	)		(10,671	)

CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of treasury stock		(4,021	)		-
Proceeds from sale of treasury stock		470			375
Proceeds from issuance of common stock		356			1,889
Repayment of line of credit		(9,019	)		-
Payment of cash dividends		(2,374	)		(2,407	)
Excess tax benefit from stock-based compensation		108			380
Cash (used for) provided by financing activities		(14,480	)		237
Effect of exchange rate changes on cash and cash equivalents		864			271
Net increase (decrease) in cash and cash equivalents		(10,217	)		2,962
Cash and cash equivalents at beginning of year		68,703			94,131
Cash and cash equivalents at end of year	$	58,486		$	97,093

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

P~~LANTR~~PLANTRONICS, INC.~~ONICS, INC.~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of Plantronics, Inc. (“Plantronics”, the “Company”, "we”, or "our") and its wholly owned subsidiaries have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). All intercompany balances and transactions have been eliminated.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements (“financial statements”) of Plantronics, Inc., (“Plantronics” or “the Company”) and its wholly owned subsidiaries, have been prepared on a consistent basis with the ~~April 1, 2006~~March 31, 2007 audited consolidated financial statements ~~except for the adoption of Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”), discussed in Note 3, “Stock-Based Compensation”~~ and include all adjustments, consisting of normal recurring adjustments, necessary to fairly state the information set forth herein. The financial statements have been prepared in accordance with the regulations of the Securities ~~and~~ Exchange Commission (“SEC”); and, therefore, omit certain information and footnote disclosures necessary to present the statements in accordance with accounting principles generally accepted in the United States of America. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended ~~April 1, 2006,~~March 31, 2007, which was filed with the SEC on ~~June 5, 2006.~~May 29, 2007. The results of operations for the interim period ended ~~December~~June 30, ~~2006~~2007 are not indicative of the results to be expected for the ~~full~~entire fiscal year ~~ended March 31, 2007.~~

Certain financial statement reclassifications have been made to prior period amounts to conform to the current period presentation. These changes had no impact on stockholders' equity, previously reported net income, or the net change in cash and ~~cash equivalents.~~any future period.

The Company has two reportable segments, ~~as a result of the Company’s acquisition of Altec Lansing Technologies, Inc. (”Altec Lansing”) in the second quarter of fiscal 2006. The~~ Audio Communications Group (“ACG”) ~~represents the original Plantronics business as operated prior to the acquisition. The~~and Audio Entertainment Group (“AEG”) ~~includes the Altec Lansing business.~~. All intercompany balances and transactions have been eliminated.

The Company’s fiscal year ends on the Saturday closest to ~~March 31. The current fiscal year ends on March 31, 2007 and~~ the ~~prior fiscal year ended on April 1, 2006.~~last day of March. The Company’s current and prior fiscal years consist of 52 ~~weeks. The third quarter end of fiscal 2007 was on December 30, 2006,~~weeks and ~~the corresponding quarter end in fiscal 2006 was on December 31, 2005. Both the current and corresponding~~each fiscal quarter ~~a year ago consist~~consists of 13 weeks.

The current fiscal year ends on March 29, 2008 and the prior fiscal year ended on March 31, 2007. The Company’s interim periods for the first quarters of fiscal 2006 and 2007 ended on July 1, 2006 and June 30, 2007, respectively. For purposes of presentation, ~~we have~~the Company has indicated ~~our~~its accounting year as ending on March 31 and ~~our~~its interim quarterly periods as ending on the applicable month end.

Certain financial statement reclassifications have been made to the prior period amounts to conform to the current year presentation. For the three months ended June 30, 2006, the Company reclassified certain expenses in the AEG segment within cost of revenues which had previously been classified as selling, general and administrative expenses, to conform to the ACG presentation. As a result of this change, the Company’s previously reported amount for gross profit for the first quarter of fiscal 2007 was reduced by $376,000.

2. RECENT ACCOUNTING PRONOUNCEMENTS

In ~~July~~September 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes”, which clarifies the accounting for uncertainty in tax positions. This interpretation prescribes a recognition threshold and measurement process for recording in the financial statements uncertain tax positions taken or expected to be taken in a tax return. Additionally, FIN 48 provides guidance on the derecognition, classification, accounting in interim periods and disclosure requirements for uncertain tax positions. The provisions of FIN 48 are effective as of the beginning of fiscal year 2008. The Company is currently evaluating the impact of adopting the provisions of FIN 48 on its financial statements.

~~Table of Contents~~

~~In September 2006, the FASB issued~~ Statement of Financial Accounting Standards No. 157, ~~(“SFAS 157”),~~ “Fair Value Measurements” (“SFAS No. 157”), which defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. SFAS No. 157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. SFAS No. 157 is effective for ~~fiscal years~~the Company beginning ~~after November 15, 2007.~~on April 1, 2008. Earlier adoption is permitted, provided the company has not yet issued financial statements, including for interim periods, for that fiscal year. The Company is currently evaluating the impact of adopting the provisions of SFAS No. 157 on its financial statements.

In ~~September~~February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 also amends certain provisions of SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities” (“SFAS No. 115”). SFAS No. 159 is effective for the Company beginning on April 1, 2008. The Company is currently evaluating the impact of adopting SFAS No. 159 on the consolidated financial statements.

Table of Contents

In June 2006, the ~~Staff~~Emerging Issues Task Force (“EITF”) reached a consensus on EITF Issue No. 06-3, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation)”. EITF Issue No. 06-3 provides that the presentation of ~~the SEC issued Staff Accounting Bulletin~~taxes assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer on either a gross basis (included in revenues and costs) or on a net basis (excluded from revenues) is an accounting policy decision that should be disclosed. EITF Issue No. 108 (“SAB 108”), “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.” SAB 108 provides guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of determining whether the current year’s financial statements are materially misstated. SAB 10806-3 is effective for fiscal years ~~ending~~beginning after ~~November~~December 15, 2006. The adoption of ~~SAB 108 is~~EITF Issue No. 06-3 did not ~~expected to~~ have ana material impact on the Company’s ~~consolidated~~ financial ~~position, results~~statements. The Company presents taxes collected from customers and remitted to governmental authorities in the statement of operations ~~or cash flows.~~on a net basis.

3. ~~STOCK-BASED COMPENSATION~~DETAILS OF CERTAIN BALANCE SHEET COMPONENTS

	March 31,		June 30,
(in thousands)	2007		2007

Inventory, net:
Purchased parts	$	57,406	$	71,351
Work in process		6,268		6,790
Finished goods		62,931		58,112
	$	126,605	$	136,253

Accrued liabilities:
Employee compensation and benefits	$	20,574	$	21,076
Warranty accrual		7,240		9,369
Accrued advertising and sales and marketing		5,104		6,200
Accrued other		21,107		22,213
	$	54,025	$	58,858

~~Adoption~~Changes in the warranty obligation, which are included as a component of ~~SFAS 123(R)~~

The Company has stock plans pursuant to which equity awards can be made to its employees and non-employee directors, including stock options and restricted stock awards. The Company also has an employee stock purchase plan (“ESPP”) pursuant to which employees can purchase the Company’s common stock.

Effective April 2, 2006, the first day of fiscal year 2007, the Company adopted SFAS 123(R), which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and non-employee directors based on estimated fair values. SFAS 123(R) replaced Statement of Financial Accounting Standards No. 123 (“SFAS 123”), “Accounting for Stock-Based Compensation”, and supersedes the Company’s previous accounting under the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”). Under the intrinsic value method, with the exception of the Company’s restricted stock awards, the Company generally recorded no stock-based compensation expense associated with its stock option and ESPP awards.

The Company elected to apply the modified prospective transition adoption method as provided by SFAS 123(R), and consequently, previously reported amounts have not been restated. Under this method, compensation expense for share-based payments include: (a) compensation expense for all share-based payment awards granted prior to but not yet vested as of April 2, 2006, basedaccrued liabilities on the grant date fair value estimated in accordance with the original provisions of SFAS 123, and (b) compensation expense for all share-based payment awards granted or modified on or after April 2, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123(R). The estimated fair value of the Company’s stock-based awards is amortized over the vesting period of the awards on a straight line basis. As compensation expense is recognized only for those awards thatcondensed consolidated balance sheets, are ~~expected to vest, such amounts have been reduced by estimated forfeitures. Previously, under SFAS 123, the Company recorded forfeitures~~ as ~~they occurred.~~follows (in thousands):

Warranty obligation at March 31, 2007	$	7,240
Warranty provision relating to products shipped during the year		6,804
Deductions for warranty claims processed		(4,675)
Warranty obligation at June 30, 2007	$	9,369

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4. GOODWILL AND PURCHASED INTANGIBLE ASSETS

The aggregate amortization expense relating to purchased intangible assets for the three months ended June 30, 2006 and 2007 was $2.1 million and $2.0 million, respectively. The estimated future amortization expense of purchased intangible assets as of June 30, 2007 is as follows (in thousands):

Fiscal Year Ending March 31,
Remainder of 2008	$	6,119
2009		8,005
2010		7,545
2011		7,502
2012		4,837
Thereafter		4,972
Total estimated amortization expense	$	38,980

Goodwill as of March 31, 2007 and June 30, 2007 was $72.8 million.

The Company reviews goodwill and purchased intangible assets with indefinite lives for impairment annually during the fourth quarter of the fiscal year or more frequently if events or circumstances indicate that an impairment loss may have occurred. In the fourth quarter of fiscal 2007, the Company completed the annual impairment test of goodwill and the Altec Lansing trade name, which indicated that there was no impairment. There were also no events or changes in circumstances during the three months ended June 30, 2007, which triggered an impairment review. If AEG’s performance continues to deteriorate, it is reasonably possible that an impairment review may be triggered for goodwill and purchased intangible assets with indefinite lives prior to the next annual review in the fourth quarter of fiscal 2008. It is also reasonably possible that an impairment review may be triggered for the remaining intangible assets. It is not possible to determine whether, if an impairment review is required, an impairment charge would result or if such charge would be material. See risk factor entitled “We have significant goodwill and intangible assets recorded on our balance sheet. If the carrying value of our goodwill or intangible assets is not recoverable, an impairment loss must be recognized, which would adversely affect our financial results” included in the “Risk Factors” section of this Form 10-Q.

5. STOCK-BASED COMPENSATION

The following table ~~shows~~summarizes the amount of stock-based compensation expense recorded under SFAS No. 123(R) included in the condensed consolidated ~~statement~~statements of operations:

($ in thousands, except per share data)	Three Months Ended December 31, 2006			Nine Months Ended December 31, 2006
							Three Months Ended
							June 30,
(in thousands)							2006			2007

Cost of revenues	$	730		$	2,210		$	788		$	641

Research, development and engineering		935			2,843			1,027			928
Selling, general and administrative		2,576			7,564			2,621			2,544
Stock-based compensation expense included in operating expenses		3,511			10,407			3,648			3,472

Total stock-based compensation ⁽¹⁾		4,241			12,617

Total stock-based compensation								4,436			4,113
Income tax benefit		(1,358	)		(4,087	)		(1,445	)		(1,309	)

Total stock-based compensation expense, net of tax	$	2,883		$	8,530
Total stock-based compensation, net of tax							$	2,991		$	2,804

Decrease in basic and diluted earnings per share	$	0.06		$	0.18		$	0.06		$	0.06

~~(1)~~

~~The three and nine months ended December 31, 2006 include stock-based compensation expense associated with restricted stock awards of $0.6 million and $1.5 million, respectively.~~

Prior to the adoption of SFAS 123(R), benefits of tax deductions in excess of recognized compensation costs were reported as operating cash flows in our condensed consolidated statements of cash flows. SFAS 123(R) requires that they be reported as a financing cash inflow rather than as an operating cash inflow. As a result of adopting SFAS 123(R), excess tax benefits for the nine months ended December 31, 2006 of $0.6 million have been classified as financing cash inflows.

The Company continues to evaluate the transition methods for calculating the tax effects of stock-based compensation pursuant to SFAS 123(R), including the establishment of the beginning balance of the additional paid-in capital pool (“APIC pool”), and has until the end of fiscal 2007 to select a transition method. The Company is currently following the alternative transition method discussed in FASB Staff Position No. 123(R)-3, “Transition Election Related to Accounting for Tax Effects of Share-Based Payment Awards.”

~~Prior to the Adoption of SFAS 123(R)~~

Prior to the adoption of SFAS 123(R), the Company used the intrinsic value method as prescribed in APB 25, to account for all stock-based employee compensation plans and had adopted the disclosure-only alternative of SFAS 123, as amended by SFAS No. 148, “Accounting for Stock-Based Compensation - Transition and Disclosure.”

Table of Contents

~~Consistent with the disclosure provisions of SFAS 148, the pro forma information for the three and nine months ended December 31, 2005 was as follows:~~

(in thousands, except per share data)

Three Months Ended
December 31, 2005

Nine Months Ended
December 31, 2005

Net income - as reported $ 25,041 $ 60,446
Add stock-based employee compensation expense included in net income, net of tax 269 428
Less stock-based compensation expense determined under fair value-based method, net of tax (2,668 ) (8,897 )
Net income - pro forma $ 22,642 $ 51,977

Basic net income per share - as reported $ 0.53 $ 1.29
Basic net income per share - pro forma $ 0.48 $ 1.11
Diluted net income per share - as reported $ 0.52 $ 1.24
Diluted net income per share - pro forma $ 0.47 $ 1.07

~~Valuation Assumptions~~

The Company estimates the fair value of stock options and ESPP shares using a Black-Scholes option valuation model, consistent with the provisions of SFAS 123(R), SEC Staff Accounting Bulletin No. 107 (“SAB 107”) and the Company’s prior period pro forma disclosures of net income under SFAS 123. The fair value of each option grant is estimated on the date of grant using the straight-line attribution approach with the following weighted average assumptions:

Three Months Ended December 31,

Nine Months Ended December 31,

Stock Options

2005

2006

2005

2006

Expected volatility 53.0 % 42.5 % 55.3 % 42.5 %
Risk-free interest rate 4.3 % 4.7 % 4.1 % 4.7 %
Expected dividends 0.7 % 1.0 % 0.6 % 1.0 %
Expected life (in years) 5.0 4.2 5.0 4.2

Nine Months Ended December 31,
ESPP

2005

2006

Expected volatility 31.2 % 52.8 %
Risk-free interest rate 4.2 % 5.2 %
Expected dividends 0.6 % 1.3 %
Expected life (in years) 0.5 0.5

~~No ESPP plan shares were granted during the three months ended December 31, 2005 and 2006 as the ESPP purchase periods begin every six months on August 1 and February 1 of each year.~~

~~Table of Contents~~

Prior to the adoption of SFAS 123(R), the Company used historical volatility in deriving its expected volatility assumption. The expected stock price volatility for the three and nine months ended December 31, 2006 was determined based on an equally weighted average of historical and implied volatility. Implied volatility is based on the volatility of the Company’s publicly traded options on its common stock. The Company determined that a blend of implied volatility and historical volatility is more reflective of market conditions and a better indicator of expected volatility than using purely historical volatility. The expected life for the three and nine months ended December 31, 2006 was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. The dividend yield assumption is based on our current dividend and the market price of our common stock at the date of grant.

The weighted average grant date fair value of options granted during the three and nine months ended December 31, 2006 was $7.63 and $7.68 per share, respectively and $13.12 and $15.14 per share, respectively during the three and nine months ended December 31, 2005. The weighted average grant date fair value of ESPP shares granted was $4.60 and $6.48 per share, respectively during the nine months ended December 31, 2006 and 2005. There were no ESPP shares granted during the first and third quarters of fiscal 2006 or 2005.

Stock Options ~~and Restricted Stock Awards~~

Under the Company’s 2003 Stock Plan, Plantronics may grant equity awards to employees, directors and consultants of the Company. Under the plan, the Company may grant incentive stock options, nonqualified stock options and restricted stock awards. Options and restricted stock awards generally vest over a 4 to 5 year period, and generally expire 7 years from the date of grant. At December 31, 2006, 0.9 million shares were available for future grant under the 2003 Stock Plan.

The Company’s 1993 Stock Plan was terminated in September 2003. Options awarded under the 1993 Stock Plan generally vested over a 4 to 5 year period, and generally expired 10 years from the date of grant. While shares are no longer available for future grant under the 1993 Stock Plan, options previously granted under the 1993 Plan remain outstanding.

The following is a summary of the Company’s stock option activity during the ~~nine months ended December 31, 2006:~~first quarter of fiscal 2008:

	Options Outstanding
	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
	(in thousands)					(in years)		(in thousands)
Outstanding at March 31, 2007		9,033		$	26.17
Options granted		104		$	24.32
Options exercised		(119	)	$	16.14
Options forfeited or expired		(211	)	$	33.56
Outstanding at June 30, 2007		8,807		$	26.11		4.57	$	31,520
Vested and expected to vest at June 30, 2007		8,462		$	26.20		4.51	$	30,256
Exercisable at June 30, 2007		6,319		$	27.09		3.99	$	22,172

Weighted

Weighted

Average

Average

Aggregate

Number of

Exercise

Remaining

Intrinsic

Shares

Price

Contractual Life

Value

(in thousands) (in years) (in thousands)
Outstanding at March 31, 2006 8,277 $ 26.75
Options granted 1,446 $ 20.58
Options exercised 274 $ 9.75 $ 3,006
Options forfeited or expired 313 $ 30.98
Outstanding at December 31, 2006 9,136 $ 26.14 5.07 $ 11,102
Vested and expected to vest at December 31, 2006 8,771 $ 26.23 5.02 $ 10,849
Exercisable at December 31, 2006 6,240 $ 27.17 4.47 $ 8,791

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the Company’s closing stock price of $21.20 as of December 29, 2006 for options that were in-the-money as of that date. Thetotal intrinsic value of options exercised during the ~~nine month period ended December 31, 2006 was $3.0 million. The total cash received from employees as a result of employee stock option exercises during the nine~~three months ended ~~December 31,~~June 30, 2006 and 2007 was ~~$2.7 million.~~

~~Table of Contents~~

$0.3 million and $1.1 million, respectively.

Compensation expense recognized for stock options during the three ~~and nine~~ months ended ~~December 31,~~June 30, 2006 and 2007 was ~~$3.4~~$3.8 million and ~~$10.4~~$3.3 million, respectively. As of ~~December 31, 2006,~~June 30, 2007, total unrecognized compensation cost related to unvested stock options was ~~$27.8~~$22.0 million which is expected to be recognized over a weighted average period of ~~2.9~~2.7 years.

~~The Company settles employee stock option exercises with newly issued common shares approved by stockholders for inclusion in the 1993 Stock Plan or the 2003 Stock Plan.~~

Restricted Stock ~~Awards~~

Compensation expense recognized for restricted stock awards was $0.5 million and $1.5 million for the three and nine months ended December 31, 2006, respectively, and $0.4 million and $0.7 million for the three and nine months ended December 31, 2005, respectively.

The following is a summary of the Company’s restricted stock ~~award~~ activity during the ~~nine~~first quarter of fiscal 2008:

				Weighted
				Average
	Number of			Grant Date
	Shares			Fair Value
		(in thousands)
Non-vested at March 31, 2007		287		$	27.09
Granted		25		$	25.24
Vested		(10	)	$	29.32
Forfeited		(14	)	$	27.15
Non-vested at June 30, 2007		288		$	26.85

Compensation expense recognized for restricted stock awards for the three months ended ~~December 31, 2006:~~

Number of
Shares

Weighted
Average
Grant Date
Fair Value

(in thousands)
Non-vested at March 31, 2006 316 $ 29.09
Granted 79 $ 20.43
Vested (57 ) $ 29.25
Forfeited (7 ) $ 27.15
Non-vested at December 31, 2006 331 $ 27.03

June 30, 2006 and 2007 was $0.4 million and $0.5 million, respectively. As of ~~December 31, 2006,~~June 30, 2007, total unrecognized compensation cost related to non-vested restricted stock awards was ~~$7.4~~$6.7 million, which is expected to be recognized over a weighted average period of ~~3.9~~3.5 years. The total fair value of restricted stock awards vested during the ~~nine~~three months ended ~~December 31, 2006~~June 30, 2007 was ~~$1.7~~$0.3 million.

~~ESPP~~

~~Under the~~ Employee Stock Purchase Plan eligible employees may contribute a portion of their compensation to purchase shares of the Company’s common stock at a purchase price per share equal to 85% of the lesser of the fair market value of Plantronics’ common stock on the first or last day of each six month offering period. At December 31, 2006, there were 261,000 shares reserved for future issuance under the ESPP.(“ESPP”)

Compensation expense recognized for the ESPP for the three ~~and nine~~ months ended ~~December 31,~~June 30, 2006 and 2007 was ~~$0.3~~$0.2 million and ~~$0.7~~$0.3 million, respectively. As of ~~December 31, 2006,~~June 30, 2007, there was $0.1 million of unrecognized compensation cost related to the ESPP that is expected to be fully recognized during the next fiscal quarter.

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~~4. DETAILS OF CERTAIN BALANCE SHEET COMPONENTS~~

(in thousands)

March 31,
2006

December 31,
2006

Inventory, net:
Purchased parts $ 44,750 $ 47,059
Work in process 3,786 7,504
Finished goods 72,324 98,317
Less: allowance for excess and obsolete inventory (14,978 ) (18,617 )
$ 105,882 $ 134,263

The Company records provisions for excess and obsolete inventory based on forecasts of future demand. While management believes the estimates and assumptions underlying its current forecasts are reasonable, there is risk that additional charges may be necessary if current forecasts are greater than actual demand.

Accrued liabilities:
Employee compensation and benefits $ 19,670 $ 22,029
Accrued advertising and sales and marketing 5,084 6,219
Warranty accrual 6,276 6,685
Accrued other 12,051 24,196
$ 43,081 $ 59,129

~~5. PRODUCT WARRANTY OBLIGATIONS~~Valuation Assumptions

~~Changes in our warranty obligation, which are included as~~The Company estimates the fair value of stock options and ESPP shares using a ~~component~~Black-Scholes option valuation model. The fair value of ~~accrued liabilities~~each option grant is estimated on the ~~condensed consolidated balance sheets, are as follows:~~

(in thousands)

2005

2006

Warranty obligation at March 31 $ 5,970 $ 6,276
Warranty provision relating to product shipped during the quarter 3,060 3,833
Deductions for warranty claims processed (2,834 ) (3,605 )
Warranty obligation at June 30 $ 6,196 $ 6,504

Warranty provision relating to product shipped during the quarter 4,242 3,654
Deductions for warranty claims processed (4,260 ) (3,594 )
Warranty obligation at September 30 $ 6,178 $ 6,564

Warranty provision relating to product shipped during the quarter 3,236 3,186
Deductions for warranty claims processed (2,705 ) (3,065 )
Warranty liability at December 31 $ 6,709 $ 6,685
date of grant using the straight-line attribution approach with the following weighted average assumptions:

	Three Months Ended
	June 30,
Employee Stock Options	2006			2007
Expected volatility		40.0	%		36.5	%
Risk-free interest rate		5.1	%		4.6	%
Expected dividends		0.9	%		0.8	%
Expected life (in years)		4.2			4.4
Weighted-average grant date fair value	$	10.10		$	8.40

~~Table of Contents~~

There were no new ESPP offering periods during the three months ended June 30, 2006 and 2007.

6. ~~ACQUISITIONS~~

~~Octiv, Inc.~~

On April 4, 2005, Plantronics completed the acquisition of 100% of the outstanding shares of Octiv, Inc. (“Octiv”), a privately held company, for up to $7.8 million in cash pursuant to the terms of an Agreement and Plan of Merger dated March 28, 2005. Octiv was merged into the Company subsequent to the acquisition and its name was changed to Volume Logic™, Inc. (“Volume Logic”).

Octiv was founded in 1999 by a group of audio professionals who developed a core audio technology to solve the problem of inconsistent volume levels and sound quality common to many forms of audio delivery. A variety of markets currently use Octiv’s Volume Logic technology, including home entertainment, digital music libraries, professional broadcast and the hearing impaired. The Octiv acquisition provides core technology to improve audio intelligibility in the Company’s products.

The results of operations of Volume Logic have been included in Plantronics’ consolidated results of operations since April 4, 2005. Pro forma results of operations have not been presented because the effect of the acquisition was not material to the results of prior periods presented.

~~The accompanying financial statements reflect the purchase price of $7.8 million, consisting of cash, and other costs directly related to the acquisition as follows:~~

(in thousands)

Paid to Octiv $ 7,430
Direct acquisition costs 388
Total cash consideration $ 7,818

The fair values of the intangible assets acquired were estimated with the assistance of an independent valuation firm. The following table presents an allocation of the purchase price based on the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

(in thousands)

Fair Value at
April 4, 2005

Total cash consideration $ 7,818
Less cash balance acquired 42
7,776
Allocated to:
Current assets, excluding cash acquired 102
Property, plant and equipment 72
Existing technologies 4,500
Deferred tax assets 2,970
Current liabilities assumed (334 )
Deferred tax liability (1,710 )
Goodwill $ 2,176

Acquired intangible assets are comprised of existing technologies, which are being amortized over their estimated useful lives of ten years. Goodwill represents the excess of the purchase price over the fair value of tangible and identified intangible assets acquired and arises as a result of, among other factors, future unidentified new products, new technologies and new customers as well as the implicit value of future cost savings as a result of the combining of entities. The goodwill arising from this acquisition is not deductible for tax purposes under Internal Revenue Code Section 197.

~~Table of Contents~~

~~Altec Lansing Technologies, Inc.~~

On August 18, 2005, Plantronics completed the acquisition of 100% of the outstanding shares of Altec Lansing Technologies, Inc., a privately-held Pennsylvania corporation for a cash purchase price including acquisition costs of approximately $165 million. The Company paid for the acquisition by drawing down $45.0 million on its credit facility and the remainder was paid using its cash and cash equivalents and short-term investments. Altec Lansing, headquartered in Milford, PA, has a manufacturing plant in Dongguan, China, and sales offices in the U.S., Europe, and Asia. Altec Lansing had approximately 1,400 employees at the date of acquisition.

~~The results of operations of Altec Lansing have been included in Plantronics’ consolidated results of operations subsequent to the acquisition on August 18, 2005.~~

~~The purchase price of approximately $165 million consists of cash and other costs directly related to the acquisition as follows:~~

(in thousands)

Paid to Altec Lansing $ 154,273
Payment of Altec Lansing pre-existing debt 9,906
Direct acquisition costs 977
Total cash consideration $ 165,156

(in thousands)

Fair Value at
August 18, 2005

Total cash consideration $ 165,156
Less cash balance acquired 7,577
157,579
Allocated to:
Prepaid compensation 1,067
Inventory 27,524
Other current assets 17,630
Property, plant, and equipment, net 8,290

Identifiable intangible assets 108,300
Deferred tax assets 4,424
Current liabilities assumed (29,368 )
Deferred tax liability (22,691 )
Goodwill $ 42,403

Goodwill was recorded based on the residual purchase price after allocating the purchase price to the fair market value of tangible and intangible assets acquired less liabilities assumed. Goodwill arises as a result of, among other factors, future unidentified new products, new technologies and new customers as well as the implicit value of future cost savings as a result of the combining of entities. The goodwill arising from this acquisition is not deductible for tax purposes under Internal Revenue Code Section 197.

~~Table of Contents~~

~~The fair values and estimated useful lives of identifiable intangible assets acquired are as follows:~~

(in thousands)

Fair Value

Amortization
Period

Existing technology $ 25,000 6 years
OEM relationships 700 7 years
Customer relationships 17,600 8 years
Trade name - inMotion 5,000 8 years
Trade name - Altec Lansing 59,100 Not amortized
In-process technology 900 Fully expensed in the second quarter of Fiscal 2006
Total $ 108,300

Existing technology represents audio products that had been introduced into the market, were generating revenue and/or had reached technological feasibility as of the close of the transaction. The value was calculated based on the present value of the future estimated cash flows derived from this technology applying a 10% discount rate. Existing technology is estimated to have a useful life of six years and is being amortized on a straight-line basis to cost of revenues.

The fair value of customer relationships with OEMs and non-OEMs, which includes major retailers and distributors, was calculated based on the present value of the future estimated cash flows that can be attributed to the existing OEM and non-OEM customer relationships applying a 19% discount rate. Based on historical attrition rates and technological obsolescence, the useful life of the customer relationships was estimated to be seven years for OEM customer relationships and eight years for non-OEM customer relationships and is being amortized on a straight-line basis to selling, general and administrative expense.

The value of the trade name “inMotion,” was calculated based on the present value of the capitalized royalties saved on the use of the inMotion trade name applying a 12% discount rate. The inMotion trade name is relatively new and relates to specific niches of the portable audio market. Based on product life cycles, history relating to the category of products for which the inMotion brand is utilized, and similar product trademarks within the retail industry, the estimated remaining useful life was determined to be eight years and is being amortized on a straight-line basis to selling, general, and administrative expense.

The value of the trade name, “Altec Lansing,” was also calculated based on the present value of the capitalized royalties saved on the use of the Altec Lansing trade name applying a 12% discount rate. Considering the recognition of the brand, its long history, and management’s intent to use the brand indefinitely, the remaining useful life of the Altec Lansing name was determined to be indefinite and is being treated as an indefinite-lived asset in accordance with SFAS 142.

In-process technology involves products which fall under the definitions of research and development as defined by SFAS No. 2, “Accounting for Research and Development Costs.” Altec Lansing’s in-process technology products were at a stage of development that required further research and development to reach technological feasibility and commercial viability. The fair value was calculated based on the present value of the future estimated cash flows applying a 15% discount rate, and adjusted for the estimated cost to complete. Because the in-process technology, which has been valued at $0.9 million, was not yet complete, there was risk that the developments would not be completed; therefore, this amount was immediately expensed at acquisition to research, development and engineering expense.

~~Table of Contents~~

~~7. GOODWILL~~COMPREHENSIVE INCOME

The ~~changes in the carrying value~~components of ~~goodwill during the nine months ended December 31, 2006 by segment were as follows:~~

(in thousands)

Audio
Communications
Group

Audio
Entertainment
Group

Consolidated

Balance at March 31, 2006
$ 11,214 $ 63,863 $ 75,077
Carrying value adjustments - (827 ) (827 )
Balance at December 31, 2006
$ 11,214 $ 63,036 $ 74,250

During the nine months ended December 31, 2006, the Company adjusted the fair value of the property, plant and equipment and inventory acquired, and wrote-off an accrual for direct acquisition costs relating to the purchase of Altec Lansing. In addition, as a result of the merger of Altec Lansing into Plantronics in the third quarter of fiscal 2007, Altec Lansing’s effective tax rate decreased, resulting in a reduction of deferred tax liabilities that were originally recorded for differences in book and tax bases of acquired intangible assets. These adjustments resulted in a reduction of goodwill of $0.8 million for AEG.

The Company reviews goodwill for impairment annually during the fourth quarter of the fiscal year or more frequently if events or circumstances indicate that an impairment loss may have occurred. During the fourth quarter of fiscal 2006, the Company completed the annual impairment test which indicated that there was no impairment. During the nine months ended December 31, 2006, no events or circumstances triggered an impairment review. The Company will perform its annual goodwill impairment test in the fourth quarter of fiscal 2007. Further, to the extent the annual impairment test does not result in a goodwill impairment, it is possible that an impairment review may be triggered during the next twelve months. However, it is not possible to determine whether, if an impairment review is required, an impairment charge would result or if such charge would be material.

~~Table of Contents~~

~~8. INTANGIBLES~~

~~The aggregate amortization expense relating to intangible assets~~comprehensive income for the three ~~and nine~~ months ended ~~December 31, 2005 was $2.1 million~~June 30, 2006 and $4.5 million, respectively. The aggregate amortization expense for the three and nine months ended December 31, 2006 was $2.1 million and $6.2 million, respectively. The following table presents information on acquired intangible assets:

(in thousands)

March 31, 2006

Intangible assets

Gross
Amount

Accumulated
Amortization

Net
Amount

Amortization
Period

Technology $ 31,500 $ (4,268 ) $ 27,232 6-10 years
State contracts 1,300 (789 ) 511 7 years
Patents 1,420 (674 ) 746 7 years
Customer relationships 17,600 (1,375 ) 16,225 8 years
Trademarks 300 (182 ) 118 7 years
Tradename - inMotion 5,000 (391 ) 4,609 8 years
Tradename - Altec Lansing 59,100 - 59,100 Indefinite
OEM relationships 700 (63 ) 637 7 years
Non-compete agreements 200 (170 ) 30 5 years
Total $ 117,120 $ (7,912 ) $ 109,208

(in thousands)

December 31, 2006

Gross
Amount

Accumulated
Amortization

Net
Amount

Amortization
Period

Technology $ 31,500 $ (7,945 ) $ 23,555 6-10 years
State contracts 1,300 (929 ) 371 7 years
Patents 1,420 (826 ) 594 7 years
Customer relationships 17,600 (3,025 ) 14,575 8 years
Trademarks 300 (214 ) 86 7 years
Tradename - inMotion 5,000 (859 ) 4,141 8 years
Tradename - Altec Lansing 59,100 - 59,100 Indefinite
OEM relationships 700 (138 ) 562 7 years
Non-compete agreements 200 (200 ) - 5 years
Total $ 117,120 $ (14,136 ) $ 102,984

~~Table of Contents~~

~~The estimated future amortization expense of purchased intangible assets as of December 31, 2006 is~~2007 are as follows (in thousands):

Fiscal year ending March 31,

Amount

Remainder of 2007 $ 2,064
2008 8,259
2009 8,105
2010 7,645
2011 7,602
Thereafter 10,209
Total $ 43,884

	Three Months Ended
	June 30,
(in thousands)	2006			2007
Net income	$	12,291		$	14,975
Unrealized loss on cash flow hedges, net of tax		(3,660	)		(158	)
Foreign currency translation gain		1,247			398
Comprehensive income	$	9,878		$	15,215

~~9. BANK LINE OF CREDIT~~

Plantronics has a $100 million revolving line of credit and a letter of credit sub-facility. Borrowings under the line of credit are unsecured and bear interest at the London inter-bank offered rate (“LIBOR”) plus 0.75%. The line of credit expires on August 1, 2010.

At March 31, 2006, $22.0 million was outstanding on this line of credit and $2.1 million committed under the letter of credit sub-facility. At December 31, 2006, $6.0 million was outstanding on this line of credit and $1.5 million committed under the letter of credit sub-facility.

Borrowings under the line are subject to certain financial covenants and restrictions that materially limit the Company’s ability to incur additional debt and pay dividends, among other matters. Plantronics is currently in compliance with the covenants under this agreement.

~~10.~~7. FOREIGN CURRENCY TRANSACTIONS

~~Fair Value~~Non-Designated Hedges

As of ~~December 31, 2006,~~June 30, 2007, the Company had foreign currency forward contracts of ~~€19.3~~€24.1 million and ~~₤3.1~~₤6.6 million denominated in Euros and Great British Pounds, respectively. These forward contracts hedge against a portion of ~~our~~the Company’s foreign currency-denominated receivables, payables and cash balances.

The following table summarizes the Company’s ~~net fair value~~outstanding foreign exchange currency ~~position,~~contracts, and approximate U.S. dollar equivalent, at ~~December 31, 2006~~June 30, 2007 (local currency and dollar amounts in thousands):

	Local Currency		USD Equivalent		Position		Maturity		Local Currency	USD Equivalent		Position	Maturity
EUR		19,300	$	25,742		Sell Euro		1 month	24,100	$	32,631	Sell Euro	1 month
GBP		3,100	$	6,136		Sell GBP		1 month	6,600	$	13,238	Sell GBP	1 month

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Table of Contents

Cash Flow Hedges

As of ~~December 31, 2006,~~June 30, 2007, the Company had foreign currency put and call option contracts of ~~€56.4~~€54.1 million and ~~£17.9~~£17.4 million. As of March 31, ~~2006,~~2007, the Company had foreign currency put and call option contracts of ~~€45.2~~€57.0 million and ~~£19.6~~£16.3 million. Collectively, the Company’s option contracts are collars to hedge against a portion of its forecasted foreign denominated sales.

~~The following table summarizes Plantronics’~~In the three months ended June 30, 2006 and 2007, realized losses of $78,000 and $322,000 on cash flow ~~hedging positions:~~

(in thousands)

Balance Sheets
Accumulated Other
Comprehensive Income (Loss)

Statements of Operations
Net Revenues
Three Months Ended December 31,

Statements of Operations
Net Revenues
Nine Months Ended December 31,



March 31, 2006

December 31, 2006

2005

2006

2005

2006

Realized gain (loss) on closed transactions
$ -- $ -- $ (121 ) $ (1,316 ) $ (537 ) $ (1,730 )
Recognized but unrealized gain (loss) on open transactions 1,567 (2,256 ) - - - -
$ 1,567 $ (2,256 ) $ (121 ) $ (1,316 ) $ (537 ) $ (1,730 )
hedges were recognized in net revenues in the condensed consolidated statements of operations.  The Company expects to reclassify the entire amount of $1.6 million of losses accumulated in other comprehensive income to net revenues during the next 12 months due to the recognition of the hedged forecasted sales.

~~11.~~8. INCOME TAXES

The effective tax rate for the three ~~and nine~~ months ended ~~December 31, 2006,~~June 30, 2007 was ~~17% and 21.1%, respectively,~~22.3% compared to ~~27% and 29%, respectively,~~23.7% for the same periods a year ago. The effective tax rate is lower than the previous year due to Congress reinstating the Research and Development Tax Credit retroactively to January 1, 2006 during the third quarter of fiscal 2007 and lower U.S. net income which is taxed at higher rates than our foreign net income. Thea decline in U.S. income and is primarily due to the losses of ~~AEG and stock-based compensation expense which is proportionately higher in the U.S. than overseas locations. Our~~AEG. The effective tax rate differs from the statutory rate due to the impact of foreign operations taxed at different statutory rates, income tax credits, state taxes, and other factors. ~~Our~~The future quarterly tax rate could be impacted by a shift in the mix of domestic and foreign income; tax treaties with foreign jurisdictions; changes in tax laws in the United States or internationally; or a change in ~~our~~ estimates of future taxable income which results in a valuation allowance being ~~required;~~ required.

On April 1, 2007, the Company adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (“FIN 48”). Under FIN 48, the impact of an uncertain income tax position on income tax expense must be recognized at the largest amount that is more-likely-than-not to be sustained. An uncertain income tax position will not be recognized unless it has a greater than 50% likelihood of being sustained. There were no material adjustments as a result of the adoption of FIN 48. At the adoption date, the Company had $13.5 million of unrecognized tax benefits, $10.9 million of which would affect our income tax expense if recognized. The remaining balance of the unrecognized tax benefits of $2.6 million would be an adjustment to goodwill. As of June 30, 2007, the Company had $14.3 million of unrecognized tax benefits. The Company estimates that there will be no material changes in its uncertain tax positions in the next 12 months.

The Company's continuing practice is to recognize interest and/or ~~a federal, state or foreign jurisdiction’s view~~penalties related to income tax matters in income tax expense. As of April 1, 2007, the Company had approximately $1.0 million of accrued interest related to uncertain tax positions. We file income tax returns which differs materially from what we originally provided. Currently, we are not able to forecast the tax rate for the fiscal year for both AEG and ACG due to many factors including the product mix, changing market conditions and AEG being a new business for Plantronics in the ~~more volatile retail sector. Accordingly, the~~U.S. federal jurisdiction, and various states and foreign jurisdictions. We are no longer subject to U.S. federal and state income tax ~~expense reflected~~examinations by tax authorities for ~~each quarterly period has~~years prior to 2003. Foreign income tax matters for most foreign jurisdictions have been ~~computed on a discrete basis instead of using an annual effective tax rate.~~concluded for years through 2001.

~~12.~~9. COMPUTATION OF EARNINGS PER COMMON SHARE

Basic net income per share is computed by dividing the net income for the period by the weighted average number of common shares outstanding during the ~~period.~~period, less common stock subject to repurchase. Diluted net income per share is computed by dividing the net income for the period by the weighted average number of shares of common stock and potentially dilutive common stock outstanding during the period. Potentially dilutive common shares include outstanding stock options and unvested restricted stock awards, which are reflected in diluted earnings per share by application of the treasury stock method. Under the treasury stock method, the amount that the employee must pay for exercising stock options, the amount of stock-based compensation cost for future services that the Company has not yet recognized, and the amount of tax benefit that would be recorded in additional paid-in capital upon exercise are assumed to be used to repurchase shares.

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The following table sets forth the computation of basic and diluted earnings per share:

									Three Months Ended
									June 30,
(in thousands, except per share data)	Three Months Ended December 31,				Nine Months Ended December 31,				2006		2007
	2005		2006		2005		2006

Net income	$	25,041	$	15,190	$	60,446	$	40,006	$	12,291	$	14,975

Weighted average shares-basic		46,834		47,409		46,968		47,256		47,157		47,835
Effect of unvested restricted stock awards		123		8		152		8		26		22
Effect of dilutive securities		1,208		505		1,648		676
Effect of employee stock options										1,085		824
Weighted average shares-diluted		48,165		47,922		48,768		47,940		48,268		48,681

Earnings per share-basic	$	0.53	$	0.32	$	1.29	$	0.85	$	0.26	$	0.31

Earnings per share-diluted	$	0.52	$	0.32	$	1.24	$	0.83	$	0.25	$	0.31

Weighted average stock options and unvested restricted stock awards to purchase ~~3.0~~4.8 million and ~~2.5~~6.0 million shares of Plantronics’ stock for the three ~~and nine~~ months ended ~~December 31, 2005, respectively, were excluded from the computation of diluted earnings per share because their effect would have been anti-dilutive. Weighted average stock options~~June 30, 2006 and ~~unvested restricted stock awards to purchase 6.9 million and 5.8 million shares of Plantronics’ stock for the three and nine months ended December 31, 2006, respectively,~~2007 were excluded from the computation of diluted earnings per share because their effect would have been anti-dilutive.

~~13. COMPREHENSIVE INCOME~~

~~Comprehensive income includes charges or credits to equity that are not the result of transactions with owners. The components of comprehensive income are as follows:~~

(in thousands)

Three Months Ended
December 31,

Nine Months Ended
December 31,

2005

2006

2005

2006

Net income $ 25,041 $ 15,190 $ 60,446 $ 40,006

Unrealized gain (loss) on cash flow hedges, for the three and nine months ended December 31, 2005 and 2006, net of tax 86 (1,579 ) 5,983 (3,823 )

Foreign currency translation gain (loss), for the three and nine months ended December 31, 2005 and 2006 (380 ) 614 (1,638 ) 1,930

Unrealized gain on investments, for the three and nine months ended December 31, 2005 and 2006, net of tax 12 - 28 -
Comprehensive income $ 24,759 $ 14,225 $ 64,819 $ 38,113

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~~14.~~10. SEGMENTS AND ENTERPRISE-WIDE DISCLOSURES

Audio Communications Group

ACG designs, manufactures, markets and sells headsets for business and consumer applications, and other specialty products for the hearing impaired. With respect to headsets, ~~we make~~it makes products for office and contact center use, ~~for~~ use with mobile and cordless phones, and ~~for~~ use with computers and gaming consoles.

The following table presents net revenues by product group within ACG:

	Three Months Ended
	June 30,
(in thousands)	2006		2007

Net revenues from unaffiliated customers:
Office and Contact Center	$	114,267	$	132,205
Mobile		35,806		41,238
Gaming and Computer Audio		7,289		6,485
Other Specialty Products		6,375		5,644
Total segment net revenues	$	163,737	$	185,572

(in thousands)

Three Months Ended
December 31,

Nine Months Ended
December 31,

2005

2006

2005

2006

Net revenues from unaffiliated customers:
Office and Contact Center $ 114,290 $ 118,280 $ 327,190 $ 348,360
Mobile 29,973 43,080 83,523 112,085
Gaming and Computer Audio 9,419 8,364 27,669 23,380
Other Specialty Products 7,837 6,787 22,346 19,456
$ 161,519 $ 176,511 $ 460,728 $ 503,281

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Audio Entertainment Group

AEG ~~created as a result of the acquisition of Altec Lansing on August 18, 2005,~~ is engaged in the design, manufacture, sales ~~marketing~~ and ~~support~~marketing of audio solutions and related technologies. ~~It offers computer and digital audio systems, digital radio frequency audio systems, and portable audio products as well as headphones and microphones for personal digital media.~~ Major product categories include ~~portable audio,~~“Docking Audio”, which is defined as all speakers, whether AC or battery-powered, that work with portable digital players such as iPod or MP3 ~~players; powered audio,~~players and “PC Audio”, which is defined as self-powered speaker systems used for computers and other multi-media application ~~systems; interactive audio (headsets);~~systems. “Other” includes PC headsets, headphones and ~~personal audio (headphones).~~professional speakers. Currently, all the revenues in AEG are derived from sales of Altec Lansing products.

The following table presents net revenues by product group within AEG:

(in thousands)

Three Months Ended
December 31,

Nine Months Ended
December 31,

2005

2006

2005

2006

Revenues from unaffiliated customers:
Portable audio $ 45,904 $ 24,656 $ 58,727 $ 65,095
Powered audio 20,564 17,911 30,182 48,068
Other 3,901 3,195 5,989 8,888
Less revenue reserves (9,376 ) (6,838 ) (11,980 ) (19,894 )
$ 60,993 $ 38,924 $ 82,918 $ 102,157

	Three Months Ended
	June 30,
(in thousands)	2006		2007

Net revenues from unaffiliated customers:
Docking Audio	$	17,430	$	10,291
PC Audio		11,852		8,448
Other		2,050		2,184
Total segment net revenues	$	31,332	$	20,923

~~AEG currently does not allocate revenue reserves by product category.~~

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Segment Financial Data

Financial data for each reportable segment for the three ~~and nine~~ months ended ~~December 31, 2005~~June 30, 2006 and ~~2006~~2007 is as follows:

Net Revenues by Segment
	Three Months Ended
	June 30,
(in thousands)	2006		2007

Audio Communications Group	$	163,737	$	185,572
Audio Entertainment Group		31,332		20,923
Consolidated net revenues	$	195,069	$	206,495

Revenues by Segment
Gross Profit (Loss) by Segment
									Three Months Ended
	Three Months Ended December 31,				Nine Months Ended December 31,				June 30,
(in thousands)	2005		2006		2005		2006		2006		2007

Audio Communications Group	$	161,519	$	176,511	$	460,728	$	503,281	$	70,073	$	85,776
Audio Entertainment Group		60,993		38,924		82,918		102,157		5,526		(2,230	)
Consolidated net revenues	$	222,512	$	215,435	$	543,646	$	605,438
Consolidated gross profit									$	75,599	$	83,546

Operating Income (Loss) by Segment
	Three Months Ended
	June 30,
(in thousands)	2006			2007

Audio Communications Group	$	20,817		$	28,986
Audio Entertainment Group		(5,693	)		(11,039	)
Consolidated operating income	$	15,124		$	17,947

Gross Profit by Segment


Three Months Ended
December 31,

Nine Months Ended
December 31,

(in thousands)

2005

2006

2005

2006


Audio Communications Group $ 74,921 $ 77,257 $ 216,511 $ 218,836
Audio Entertainment Group 19,105 4,079 24,666 15,861
Consolidated gross profit $ 94,026 $ 81,336 $ 241,177 $ 234,697

Operating Income (Loss) by Segment


Three Months Ended
December 31,

Nine Months Ended
December 31,

(in thousands)

2005

2006

2005

2006


Audio Communications Group $ 25,792 $ 22,855 $ 75,669 $ 64,436
Audio Entertainment Group 9,124 (6,037 ) 8,795 (16,471 )
Consolidated operating income $ 34,916 $ 16,818 $ 84,464 $ 47,965

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PART ~~II.~~II -- OTHER INFORMATION

ITEM 1. L EG~~AL PROCEEDINGS.~~LEGAL PROCEEDINGS

We are presently engaged in various legal actions arising in the normal course of our business. We believe that it is unlikely that any of these actions will have a material adverse impact on our operating results. However, because of the inherent uncertainties of litigation, the outcome of any of these actions could be unfavorable and could have a material adverse effect on our financial condition, results of operations or cash flows.

~~Four class action lawsuits~~ There were ~~recently filed against Plantronics alleging that our Bluetooth headsets may cause noise-induced hearing loss.~~ ~~Shannon Wars et al. vs. Plantronics, Inc.~~ ~~was filed on November 14, 2006~~no material developments in the ~~United States District Court~~litigation on which we reported in our Annual Report on Form 10-K for the ~~Eastern District of Texas.~~ fiscal year ended March 31, 2007.~~Lori Raines, et al. vs. Plantronics, Inc.~~ ~~was filed on October 20, 2006 in the United States District Court, Central District of California.~~ ~~Kyle Edwards, et al vs. Plantronics, Inc.~~ ~~was filed on October 17, 2006 in the United States District Court, Middle District of Florida.~~ ~~Bruce Schiller, et al vs. Plantronics, Inc.~~ was filed on October 10, 2006 in the Superior Court of the State of California in and for the County of Los Angeles. The complaints state that they do not allege actual personal injury to any individual. All of these complaints seek various remedies, including injunctive relief requiring Plantronics to include certain additional warnings with its Bluetooth headsets and to redesign the headsets to limit the volume produced, or, alternatively, to provide the user with the ability to determine the level of sound emitted from the headset. Plaintiffs also seek unspecified general, special, and punitive damages, as well as restitution. We do not believe that the allegations in these lawsuits have any merit, and Plantronics will aggressively defend itself in these cases.

ITEMITEM 1A ~~1A.~~. RISK ~~FACTORS.~~FACTORS

Investors or potential investors in our stock should carefully consider the risks described below. Our stock price will reflect the performance of our business relative to, among other things, our competition, expectations of securities analysts or investors, and general economic market conditions and industry conditions. One should carefully consider the following factors in connection with any investment in our stock. We have materially amended the second and third risk factors below from the corresponding risk factors published in our Form 10-K for the fiscal year ended March 31, 2007. Our business, financial condition and results of operations could be materially adversely affected if any of the following risks occur. Should any or all of the following risks materialize, the trading price of our stock could decline, and investors could lose all or part of their investment.

Our operating results are difficult to predict and fluctuations may cause volatility in the trading price of our common stock.

Given the nature of the markets in which we compete, our revenues and profitability are difficult to predict for many reasons, including the following:

—·

Our operating results are highly dependent on the volume and timing of orders received during the quarter, which are difficult to forecast. Customers generally order on an as-needed basis, and we typically do not obtain firm, long-term purchase commitments from our customers. As a result, our revenues in any quarter depend primarily on orders booked and shipped in that quarter;

—·

We ~~must~~ incur a large portion of our costs in advance of sales orders because we must plan research and production, order components and enter into development, sales and marketing, and other operating commitments prior to obtaining firm commitments from our customers. In the event we acquire too much inventory for certain products, the risk of future inventory write-downs increases. In the event we have inadequate inventory to meet the demand for particular products, we may miss significant revenue opportunities or ~~may~~ incur significant expenses such as air freight, expediting shipments, and other negative variances in our manufacturing processes as we attempt to make up for the shortfall. ~~The foregoing difficulties are exacerbated in periods such as the present when~~When a significant portion of our revenue is derived from new products, ~~and~~forecasting the ~~difficulties of forecasting~~ appropriate volumes of production ~~are~~is even more ~~tenuous;~~

difficult;

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—·

~~Our~~In the ACG ~~profitability depends, in part, on the mix of~~segment, our ~~Business-to-Business (“B2B”) and Business-to-Consumer (“B2C”) as well as our product mix. Our~~ prices and gross margins are generally lower for sales to ~~B2C~~Business-to-Consumer (“B2C”) customers compared to sales to our ~~B2B~~Business-to-Business (“B2B”) customers. ~~Our~~In addition, our prices and gross margins can vary significantly by product line as well as within product lines. Therefore, our profitability depends, in part, on the mix of our B2B to B2C customers as well as our product mix. In the AEG segment, our prices and gross margins are generally lower for our PC Audio products than our Docking Audio products. Therefore, our profitability depends, in part, on our mix of PC Audio to Docking Audio products. For example, in the fourth quarter of fiscal 2007, sales of Docking Audio products declined substantially, resulting in lower gross margins and increased operating losses. The size and timing of opportunities in ~~this market~~these markets are difficult to predict;

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—·

We are working to refresh virtually the entire AEG product line; however, market adoption of new products is difficult to predict;

A significant portion of our annual retail sales for AEG generally occur in the third fiscal quarter, thereby increasing the difficulty of predicting revenues and profitability from quarter to quarter and in managing inventory levels;

—·

Fluctuations in currency exchange rates impact our revenues and profitability because we report our financial statements in U.S. dollars, whereas a significant portion of our sales to customers are transacted in other currencies, particularly the ~~Euro.~~Euro and Great British Pound. Furthermore, fluctuations in foreign currencies impact our global pricing strategy resulting in our lowering or raising selling prices in a currency in order to avoid disparity with U.S. dollar prices and to respond to currency-driven competitive pricing actions; and

—·

Because we have significant manufacturing operations in Mexico and China, fluctuations in currency exchange rates in those two countries can impact our gross profit and profitability.

Fluctuations in our operating results may cause volatility in the trading price of our common stock. For example, in the second and fourth quarters of fiscal year 2006 and the first quarter of fiscal year 2007, our operating results either did not meet our targets or the market’s expectations, which had a significant adverse effect on the trading price of our common stock.

~~If we do not match production to demand, we may lose business or our gross margins could be materially adversely affected.~~

Our industry is characterized by rapid technological change, frequent new product introductions, short-term customer commitments and rapid changes in demand. We determine production levels based on our forecasts of demand for our products. Actual demand for our products depends on many factors, which makes it difficult to forecast. We have experienced differences between our actual and our forecasted demand in the past and expect differences to arise in the future. Significant unanticipated fluctuations in demand and the global trend towards consignment of products could cause the following operating problems, among others:

—

If forecasted demand does not develop, we could have excess inventory and excess capacity. Over-forecast of demand could result in higher inventories of finished products, components and subassemblies. In addition, because our retail customers have pronounced seasonality, we must build inventory well in advance of the December quarter in order to stock up for the anticipated future demand. If we were unable to sell these inventories, we would have to write off some or all of our inventories of excess products and unusable components and subassemblies. Excess manufacturing capacity could lead to higher production costs and lower margins.

—

If demand increases beyond that forecasted, we would have to rapidly increase production. We currently depend on suppliers to provide additional volumes of components and sub-assemblies, and we are experiencing greater dependence on single source suppliers; therefore, we might not be able to increase production rapidly enough to meet unexpected demand. This could cause us to fail to meet customer expectations. There could be short-term losses of sales while we are trying to increase production. If customers turn to our competitors to meet their needs, there could be a long-term impact on our revenues and profitability.

—

Rapid increases in production levels to meet unanticipated demand could result in higher costs for components and sub-assemblies, increased expenditures for freight to expedite delivery of required materials, and higher overtime costs and other expenses. These higher expenditures could lower our profit margins. Further, if production is increased rapidly, there may be decreased manufacturing yields, which may also lower our margins.

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—

~~The introduction of~~ ~~Bluetooth~~ and other wireless headsets presents many significant manufacturing, marketing and other operational risks and uncertainties, including developing and marketing these wireless headset products; unforeseen delays or difficulties in introducing and achieving volume production of such products, as occurred in our second and third quarter of fiscal 2006; our dependence on third parties to supply key components, many of which have long lead times; and our ability to forecast demand for this new product category for which relevant data is incomplete or unavailable. We may have longer lead times with certain suppliers than commitments from some of our customers. If we are unable to deliver product on time to meet the market window of our retail customers, we will lose opportunities to increase revenues and profits. We may also be unable to sell these finished goods, which would result in excess or obsolete inventory.

—

Increasing production beyond planned capacity involves increasing tooling, test equipment and hiring and training additional staff. Lead times to increase tooling and test equipment are typically several months, or more. Once such additional capacity is in place, we incur increased depreciation and the resulting overhead. Should we fail to ramp production once capacity is in place, we would not be able to absorb this incremental overhead, and this could lead to lower gross margins.

—

We are in the process of in sourcing some of our production from certain third party vendors, and shifting some production from our plant in Mexico to our plant in Suzhou, China. If we are not able to successfully transition production we may not be able to meet demand or manufacture products at a cost which is competitive with historical costs.

~~Any of the foregoing problems could materially and adversely affect our business, financial condition and results of operations.~~

~~Integration of Altec Lansing Technologies, Inc. may have an adverse effect on our business and financial condition.~~

There are inherent risks associated with our acquisition of Altec Lansing that could materially adversely affect our business, financial condition and results of operations. The risks faced in connection with this acquisition include among others:

—

~~Cultural differences in the conduct of the business;~~

—

Difficulties in integration of the operations, technologies, and products of Altec Lansing. Our systems integration plan for Altec Lansing includes the on-going transition of Altec Lansing’s current ERP system to ours. We anticipate that there will be significant business processes and internal controls which will change as a result of the integration. If we are unable to complete the systems integration plan successfully or on a timely basis this could result either in delays to our internal controls evaluation for Altec Lansing or in additional costs in the documentation and testing of these controls;

—

~~Diversion of management's attention from normal daily operations of the core business;~~

—

~~The potential loss of key employees of Altec Lansing and Plantronics;~~

—

~~Competition may continue to increase in Altec Lansing’s markets more than expected; and~~

—

~~Altec Lansing’s product sales and new product development may not evolve as anticipated.~~

Mergers and acquisitions, particularly those of technology companies, are inherently risky, and no assurance can be given that this or any future acquisitions will be successful and will not materially adversely affect our business, operating results or financial condition. We must also manage any acquisition-related growth effectively. Failure to manage growth effectively and successfully integrate this or any future acquisitions made by us could materially harm our business and operating results. If the anticipated future results of operations of the combined Altec Lansing and Plantronics’ businesses do not materialize as expected, goodwill and other intangible assets which were recorded as a result of the acquisition could become impaired and could result in write-offs which would negatively impact our operating results.

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~~Our business will be materially adversely affected if we are not able to develop, manufacture and market new products in response to changing customer requirements and new technologies.~~

The market for our products is characterized by rapidly changing technology, evolving industry standards, short product life cycles and frequent new product introductions. As a result, we must continually introduce new products and technologies and enhance existing products in order to remain competitive.

The technology used in our products is evolving more rapidly now than it has historically, and we anticipate that this trend may accelerate. Historically, the technology used in lightweight communications headsets and speakers has evolved slowly. New products have primarily offered stylistic changes and quality improvements rather than significant new technologies. Our increasing reliance and focus on the B2C market has resulted in a growing portion of our products incorporating new technologies, experiencing shorter lifecycles and a need to offer deeper product lines. We believe this is particularly true for our newer emerging technology products especially in the speaker, mobile, computer, residential and certain parts of the office markets. In particular, we anticipate a trend towards more integrated solutions that combine audio, video, and software functionality, while currently our focus is limited to audio products.

We are also experiencing a trend away from corded headsets to cordless products. In general, our corded headsets have had higher gross margins than our cordless products. In addition, we expect that office phones will begin to incorporate ~~Bluetooth~~ ~~functionality, which would open the market to consumer~~ ~~Bluetooth~~ headsets and reduce the demand for our traditional office telephony headsets and adapters as well as impacting potential revenues from our own wireless headset systems, resulting in lost revenue and lower margins.

~~The success of our products depends on several factors, including our ability to:~~

—

~~Anticipate technology and market trends;~~

—

~~Develop innovative new products and enhancements on a timely basis;~~

—

~~Distinguish our products from those of our competitors;~~

—

~~Manufacture and deliver high-quality products in sufficient volumes; and~~

—

~~Price our products competitively.~~

If we are unable to develop, manufacture, market and introduce enhanced or new products in a timely manner in response to changing market conditions or customer requirements, including changing fashion trends and styles, it will materially adversely affect our business, financial condition and results of operations. Furthermore, as we develop new generations of products more quickly, we expect that the pace of product obsolescence will increase concurrently. The disposition of inventories of excess or obsolete products may result in reductions to our operating margins and materially adversely affect our earnings and results of operations.

The failure of our suppliers to provide quality components or services in a timely manner could adversely affect our results.

Our growth and ability to meet customer demands depend in part on our ability to obtain timely deliveries of raw materials, components, sub-assemblies and products from our suppliers. We buy raw materials, components and sub-assemblies from a variety of suppliers and assemble them into finished products. We also have certain of our products manufactured for us by third party suppliers. The cost, quality, and availability of such goods are essential to the successful production and sale of our products. Obtaining raw materials, components, sub-assemblies and finished products entails various risks, including the following:

—· Although we generally use standard raw materials, parts and components for our products, the high development costs associated with wireless technologies permit us to work with only a single source of silicon chip-sets on any particular new product. We, or our chosen supplier of chip-sets, may experience challenges in designing, developing and manufacturing components in these new technologies which could affect our ability to meet market schedules. Due to our dependence on single suppliers for certain chip sets, we could experience higher prices, a delay in development of the chip-set, and/or the inability to meet our customer demand for these new products. Additionally, these supplier or other suppliers may discontinue production of the parts we depend on. If this occurs, we may have difficulty obtaining sufficient product to meet our needs. This could cause us to fail to meet customer expectations. If customers turn to our competitors to meet their needs, there could be a long-term impact on our revenues and profitability. Our business, operating results and financial condition could therefore be materially adversely affected as a result of these factors;

We have been put on notice by a single source supplier that chipsets used in headsets accounting for approximately 30% of ACG revenues are subject to an end-of-life notice. We believe that we will be able to obtain sufficient quantities of these chipsets to last us for approximately one year, and we are exploring opportunities with that supplier to obtain greater supplies of the chipset in the future. We also have products in development that can replace the products that use these chipsets. These products are currently scheduled for release to volume production before we expect to exhaust supplies of the chipset currently in use. However, development is risky and there can be no assurance that we will complete the new products on schedule, that the cost of those products will be similar to the current products and/or that our channels will accept the new products as rapidly as will be necessary to maintain revenue continuity. If we are unable to obtain sufficient supplies of the current chipsets or commence volume production of the new products in a timely manner or otherwise remedy the situation before the current chipsets become unavailable it would materially and adversely affect our business, financial condition and results of operations;

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If product is available, we may be unable to predict last time buy quantities accurately and we may experience excess or insufficient inventories of product. This could cause us to either fail to produce sufficient quantities of products to fill our customers’ orders or to have larger inventories that could lead to our writing off un-useable product as being excess and obsolete. This could have an adverse effect on our financial results;

We obtain certain raw materials, sub-assemblies, components and products from single suppliers and alternate sources for these items are not readily available. To date, we have not experienced any significant interruptions in the supply of these raw materials, sub-assemblies, components and products. Adverse economic conditions could lead to a higher risk of failure of our suppliers to remain in business or to be able to purchase the raw materials, subcomponents and parts required by them to produce and provide to us the parts we need. An interruption in supply from any of our single source suppliers in the future would materially adversely affect our business, financial condition and results of ~~operations.~~operations;

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—·

Prices of raw materials, components and sub-assemblies may rise. If this occurs and we are not able to pass these increases on to our customers or to achieve operating efficiencies that would offset the increases, it would have a material adverse effect on our business, financial condition and results of ~~operations.~~operations;

—·

Due to the lead times required to obtain certain raw materials, sub-assemblies, components and products from certain foreign suppliers, we may not be able to react quickly to changes in demand, potentially resulting in either excess inventories of such goods or shortages of the raw materials, sub-assemblies, components and products. Lead times are particularly long on silicon-based components incorporating radio frequency and digital signal processing technologies and such components are an increasingly important part of our product costs. In particular, many B2C customer orders have shorter lead times than the component lead times, making it increasingly necessary to carry more inventory in anticipation of those orders, which may not materialize. Failure in the future to match the timing of purchases of raw materials, sub-assemblies, components and products to demand could increase our inventories and/or decrease our revenues, consequently materially adversely affecting our business, financial condition and results of ~~operations.~~operations; and

—·

Most of our suppliers are not obligated to continue to provide us with raw materials, components and sub-assemblies. Rather, we buy most raw materials, components and subassemblies on a purchase order basis. If our suppliers experience increased demand or shortages, it could affect deliveries to us. In turn, this would affect our ability to manufacture and sell products that are dependent on those raw materials, components and subassemblies. For example, during the first quarter of fiscal 2005, we had lower shipments to one of our key wireless OEM carrier partners, which resulted from a constraint in supply of a new part for a custom product. SuchAny such shortages would materially adversely affect our business, financial condition and results of operations.

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Acquisition and integration of Altec Lansing Technologies, Inc. has had and may continue to have an adverse effect on our financial condition.

—·

~~Although~~Competition may continue to increase in Altec Lansing’s markets more than expected;

Altec Lansing’s product sales and new product development may not evolve as anticipated. We are currently working on a product refresh which we ~~generally use standard raw materials, parts~~are anticipating will take us at least eighteen months to complete. There is no assurance that these new products will be successful, and ~~components~~the length of time required for this refresh may cause our customers to buy from our competitors;

We must be able to meet the market windows for Altec Lansing’s products;

We must be able to retain or obtain shelf space for these products in our sales channel;

We must retain or improve the ~~high development costs~~brand recognition associated with ~~emerging wireless technologies permits us to work with only a single source of silicon chip-sets on any particular new product. We, or our chosen supplier of chip-sets, may experience challenges~~the Altec Lansing brand during the turnaround;

Difficulties in designing, developing and manufacturing components in these new technologies which could affect our ability to meet market schedules. Due to our dependence on single suppliers for certain chip sets, we could experience higher prices, a delay in developmentintegration of the ~~chip-set, and/or the inability~~operations, technologies, and products of Altec Lansing. We have transitioned a significant portion of Altec Lansing’s operations onto our ERP system; however, we have not completed our integration effort. There has been a significant cost to ~~meet our customer demand for these~~implement new ~~products. Our~~systems and business ~~operating results~~processes. We anticipate that there will continue to be significant business processes and ~~financial condition could therefore be materially adversely affected~~internal controls which will change as a result of ~~these factors.~~the integration;

Diversion of management's attention from normal daily operations of the core business;

The potential loss of key employees of Altec Lansing and Plantronics;and,

Cultural differences in the conduct of the business.

Mergers and acquisitions, particularly those of technology companies, are inherently risky, and no assurance can be given that this or any future acquisitions will be successful and will not materially adversely affect our business, operating results or financial condition. We must also manage any acquisition-related growth effectively. In fiscal 2007 and continuing into fiscal 2008, we incurred significant losses from the Altec Lansing business. If the anticipated future results of our AEG business do not materialize as expected, goodwill and other intangible assets which were recorded as a result of the acquisition could become impaired and could result in write-offs which would negatively impact our operating results.

If we do not match production to demand, we may lose business or our gross margins could be materially adversely affected.

Our industry is characterized by rapid technological change, frequent new product introductions, short-term customer commitments and rapid changes in demand. We determine production levels based on our forecasts of demand for our products. Actual demand for our products depends on many factors, which makes it difficult to forecast. We have experienced differences between our actual and our forecasted demand in the past and expect differences to arise in the future. Significant unanticipated fluctuations in supply or demand and the global trend towards consignment of products could cause the following operating problems, among others:

If forecasted demand does not develop, we could have excess inventory and excess capacity. Over-forecast of demand could result in higher inventories of finished products, components and sub-assemblies. In addition, because our retail customers have pronounced seasonality, we must build inventory well in advance of the December quarter in order to stock up for the anticipated future demand. If we were unable to sell these inventories, we would have to write off some or all of our inventories of excess products and unusable components and sub-assemblies. Excess manufacturing capacity could lead to higher production costs and lower margins;

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If demand increases beyond that forecasted, we would have to rapidly increase production. We currently depend on suppliers to provide additional volumes of components and sub-assemblies, and we are experiencing greater dependence on single source suppliers; therefore, we might not be able to increase production rapidly enough to meet unexpected demand. There could be short-term losses of sales while we are trying to increase production;

The introduction of Bluetooth and other wireless headsets presents many significant manufacturing, marketing and other operational risks and uncertainties:

Our dependence on third parties to supply key components, many of which have long lead times;

Our ability to forecast demand for the variety of products within this new product category for which relevant data is incomplete or unavailable; and

Longer lead times with suppliers than commitments from some of our customers.

If we are unable to deliver products on time to meet the market window of our retail customers, we will lose opportunities to increase revenues and profits or we may incur penalties for late delivery. We may also be unable to sell these finished goods, which would result in excess or obsolete inventory.

Increasing production beyond planned capacity involves increased tooling, test equipment and hiring and training additional staff. Lead times to increase tooling and test equipment are typically several months, or more. Once such additional capacity is in place, we incur increased depreciation and the resulting overhead. Should we fail to ramp production once capacity is in place, we would not be able to absorb this incremental overhead, and this could lead to lower gross margins; and

We are working on a new initiative to re-engineer our supply chain by implementing new product forecasting systems, increasing automation within supply chain activities, improving the integrity of our supply chain data, and creating dashboards in order to improve our ability to match production to demand. If we are not able to successfully implement this initiative, we may not be able to meet demand or compete effectively with other companies who have successfully implemented similar initiatives.

Any of the foregoing problems could materially and adversely affect our business, financial condition and results of operations.

We have significant goodwill and intangible assets recorded on our balance sheet. If the carrying value of our goodwill or intangible assets is not recoverable, an impairment loss must be recognized, which would adversely affect our financial results.

As a result of the acquisition of Altec Lansing and Octiv, now Volume Logic, in fiscal 2006, we have significant goodwill and intangible assets recorded on our balance sheet. Certain events or changes in circumstances, such as the change in our Volume Logic roadmap in the fourth quarter of fiscal 2007, would require us to assess the recoverability of the carrying amount of our goodwill and intangible assets. We wrote off approximately $0.8 million in intangible assets from the Volume Logic business in fiscal 2007.

The results of operations for our acquired Altec Lansing business have been negatively impacted by intense price competition, particularly in the Docking Audio products, and our new product introductions have not been as profitable as those in the prior year. We have also had significant losses in fiscal 2007 and fiscal 2008 from excess and obsolete inventory and non-cancelable purchase commitments. If we are unable to successfully introduce new, profitable products and align the cost structure to the revenue base, our anticipated future cash flows from the Altec Lansing business could be negatively impacted.

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We will continue to evaluate the recoverability of the carrying amount of our goodwill and intangible assets on an ongoing basis, and we may incur substantial impairment charges, which would adversely affect our financial results. There can be no assurance that the outcome of such reviews in the future will not result in substantial impairment charges.

Our business will be materially adversely affected if we are not able to develop, manufacture and market new products in response to changing customer requirements and new technologies.

The technology used in our products is evolving more rapidly now than it has historically, and we anticipate that this trend may accelerate. Historically, the technology used in lightweight communications headsets and speakers has evolved slowly. New products have primarily offered stylistic changes and quality improvements rather than significant new technologies. Our increasing reliance and focus on the consumer market has resulted in a growing portion of our products incorporating new technologies, experiencing shorter lifecycles and a need to offer deeper product lines. We believe this is particularly true for our newer emerging technology products especially in the speaker, mobile, computer, residential and certain parts of the office markets. In particular, we anticipate a trend towards more integrated solutions that combine audio, video, and software functionality, while currently our focus is limited to audio products.

We are also experiencing a trend away from corded headsets to cordless products. In general, our corded headsets have had higher gross margins than our cordless products. In addition, we expect that office phones will begin to incorporate Bluetooth functionality, which would open the market to consumer Bluetooth headsets and reduce the demand for our traditional office telephony headsets and adapters as well as impacting potential revenues from our own wireless headset systems, resulting in lost revenue and lower margins.

The success of our products depends on several factors, including our ability to:

Anticipate technology and market trends;

Develop innovative new products and enhancements on a timely basis;

Distinguish our products from those of our competitors;

Manufacture and deliver high-quality products in sufficient volumes; and

Price our products competitively.

We depend on original design manufacturers and contract manufacturers who may not have adequate capacity to fulfill our needs or may not meet our quality and delivery objectives.

Original design manufacturers and contract manufacturers produce key portions of our product lines for us. Our reliance on them involves significant risks, including reduced control over quality and logistics management, the potential lack of adequate capacity and loss of services. Financial instability of our manufacturers or contractors could result in our having to find new suppliers, which could increase our costs and delay our product deliveries. These manufacturers and contractors may also choose to discontinue building our products for a variety of reasons.

Consequently, we may experience delays in the timeliness, quality and adequacy of product deliveries, any of which could harm our business and operating results.

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Demand for iPod products, which are produced by Apple, Inc., affects demand for certain ~~portable~~Docking Audio products.

Certain of our ~~portable~~Docking Audio products under our Altec Lansing brand were developed for use with Apple, Inc.’s (“Apple”) iPod products. We have a non-exclusive right to use the Apple interface with certain of our ~~portable~~Docking Audio products, and we are required to pay Apple a royalty for this right. The risks faced in conjunction with our Apple related products include, among others:

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If supply or demand for iPod products decreases, demand for certain of our ~~portable~~Docking Audio products could be negatively ~~affected, as we experienced in the first quarter of fiscal 2007. MP3 integration with cell phones could take significant market share from Apple’s iPod products;~~affected;

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If Apple does not renew or cancels our licensing agreement, our products may not be compatible with iPods, resulting in loss of revenues and excess inventories which would negatively impact our financial results;

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If Apple changes its iPod product design more frequently than we update certain of our ~~portable~~Docking Audio products, certain of our products may not be compatible with the changed design. Moreover, if Apple makes style changes to its products more frequently than we update certain of our ~~portable~~Docking Audio products, consumers may not like the look of our products with the iPod. Both of these factors could result in decreased demand for our products and excess inventories could result which would negatively impact our financial results; and

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Apple has ~~recently~~ introduced its own line of iPod speaker products, which compete with certain of our Altec Lansing-branded speaker products. As the manufacturer of the iPod, Apple has unique advantages with regard to product changes or introductions that we do not possess, which could negatively impact our ability to compete effectively against Apple’s speaker products. Moreover, certain consumers may prefer to buy Apple’s iPod speakers rather than other vendors’ speakers because Apple is the manufacturer. As a result, this could lead to decreased demand for our products and excess inventories could result which would negatively impact our financial results.

We sell our products through various channels of distribution that can be volatile and failure to establish successful relationships with our channel partners could materially adversely affect our business, financial condition or results of operations.

We sell substantially all of our products through distributors, retailers, OEM customers and telephony service providers. Our existing relationships with these parties are not exclusive and can be terminated by either party without cause. Our channel partners also sell or can potentially sell products offered by our competitors. To the extent that our competitors offer our channel partners more favorable terms, such partners may decline to carry, de-emphasize or discontinue carrying our products. In the future, we may not be able to retain or attract a sufficient number of qualified channel partners. Further, such partners may not recommend, or continue to recommend, our products. In the future, our OEM customers or potential OEM customers may elect to manufacture their own products, similar to those we currently sell to them. The inability to establish or maintain successful relationships with distributors, OEM customers, retailers and telephony service providers or to expand our distribution channels could materially adversely affect our business, financial condition or results of operations.

As a result of the growth of our B2C business, our customer mix is changing and certain retailers, OEM customers and wireless carriers are becoming significant. This greater reliance on certain large customers could increase the volatility of our revenues and earnings. In particular, we have several large customers whose order patterns are difficult to predict. Offers and promotions by these customers may result in significant fluctuations of their purchasing activities over time. If we are unable to anticipate the purchase requirements of these customers, our quarterly revenues may be adversely affected and/or we may be exposed to large volumes of inventory that cannot be immediately resold to other customers.

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The success of our business depends heavily on our ability to effectively market our products, and our business could be materially adversely affected if markets do not develop as we expect.

We compete in the ~~B2B~~business market for the sale of our office and contact center products. We believe that our greatest long-term opportunity for profit growth in ACG is in the office market, and our foremost strategic objective for this segment is to increase headset adoption. To this end, we are investing in creating new products that are more appealing in functionality and design as well as ~~investing in a national advertising campaign~~targeting certain vertical segments to increase ~~awareness and interest.~~sales. If these investments do not generate incremental revenue, our business could be materially affected. We are also experiencing a more aggressive and competitive environment with respect to price in our ~~B2B~~business markets, leading to increased order volatility which puts pressure on profitability and could result in a loss of market share if we do not respond effectively.

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We also compete in the ~~B2C~~consumer market for the sale of our mobile, computer audio, gaming, Altec Lansing and Clarity products. We believe that consumer marketing is highly relevant in the ~~B2C~~consumer market, which is dominated by large brands that have significant consumer mindshare. We invested in marketing initiatives to raise awareness and consideration of the Plantronics brand. We believe this will help increase preference for Plantronics and promote headset adoption overall. The ~~B2C~~consumer market is characterized by relatively rapid product obsolescence, and we are at risk if we do not have the right products at the right time to meet consumer needs. In addition, some of our competitors have significant brand recognition, and we are experiencing more competition in pricing actions, which can result in significant losses and excess inventory.

If we are unable to stimulate growth in our ~~B2B~~business and ~~B2C~~consumer markets, if our costs to stimulate demand do not generate incremental profit, or if we experience significant price competition, our business, financial condition, results of operations and cash flows could suffer. In addition, failure to effectively market our products to customers in these markets could lead to lower and more volatile revenue and earnings, excess inventory and the inability to recover the associated development costs, any of which could also have a material adverse effect on our business, financial condition, results of operations and cash flows.

Headset markets are also subject to general economic conditions and if there is a slowing of national or international economic growth, these markets may not materialize to the levels we require to achieve our anticipated financial results, which could in turn materially adversely affect the market price of our stock. In particular, we may accept returns from our retailers of products that have failed to sell as expected, and, in some instances, such products may be returned to our inventory. Should product returns vary significantly from our estimate, then our estimated returns which net against revenue, may need to be revised.

We have significant intangible assets recorded on our balance sheet. If the carrying value of our intangible assets is not recoverable, an impairment loss must be recognized, which would adversely affect our financial results.

As a result of the acquisition of Altec Lansing and Octiv, now Volume Logic, in fiscal 2006, we have significant intangible assets recorded on our balance sheet. Certain events or changes in circumstances would require us to assess the recoverability of the carrying amount of our intangible assets. To date, we have not recorded any impairment losses. We will continue to evaluate the recoverability of the carrying amount of our intangible assets, and we may incur substantial impairment charges, which would adversely affect our financial results.

Our failure to effectively manage growth could harm our business.

We have rapidly and significantly expanded the number and types of products we sell, and we will endeavor to further expand our product portfolio. We must continually introduce new products and technologies, enhance existing products in order to remain competitive, and effectively stimulate customer demand for new products and upgraded versions of our existing products.

This expansion of our products places a significant strain on our management, operations and engineering resources. Specifically, the areas that are strained most by our growth include the following:

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New Product Launch.: With the growth of our product portfolio, we experience increased complexity in coordinating product development, manufacturing, and shipping. As this complexity increases, it places a strain on our ability to accurately coordinate the commercial launch of our products with adequate supply to meet anticipated customer demand and effective marketing to stimulate demand and market acceptance. If we are unable to scale and improve our product launch coordination, we could frustrate our customers and lose retail shelf space and product ~~sales.~~sales;

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Forecasting, Planning and Supply Chain Logistics.: With the growth of our product portfolio, we also experience increased complexity in forecasting customer demand and in planning for production, and transportation and logistics management. If we are unable to scale and improve our forecasting, planning and logistics management, we could frustrate our customers, lose product sales or accumulate excess ~~inventory.~~inventory; and

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Support Processes.: To manage the growth of our operations, we will need to continue to improve our transaction processing, operational and financial systems, and procedures and controls to effectively manage the increased complexity. If we are unable to scale and improve these areas, the consequences could include: delays in shipment of product, degradation in levels of customer support, lost sales, decreased cash flows, and increased inventory. These difficulties could harm or limit our ability to expand.

We have strong competitors and expect to face additional competition in the future. If we are unable to compete effectively, our results of operations may be adversely affected.

Certain of our markets are intensely competitive. They are characterized by a trend of declining average selling prices, continual performance enhancements and new features, as well as rapid adoption of technological and product advancements by competitors in our retail market. Also, aggressive industry pricing practices have resulted in downward pressure on margins from both our primary competitors as well as from less established brands.

Competitors in audio devices vary by product line. In the PC speaker business, competitors include Logitech and Creative Labs. In the PC and office and contact center markets, a significant competitor is Sennheiser Communications. In the PC and console headset, telephony and microphone business, our primary competitor is Logitech. In the Audio Entertainment speaker business, competitors include Harmon Kardon, Bose, Logitech, Cyber Acoustics and Creative Labs. Since our entry into the mobile phone headset business, we have been competing against mobile phone and accessory companies such as Jabra, Motorola, Nokia, and Sony−Ericsson, some of whom have substantially greater resources than we have, and each of whom has established market positions in this business. Currently, our single largest competitor is GN ~~Netcom, a subsidiary of GN Great Nordic Ltd.~~Store Nord A/S (“GN”), a Danish telecommunications conglomerate. We are currently experiencing more price competition from GN ~~Netcom~~ in the ~~B2B~~business markets than in the past. Motorola is a significant competitor in the consumer headset market, primarily in the mobile Bluetooth market, and has a brand name that is very well known and supported with significant marketing investments. Motorola also benefits from the ability to bundle other offerings with their headsets. We are also experiencing additional competition from other consumer electronics companies that currently manufacture and sell mobile phones or computer peripheral equipment. These competitors generally are larger, offer broader product lines, bundle or integrate with other ~~products~~products’ communications headset tops and bases manufactured by them or others, offer products containing bases that are incompatible with our headset tops and have substantially greater financial, marketing and other resources than we do.

Our product markets are intensely competitive and market leadership changes frequently as a result of new products, designs and pricing. The growing focus of telephony service providers on the resale and profit from headsets and other accessories threatens the price structure of the industry, margins and market share. We also expect to face additional competition from companies, principally located in ~~the Far East,~~Asia Pacific, which offer very low cost headset products, including products that are modeled on, or are direct copies of our products. These new competitors are likely to offer very low cost products, which may result in pricing pressure in the market. If market prices are substantially reduced by such new entrants into the headset market, our business, financial condition or results of operations could be materially adversely affected.

Further, we expect to continue to experience increased competitive pressures in our retail business, particularly in the terms and conditions that our competitors offer to our customers, which may be more favorable than our terms. For example, some of our competitors are beginning to offer to consign products rather than sell them directly to their customers. In order to compete effectively, we are offering similar terms to select customers within both our ~~Audio Communications~~ACG and AEG products space. Offering more products on a consignment basis ~~could potentially delay~~delays the timing of our revenue recognition and could potentially increase inventory balances as well as require changes in our systems to track inventory and point of sale.

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If we do not continue to distinguish our products, particularly our retail products, through distinctive, technologically advanced features, and design, as well as continue to build and strengthen our brand recognition, our business could be harmed. In particular, Microsoft’s entry into the Universal Audio Architecture open access platform, provides more value in software and, as a result, reduces the opportunities for us to provide distinctive, technologically advanced features, further commoditizing headsets. If we do not otherwise compete effectively, demand for our products could decline, our gross margins could decrease, we could lose market share, and our revenues and earnings could decline.

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While we believe we comply with environmental laws and regulations, we are still exposed to potential risks associated with environmental regulations.

There are multiple initiatives in several jurisdictions regarding the removal of certain potential environmentally sensitive materials from our products to comply with the European Union Directives on Restrictions on certain Hazardous Substances on electrical and electronic equipment (“ROHS”) and on Waste Electrical and Electronic Equipment (“WEEE”). In certain jurisdictions the ROHS legislation has already been enacted as of July 1, ~~2006. However,~~2006; however, other jurisdictions have delayed implementation. Some of our customers are requesting that we implement these new compliance standards sooner than the legislation would require. While we believe that we will have the resources and ability to fully meet our customers' requests, and ~~spirit~~the requirements of the ROHS and WEEE directives, if unusual occurrences arise, or, if we are wrong in our assessment of what it will take to fully comply, there is a risk that we will not be able to meet the aggressive schedule set by our customers or comply with the legislation as passed by the EU member ~~states.~~states or other global jurisdictions. If that were to happen, a material negative effect on our financial results may occur.

We are subject to various federal, state, local and foreign environmental laws and regulations, including those governing the use, discharge and disposal of hazardous substances in the ordinary course of our manufacturing process. We believe that our current manufacturing operations comply in all material respects with applicable environmental laws and regulations. We have included reserves for environmental remediation in our financial statements related to one of our discontinued businesses as well as for ground and soil contamination at our corporate headquarters in Santa Cruz, California, based upon management’s assessment of exposure and the advice of outside environmental consultants. We believe that these reserves will be sufficient to remediate the effects of the contamination found in accordance with the requirements of federal, state and local authorities who have jurisdiction over these sites. While no claims have been asserted against us in connection with these matters, there can be no assurance that such claims will not be asserted in the future or that any resulting liability will not exceed the amount of the reserve. Although we believe that our current manufacturing operations comply in all material respects with applicable environmental laws and regulations, it is possible that future environmental legislation may be enacted or current environmental legislation may be interpreted to create environmental liability with respect to our other facilities, operations, or products. To the extent that we incur claims for environmental matters exceeding reserves or insurance for environmental liability, our operating results could be negatively impacted.

Our products are subject to various regulatory requirements, and changes in such regulatory requirements may adversely impact our gross margins as we comply with such changes or reduce our ability to generate revenues if we are unable to comply.

Our products must meet the requirements set by regulatory authorities in the numerous jurisdictions in which we sell them. As regulations and local laws change, we must modify our products to address those changes. Regulatory restrictions may increase the costs to design and manufacture our products, resulting in a decrease in our margins or a decrease in demand for our products if the costs are passed along. Compliance with regulatory restrictions may impact the technical quality and capabilities of our products reducing their marketability.

Our stock price may be volatile and the value of your investment in Plantronics stock could be diminished.

The market price for our common stock may continue to be affected by a number of factors, including:

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Uncertain economic conditions and the decline in investor confidence in the market place;

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Changes in our published forecasts of future results of operations;

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Quarterly variations in our or our competitors' results of operations and changes in market share;

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The announcement of new products or product enhancements by us or our competitors;

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The loss of services of one or more of our executive officers or other key employees;

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Changes in earnings estimates or recommendations by securities analysts;

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Developments in our industry;

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Sales of substantial numbers of shares of our common stock in the public market;

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Integration of the Altec Lansing business or market reaction to future acquisitions;

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Our ability to successfully complete the product refresh for the Altec Lansing products and turnaround the AEG business;

General market conditions; and

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Other factors unrelated to our operating performance or the operating performance of our competitors.

In addition, the stock market has experienced extreme price and volume fluctuations that have affected the market price of many technology companies in particular, and that have often been unrelated to the operating performance of these companies. Such factors and fluctuations, as well as general economic, political and market conditions, such as recessions, could materially adversely affect the market price of our common stock.

Our corporate tax rate may increase, which could adversely impact our cash flow, financial condition and results of operations.

We have significant operations in various tax jurisdictions throughout the world, and a substantial portion of our taxable income historically has been generated in these jurisdictions. Currently, some of our operations are taxed at rates substantially lower than U.S. tax rates. If our income in these lower tax jurisdictions were no longer to qualify for these lower tax rates, if the applicable tax laws were rescinded or changed, or if the mix of our earnings shifts from lower rate jurisdictions to higher rate jurisdictions, our operating results could be materially adversely affected. While we are looking at opportunities to reduce our tax rate, there is no assurance that our tax planning strategies will be successful. In addition, many of these strategies will require a period of time to implement. Moreover, if U.S. or other foreign tax authorities were to change applicable foreign tax laws or successfully challenge the manner in which our profits are currently recognized, our overall taxes could increase, and our business, cash flow, financial condition and results of operations could be materially adversely affected. In addition, the adoption of FIN 48 in the first quarter of fiscal 2008 may add more variability to our future effective tax rates.

We have significant foreign operations, and there are inherent risks in operating abroad.

During ~~our third~~the first quarter of fiscal ~~year 2007,~~2008, approximately ~~41%~~36% of our net revenues were derived from customers outside the United States. In addition, we conduct the majority of our ACG headset assembly operations in our manufacturing facility located in Tijuana, Mexico, and we obtain most of the components and ~~subassemblies~~sub-assemblies used in our products from various foreign suppliers. We have recently completed construction of a factory and design center in Suzhou, ~~China and are also purchasing a growing number of turnkey products directly from Asia.~~China. We have begun to transition new products and outsourced production to our new facility to ramp production. If we are unable to effectively produce new products or to transition outsourced production into our new Suzhou facility, we may be unable to meet demand for these products, and our margins on these products may decrease. There are risks in operating the Suzhou factory and expanding our competency in a rapidly evolving economy because, among other reasons, we may be unable to attract sufficient qualified personnel, intellectual property rights may not be enforced as we expect, power may not be available as contemplated or the like. Should any of these risks occur, we may be unable to maximize the output from the facility and our financial results may decrease from our anticipated levels. We also purchase a number of turnkey products directly from Asia. Further, the majority of our ~~Audio Entertainment~~AEG products are manufactured either in our Dongguan, China manufacturing plant or manufactured by foreign vendors, primarily in China. The inherent risks of international operations, either in Mexico or in Asia, could materially adversely affect our business, financial condition and results of operations. The types of risks faced in connection with international operations and sales include, among others:

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~~cultural~~Cultural differences in the conduct of business;

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~~fluctuations~~Fluctuations in foreign exchange rates;

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~~greater~~Greater difficulty in accounts receivable collection and longer collection periods;

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~~impact~~Impact of recessions in economies outside of the United States;

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~~reduced~~Reduced protection for intellectual property rights in some countries;

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~~unexpected~~Unexpected changes in regulatory requirements;

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~~tariffs~~Tariffs and other trade barriers;

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~~political~~Political conditions in each country;

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~~management~~Management and operation of an enterprise spread over various countries; ~~and~~

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~~the~~The burden and administrative costs of complying with a wide variety of foreign ~~laws.~~laws; and

Currency restrictions.

War, terrorism, public health issues or other business interruptions could disrupt supply, delivery or demand of products, which could negatively affect our operations and performance.

War, terrorism, public health issues or other business interruptions whether in the United States or abroad, have caused or could cause damage or disruption to international commerce by creating economic and political uncertainties that may have a strong negative impact on the global economy, our company, and our suppliers or customers. Our major business operations are subject to interruption by earthquake, flood or other natural disasters, fire, power shortages, terrorist attacks, and other hostile acts, public health issues, and other events beyond our control. Our corporate headquarters, information technology, manufacturing, certain research and development activities, and other critical business operations, are located near major seismic faults or flood zones. While we are partially insured for earthquake-related losses or floods, our operating results and financial condition could be materially affected in the event of a major earthquake or other natural or manmade disaster.

Although it is impossible to predict the occurrences or consequences or any events, such as described above, such events could significantly disrupt our operations. In addition, should major public health issues, including pandemics, arise, we could be negatively impacted by the need for more stringent employee travel restrictions, limitations in the availability of freight services, governmental actions limiting the movement of products between various regions, delays in production ramps of new products, and disruptions in the operations of our manufacturing vendors and component suppliers. Our operating results and financial condition could be adversely affected by these events.

We have intellectual property rights that could be infringed by others, and we are potentially at risk of infringement of the intellectual property rights of others.

Our success will depend in part on our ability to protect our copyrights, patents, trademarks, trade dress, trade secrets, and other intellectual property, including our rights to certain domain names. We rely primarily on a combination of nondisclosure agreements and other contractual provisions as well as patent, trademark, trade secret, and copyright laws to protect our proprietary rights. Effective trademark, patent, copyright, and trade secret protection may not be available in every country in which our products and media properties are distributed to customers. We currently hold ~~173~~167 United States patents and additional foreign patents and will continue to seek patents on our inventions when we believe it to be appropriate. The process of seeking intellectual property protection can be lengthy and expensive. Intellectual property may not be issued in response to our applications, and intellectual property that is issued may be invalidated, circumvented or challenged by others. If we are required to enforce our intellectual property or other proprietary rights through litigation, the costs and diversion of management's attention could be substantial. In addition, the rights granted under any intellectual property may not provide us competitive advantages or be adequate to safeguard and maintain our proprietary rights. Moreover, the laws of certain countries do not protect our proprietary rights to the same extent as do the laws of the United States. If we do not enforce and protect our intellectual property rights, it could materially adversely affect our business, financial condition and results of operations.

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We are exposed to potential lawsuits alleging defects in our products and/or other claims related to the use of our products.

The use of our products exposes us to the risk of product liability and hearing loss claims. These claims have in the past been, and are currently being, asserted against us. None of the previously resolved claims have materially affected our business, financial condition or results of operations, nor do we believe that any of the pending claims will have such an effect. Although we maintain product liability insurance, the coverage provided under our policies could be unavailable or insufficient to cover the full amount of any such claim. Therefore, successful product liability or hearing loss claims brought against us could have a material adverse effect upon our business, financial condition and results of operations. ~~See Item 1. Legal Proceedings.~~

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Our mobile headsets are used with mobile telephones. There has been continuing public controversy over whether the radio frequency emissions from mobile telephones are harmful to users of mobile phones. We believe that there is no conclusive proof of any health hazard from the use of mobile telephones but that research in this area is incomplete. We have tested our headsets through independent laboratories and have found that use of our corded headsets reduces radio frequency emissions at the user's head to virtually zero. Our Bluetooth and other wireless headsets emit significantly less powerful radio frequency emissions than mobile phones. However, if research establishes a health hazard from the use of mobile telephones or public controversy grows even in the absence of conclusive research findings, there could be an adverse impact on the demand for mobile phones, which reduces demand for headset products. Likewise, should research establish a link between radio frequency emissions and wireless headsets and public concern in this area grows, demand for our wireless headsets could be reduced creating a material adverse effect on our financial results.

There is also continuing and increasing public controversy over the use of mobile telephones by operators of motor vehicles. While we believe that our products enhance driver safety by permitting a motor vehicle operator to generally be able to keep both hands free to operate the vehicle, there is no certainty that this is the case, and we may be subject to claims arising from allegations that use of a mobile telephone and headset contributed to a motor vehicle accident. We maintain product liability insurance and general liability insurance that we believe would cover any such claims. However, the coverage provided under our policies could be unavailable or insufficient to cover the full amount of any such claim. Therefore, successful product liability claims brought against us could have a material adverse effect upon our business, financial condition and results of operations.

There were no material developments in the litigation on which we reported in our Annual Report on Form 10-K for the fiscal year ended March 31, 2007.

Our business could be materially adversely affected if we lose the benefit of the services of key personnel.

Our success depends to a large extent upon the services of a limited number of executive officers and other key employees. The unanticipated loss of the services of one or more of our executive officers or key employees could have a material adverse effect upon our business, financial condition and results of operations.

We also believe that our future success will depend in large part upon our ability to attract and retain additional highly skilled technical, management, sales and marketing personnel. Competition for such personnel is intense. We are currently seeing employee departures at a rate greater than that historically experienced due in part to a number of factors such as, a stronger more competitive labor environment, our weaker stock price, reduced bonuses and reduced profit sharing. We may not be successful in attracting and retaining such personnel, and our failure to do so could have a material adverse effect on our business, operating results or financial condition.

The adoption of voice-activated software may cause profits from our contact center products to decline.

We are seeing a proliferation of speech-activated and voice interactive software in the market place. We have been re-assessing long-term growth prospects for the contact center market given the growth rate and the advancement of these new voice recognition-based technologies. Businesses that first embraced these technologies to resolve labor shortages at the peak of the last economic up cycle are now increasing spending on these technologies in order to reduce costs. We may experience a decline in our sales to the contact center market if businesses increase their adoption of speech-activated and voice interactive software as an alternative to customer service agents. Such adoption could cause a net reduction in contact center agents, and our revenues in this market could decline.

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A significant portion of our profits comes from the contact center market, and a decline in demand in that market could materially adversely affect our results. While we believe that this market may grow in future periods, this growth could be slow or revenues from this market could be flat or decline. Deterioration in general economic conditions could result in a reduction in the establishment of new contact centers and in capital investments to expand or upgrade existing centers, which could negatively affect our business. Because of our reliance on the contact center market, we will be affected more by changes in the rate of contact center establishment and expansion and the communications products used by contact center agents than would a company serving a broader market. Any decrease in the demand for contact centers and related headset products could cause a decrease in the demand for our products, which would materially adversely affect our business, financial condition and results of operations.

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While we believe we currently have adequate internal control over financial reporting, we are required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 and any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and have an adverse effect on our stock price.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (Section 404)~~, beginning with our Annual Report on Form 10-K for the fiscal year ended March 31, 2005,~~ our management is required to report on, and our independent registered public accounting firm to attest to, the effectiveness of our internal control over for financial reporting. We have an ongoing program to perform the system and process evaluation and testing necessary to comply with these requirements.

On August 18, 2005, we acquired Altec Lansing Technologies, Inc. Our management is required to complete an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission for the consolidated company, including this recently acquired business, for the fiscal year ended March 31, 2007. We intend to disclose all material changes to our internal controls over financial reporting resulting from the acquisition of Altec Lansing within or prior to the time of our first annual assessment of internal control over financial reporting that is required to include this business or are reasonably likely to materially affect, our internal control over financial reporting. We are currently in the process of, but have not yet completed, our review of the controls of Altec Lansing; therefore, we may have risk associated with controls at this business.

We have and will continue to incur significant expenses and management resources for Section 404 compliance on an ongoing ~~basis and anticipate significant expenditures associated with Section 404 compliance for the Altec Lansing acquisition.~~basis. In the event that our chief executive officer, chief financial officer or independent registered public accounting firm determine in the future that our internal control over financial reporting is not effective as defined under Section 404, investor perceptions may be adversely affected and could cause a decline in the market price of our stock.

Provisions in our charter documents and Delaware law and our adoption of a stockholder rights plan may delay or prevent a third party from acquiring us, which could decrease the value of our stock.

Our board of directors has the authority to issue preferred stock and to determine the price, rights, preferences, privileges and restrictions, including voting and conversion rights, of those shares without any further vote or action by the stockholders. The issuance of our preferred stock could have the effect of making it more difficult for a third party to acquire us. In addition, we are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, which could also have the effect of delaying or preventing our acquisition by a third party. Further, certain provisions of our Certificate of Incorporation and bylaws could delay or make more difficult a merger, tender offer or proxy contest, which could adversely affect the market price of our common stock.

In 2002, our board of directors adopted a stockholder rights plan, pursuant to which we distributed one right for each outstanding share of common stock held by stockholders of record as of April 12, 2002. Because the rights may substantially dilute the stock ownership of a person or group attempting to take us over without the approval of our board of directors, the plan could make it more difficult for a third party to acquire us, or a significant percentage of our outstanding capital stock, without first negotiating with our board of directors regarding such acquisition.

6044

Table of Contents

	Three Months Ended
	June 30,
(in thousands)	2006		2007

Net revenues from unaffiliated customers:
United States	$	126,900	$	131,295

Europe, Middle East and Africa		41,938		49,430
Asia Pacific and Latin America		19,042		19,141
Canada and other international		7,189		6,629
Total international		68,169		75,200
	$	195,069	$	206,495

(in thousands)	Three Months Ended December 31,				Nine Months Ended December 31,
	2005		2006		2005		2006
Net revenues from unaffiliated customers:

United States	$	139,033	$	126,177	$	349,148	$	375,859

Europe, Middle East and Africa		55,246		56,337		129,821		142,165
Asia Pacific and Latin America		18,883		20,155		45,317		58,328
Canada and other international		9,350		12,766		19,360		29,086
Total international		83,479		89,258		194,498		229,579
	$	222,512	$	215,435	$	543,646	$	605,438

	March 31, 2006			December 31, 2006
ASSETS
Current assets:
Cash and cash equivalents	$	68,703		$	68,743
Short-term investments		8,029			--
Total cash, cash equivalents, and short-term investments		76,732			68,743

Accounts receivable, net		118,008			131,735
Inventory		105,882			134,263
Deferred income taxes		12,409			12,590
Other current assets		15,318			13,870
Total current assets		328,349			361,201


Property, plant and equipment, net		93,874			97,227
Intangibles, net		109,208			102,984
Goodwill		75,077			74,250
Other assets		5,741			6,190
Total assets	$	612,249		$	641,852


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit	$	22,043		$	6,011
Accounts payable		48,574			45,975
Accrued liabilities		43,081			59,129
Income taxes payable		13,231			7,224
Total current liabilities		126,929			118,339

Deferred income taxes		48,246			41,137
Long-term liabilities		1,453			1,263
Total liabilities		176,628			160,739

Stockholders' equity:
Preferred stock, $0.01 par value per share; 1,000 shares authorized, no shares outstanding		--			--
Common stock, $0.01 par value per share; 100,000 shares authorized, 66,270 and 66,617 shares issued at March, 31, 2006 and December 31, 2006, respectively		663			666
Additional paid-in capital		316,863			334,303
Accumulated other comprehensive income		3,934			2,041
Retained earnings		509,563			542,429
		831,023			879,439
Less: Treasury stock (common: 18,732 shares at March 31, 2006 and December 31, 2006) at cost		(395,402	)		(398,326	)
Total stockholders' equity		435,621			481,113

Total liabilities and stockholders' equity	$	612,249		$	641,852

	Three Months Ended December 31,						Nine Months Ended December 31,
Stock Options	2005			2006			2005			2006
Expected volatility		53.0	%		42.5	%		55.3	%		42.5	%
Risk-free interest rate		4.3	%		4.7	%		4.1	%		4.7	%
Expected dividends		0.7	%		1.0	%		0.6	%		1.0	%
Expected life (in years)		5.0			4.2			5.0			4.2

							Nine Months Ended December 31,
ESPP								2005			2006
Expected volatility								31.2	%		52.8	%
Risk-free interest rate								4.2	%		5.2	%
Expected dividends								0.6	%		1.3	%
Expected life (in years)								0.5			0.5

	Number of Shares			Weighted Average Grant Date Fair Value
	(in thousands)
Non-vested at March 31, 2006		316		$	29.09
Granted		79		$	20.43
Vested		(57	)	$	29.25
Forfeited		(7	)	$	27.15
Non-vested at December 31, 2006		331		$	27.03

Accrued liabilities:
Employee compensation and benefits	$	19,670	$	22,029
Accrued advertising and sales and marketing		5,084		6,219
Warranty accrual		6,276		6,685
Accrued other		12,051		24,196
	$	43,081	$	59,129

(in thousands)

Paid to Octiv	$	7,430
Direct acquisition costs		388
Total cash consideration	$	7,818

(in thousands)	Fair Value at April 4, 2005

Total cash consideration	$	7,818
Less cash balance acquired		42
		7,776
Allocated to:
Current assets, excluding cash acquired		102
Property, plant and equipment		72
Existing technologies		4,500
Deferred tax assets		2,970
Current liabilities assumed		(334	)
Deferred tax liability		(1,710	)
Goodwill	$	2,176

(in thousands)

Paid to Altec Lansing	$	154,273
Payment of Altec Lansing pre-existing debt		9,906
Direct acquisition costs		977
Total cash consideration	$	165,156

(in thousands)	Fair Value at August 18, 2005

Total cash consideration	$	165,156
Less cash balance acquired		7,577
		157,579
Allocated to:
Prepaid compensation		1,067
Inventory		27,524
Other current assets		17,630
Property, plant, and equipment, net		8,290

Identifiable intangible assets		108,300
Deferred tax assets		4,424
Current liabilities assumed		(29,368	)
Deferred tax liability		(22,691	)
Goodwill	$	42,403

(in thousands)	Fair Value		Amortization Period

Existing technology	$	25,000		6 years
OEM relationships		700		7 years
Customer relationships		17,600		8 years
Trade name - inMotion		5,000		8 years
Trade name - Altec Lansing		59,100		Not amortized
In-process technology		900		Fully expensed in the second quarter of Fiscal 2006
Total	$	108,300

(in thousands)	Audio Communications Group		Audio Entertainment Group			Consolidated

Balance at March 31, 2006	$	11,214	$	63,863		$	75,077
Carrying value adjustments		-		(827	)		(827	)
Balance at December 31, 2006	$	11,214	$	63,036		$	74,250

(in thousands)	March 31, 2006
Intangible assets	Gross Amount		Accumulated Amortization			Net Amount		Amortization Period

Technology	$	31,500	$	(4,268	)	$	27,232		6-10 years
State contracts		1,300		(789	)		511		7 years
Patents		1,420		(674	)		746		7 years
Customer relationships		17,600		(1,375	)		16,225		8 years
Trademarks		300		(182	)		118		7 years
Tradename - inMotion		5,000		(391	)		4,609		8 years
Tradename - Altec Lansing		59,100		-			59,100		Indefinite
OEM relationships		700		(63	)		637		7 years
Non-compete agreements		200		(170	)		30		5 years
Total	$	117,120	$	(7,912	)	$	109,208

(in thousands)	December 31, 2006
	Gross Amount		Accumulated Amortization			Net Amount		Amortization Period

Technology	$	31,500	$	(7,945	)	$	23,555		6-10 years
State contracts		1,300		(929	)		371		7 years
Patents		1,420		(826	)		594		7 years
Customer relationships		17,600		(3,025	)		14,575		8 years
Trademarks		300		(214	)		86		7 years
Tradename - inMotion		5,000		(859	)		4,141		8 years
Tradename - Altec Lansing		59,100		-			59,100		Indefinite
OEM relationships		700		(138	)		562		7 years
Non-compete agreements		200		(200	)		-		5 years
Total	$	117,120	$	(14,136	)	$	102,984

Fiscal year ending March 31,	Amount

Remainder of 2007	$	2,064
2008		8,259
2009		8,105
2010		7,645
2011		7,602
Thereafter		10,209
Total	$	43,884

(in thousands)	Balance Sheets Accumulated Other Comprehensive Income (Loss)					Statements of Operations Net Revenues Three Months Ended December 31,						Statements of Operations Net Revenues Nine Months Ended December 31,

	March 31, 2006		December 31, 2006			2005			2006			2005			2006
Realized gain (loss) on closed transactions	$	--	$	--		$	(121	)	$	(1,316	)	$	(537	)	$	(1,730	)
Recognized but unrealized gain (loss) on open transactions		1,567		(2,256	)		-			-			-			-
	$	1,567	$	(2,256	)	$	(121	)	$	(1,316	)	$	(537	)	$	(1,730	)

Gross Profit by Segment
	Three Months Ended December 31,				Nine Months Ended December 31,
(in thousands)	2005		2006		2005		2006

Audio Communications Group	$	74,921	$	77,257	$	216,511	$	218,836
Audio Entertainment Group		19,105		4,079		24,666		15,861
Consolidated gross profit	$	94,026	$	81,336	$	241,177	$	234,697

(in thousands)	Three Months Ended						Nine Months Ended
	December 31, 2005			December 31, 2006			December 31, 2005			December 31, 2006

Total operating income of segments	$	34,916		$	16,818		$	84,464		$	47,965
Interest and other income (expense), net		(596	)		1,493			667			2,745
Income tax expense		(9,279	)		(3,121	)		(24,685	)		(10,704	)
Consolidated net income	$	25,041		$	15,190		$	60,446		$	40,006

Assets by Segment
(in thousands)	March 31, 2006		December 31, 2006

Audio Communications Group	$	370,874	$	412,190
Audio Entertainment Group		241,375		229,662
Consolidated assets	$	612,249	$	641,852

*Consolidated*

(in thousands)	Three Months Ended June 30,
	2006					2007

Net revenues	$	195,069		100.0	%	$	206,495	100.0	%
Cost of revenues		119,470		61.2	%		122,949	59.5	%
Gross profit		75,599		38.8	%		83,546	40.5	%

Operating expense:
Research, development and engineering		18,659		9.6	%		19,488	9.5	%
Selling, general and administrative		44,453		22.8	%		46,111	22.3	%
Gain on sale of land		(2,637	)	(1.4	)%		-	0.0	%
Total operating expenses		60,475		31.0	%		65,599	31.8	%
Operating income		15,124		7.8	%		17,947	8.7	%
Interest and other income (expense), net		985		0.5	%		1,334	0.7	%
Income before income taxes		16,109		8.3	%		19,281	9.4	%
Income tax expense		3,818		2.0	%		4,306	2.1	%
Net income	$	12,291		6.3	%	$	14,975	7.3	%

($ in thousands)	Three Months Ended									Nine Months Ended
	December 31, 2005					December 31, 2006				December 31, 2005				December 31, 2006

Net revenues	$	222,512		100.0	%	$	215,435	100.0	%	$	543,646	100	%	$	605,438		100.0	%
Cost of revenues		128,486		57.7	%		134,099	62.2	%		302,469	55.6	%		370,741		61.2	%
Gross profit		94,026		42.3	%		81,336	37.8	%		241,177	44.4	%		234,697		38.8	%
Operating expense:
Research, development and engineering		15,980		7.2	%		17,709	8.2	%		45,868	8.4	%		53,113		8.9	%
Selling, general and administrative		43,130		19.4	%		46,809	21.7	%		110,845	20.4	%		136,256		22.5	%
Gain on sale of land		-					-	0.0	%		-				(2,637	)
Total operating expenses		59,110		26.6	%		64,518	29.9	%		156,713	28.8	%		186,732		30.9	%
Operating income		34,916		15.7	%		16,818	7.8	%		84,464	15.5	%		47,965		7.9	%
Interest and other income (expense), net		(596	)	-0.3	%		1,493	0.7	%		667	0.1	%		2,745		0.5	%
Income before income taxes		34,320		15.4	%		18,311	8.5	%		85,131	15.7	%		50,710		8.4	%
Income tax expense		9,279		4.2	%		3,121	1.4	%		24,685	4.5	%		10,704		1.8	%
Net income	$	25,041		11.3	%	$	15,190	7.0	%	$	60,446	11.2	%	$	40,006		6.6	%

	Three Months Ended
	June 30,				Increase
(in thousands)	2006		2007		(Decrease)

Net revenues from unaffiliated customers:
Office and Contact Center	$	114,267	$	132,205	$	17,938		15.7	%
Mobile		35,806		41,238		5,432		15.2	%
Gaming and Computer Audio		7,289		6,485		(804	)	(11.0	)%
Other Specialty Products		6,375		5,644		(731	)	(11.5	)%
Total segment net revenues	$	163,737	$	185,572	$	21,835		13.3	%

	Payments Due by Period
				Remainder
				of Fiscal			Fiscal			Fiscal			Fiscal			Fiscal
(in thousands)	Total			2008			2009			2010			2011			2012			Thereafter

Operating leases	$	15,552	$		4,403	$		3,746	$		2,296	$		1,160	$		921	$		3,026
Unconditional purchase obligations		4,376			4,376			-			-			-			-			-
Total contractual cash obligations	$	19,928	$		8,779	$		3,746	$		2,296	$		1,160	$		921	$		3,026

				FX		FX
				Gain (Loss)		Gain (Loss)
		USD Value		From 10%		From 10%
		of Net FX		Appreciation		Depreciation
Currency - forward contracts	Position	Contracts		of USD		of USD
Euro	Sell Euro	$	32.6	$	3.3	$	(3.3	)
Great British Pound	Sell GBP		13.2		1.3		(1.3	)
Net position		$	45.8	$	4.6	$	(4.6	)

December 31, 2006
(in millions)
Currency - forward contracts	USD Value of Net FX Contracts		FX Gain (Loss) From 10% Appreciation of USD		FX Gain (Loss) Form 10% Depreciation of USD
Euro	$	25.7	$	2.6	$	(2.6	)
Great British Pound		6.1		0.6		(0.6	)
Net position	$	31.8	$	3.2	$	(3.2	)

	PLANTRONICS, INC.


Date: ~~February~~August 8, 2007	By: ~~/s/~~	/s/ Barbara V. Scherer
	Barbara V. Scherer
	Senior Vice President - Finance and Administration and Chief Financial Officer

	(Principal Financial Officer and Duly Authorized Officer of the Registrant)

~~Exhibit~~ ~~Number~~	~~Description of Document~~

~~2.1~~	Agreement and Plan of Merger by and among Plantronics, Inc., Sonic Acquisition Corporation, Altec Lansing Technologies, Inc. and the other parties named herein, dated July 11, 2005 (incorporated herein by reference from Exhibit 2.1 of the Registrant’s Form 8-K (File 001-12696), filed on August 19, 2005).

~~3.1.1~~	~~Amended and Restated By-Laws of the Registrant (incorporated herein by reference from Exhibit (3.1) to the Registrant’s Annual Report on Form 10-K (File No. 001-12696), filed on June 21, 2002).~~

~~3.1.2~~	Certificate of Amendment to Amended and Restated Bylaws of Plantronics, Inc. (incorporated herein by reference from Exhibit (3.1.2) of the Registrant's Current Report on Form 10-K (File No. 001-12696), filed on May 31, 2005).

~~3.2.1~~	Restated Certificate of Incorporation of the Registrant filed with the Secretary of State of Delaware on January 19, 1994 (incorporated herein by reference from Exhibit (3.1) to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-12696), filed on March 4, 1994).

~~3.2.2~~	Certificate of Retirement and Elimination of Preferred Stock and Common stock of the Registrant filed with the Secretary of State of Delaware on January 11, 1996 (incorporated herein by reference from Exhibit (3.3) of the Registrant’s Annual Report on Form 10-K (File No. 001-12696), filed on June 27, 1996).

~~3.2.3~~	Certificate of Amendment of Restated Certificate of Incorporation of the Registrant filed with the Secretary of State of Delaware on August 5, 1997 (incorporated herein by reference from Exhibit (3.1) to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-12696), filed on August 12, 1997).

~~3.2.4~~	Certificate of Amendment of Restated Certificate of Incorporation of the Registrant filed with the Secretary of State of Delaware on May 23, 2000 (incorporated herein by reference from Exhibit (4.2) to the Registrant’s Registration Statement on Form S-8 (File No. 333-42664), filed on July 31, 2000).

~~3.3~~	Registrant’s Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred Stock filed with the Secretary of State of the State of Delaware on April 1, 2002 (incorporated herein by reference from Exhibit (3.6) to the Registrant’s Form 8-A (File No. 001-12696), filed on March 29, 2002).

~~4.1~~	Preferred Stock Rights Agreement, dated as of March 13, 2002 between the Registrant and Equiserve Trust Company, N.A., including the Certificate of Designation, the form of Rights Certificate and the Summary of Rights attached thereto as Exhibits A, B, and C, respectively (incorporated herein by reference from Exhibit (4.1) to the Registrant’s Form 8-A (File No. 001-12696), filed on March 29, 2002).

10.1*	~~Plantronics, Inc. Non-EMEA Quarterly Profit Sharing Plan (incorporated herein by reference from Exhibit (10.1) to the Registrant’s Report on Form 10-K (File No. 001-12696), filed on June 1, 2001).~~

10.2*	Form of Indemnification Agreement between the Registrant and certain directors and executives. (incorporated herein by reference from Exhibit (10.2) to the Registrant’s Report on Form 10-K (File No. 001-12696), filed on May 31, 2005).

10.3.1*	~~Regular and Supplemental Bonus Plan (incorporated herein by reference from Exhibit (10.4(a)) to the Registrant’s Report on Form 10-K (File No. 001-12696), filed on June 1, 2001).~~

10.3.2*	~~Overachievement Bonus Plan (incorporated herein by reference from Exhibit (10.4(b)) to the Registrant’s Report on Form 10-K (File No. 001-12696), filed on June 1, 2001).~~

~~10.4.1~~	Lease Agreement dated May 2004 between Finsa Portafolios, S.A. DE C.V.and Plamex, S.A. de C.V., a subsidiary of the Registrant, for premises located in Tijuana, Mexico (translation from Spanish original) (incorporated herein by reference from Exhibit (10.5.1) of the Registrant's Quarterly Report on Form 10-Q (File No. 001-12696), filed on August 6, 2004).

~~10.4.2~~	Lease Agreement dated May 2004 between Finsa Portafolios, S.A. DE C.V.and Plamex, S.A. de C.V., a subsidiary of the Registrant, for premises located in Tijuana, Mexico (translation from Spanish original) (incorporated herein by reference from Exhibit (10.5.2) of the Registrant's Quarterly Report on Form 10-Q (File No. 001-12696), filed on August 6, 2004).

~~10.4.3~~	Lease Agreement dated May 2004 between Finsa Portafolios, S.A. DE C.V.and Plamex, S.A. de C.V., a subsidiary of the Registrant, for premises located in Tijuana, Mexico (translation from Spanish original) (incorporated herein by reference from Exhibit (10.5.3) of the Registrant's Quarterly Report on Form 10-Q (File No. 001-12696), filed on August 6, 2004).

~~10.4.4~~	Lease Agreement dated October 2004 between Finsa Portafolios, S.A. DE C.V.and Plamex, S.A. de C.V., a subsidiary of the Registrant, for premises located in Tijuana, Mexico (translation from Spanish original) (incorporated herein by reference from Exhibit (10.5.4) of the Registrant's Quarterly Report on Form 10-Q (File No. 001-12696), filed on August 6, 2004).

~~10.5~~	Lease dated December 7, 1990 between Canyge Bicknell Limited and Plantronics Limited, a subsidiary of the Registrant, for premises located in Wootton Bassett, The United Kingdom (incorporated herein by reference from Exhibit (10.32) to the Registrant’s Registration Statement on Form S-1 (as amended) (File No.33-70744), filed on October 20, 1993).

10.6*	~~Amended and Restated 2003 Stock Plan (incorporated herein by reference from the Registrant's Definitive Proxy Statement on Form 14-A (File No. 001-12696), filed on May 26, 2004).~~

10.7*	~~1993 Stock Option Plan (incorporated herein by reference from Exhibit (10.8) to the Registrant's Annual Report on Form 10-K (File No. 001-12696), filed on June 21, 2002).~~

10.8 1*	1993 Director Stock Option Plan (incorporated herein by reference from Exhibit (10.29) to the Registrant's Registration Statement on Form S-1 (as amended) (File No. 33-70744), filed on October 20, 1993).

10.8.2*	Amendment to the 1993 Director Stock Option Plan (incorporated herein by reference from Exhibit (4.4) to the Registrant's Registration Statement on Form S-8 (File No. 333-14833), filed on October 25, 1996).

10.8.3*	~~Amendment No. 2 to the 1993 Director Stock Option Plan (incorporated herein by reference from Exhibit (10.9(a)) to the Registrant's Report on Form 10-K (File No. 001-12696), filed on June 1, 2001).~~

10.8.4 *	~~Amendment No. 3 to the 1993 Director Stock Option Plan (incorporated herein by reference from Exhibit (10.9(b)) to the Registrant's Report on Form 10-K (File No. 001-12696), filed on June 1, 2001).~~

10.8.5*	Amendment No. 4 to the 1993 Director Stock Option Plan (incorporated herein by reference from Exhibit (10.9.5) to the Registrant's Annual Report on Form 10-K (File No. 001-12696), filed on June 21, 2002).

10.9.1*	~~2002 Employee Stock Purchase Plan (incorporated herein by reference from the Registrant's Definitive Proxy Statement on Form 14-A (File No. 001-12696), filed on June 3, 2005).~~

~~10.9.1~~	Trust Agreement Establishing the Plantronics, Inc. Annual Profit Sharing/Individual Savings Plan Trust (incorporated herein by reference from Exhibit (4.3) to the Registrant's Registration Statement on Form S-8 (File No. 333-19351), filed on January 7, 1997).

10.9.2*	Plantronics, Inc. 401(k) Plan, effective as of April 2, 2000 (incorporated herein by reference from Exhibit (10.11) to the Registrant's Report on Form 10-K (File No. 001-12696), filed on June 1, 2001).

10.10*	Resolutions of the Board of Directors of Plantronics, Inc. Concerning Executive Stock Purchase Plan (incorporated herein by reference from Exhibit (4.4) to the Registrant's Registration Statement on Form S-8 (as amended) (File No. 333-19351), filed on March 25, 1997).

10.11.1*	Plantronics, Inc. Basic Deferred Compensation Plan, as amended August 8, 1996 (incorporated herein by reference from Exhibit (4.5) to the Registrant's Registration Statement on Form S-8 (as amended) (File No. 333-19351), filed on March 25, 1997).

~~10.11.2~~	Trust Agreement Under the Plantronics, Inc. Basic Deferred Stock Compensation Plan (incorporated herein by reference from Exhibit (4.6) to the Registrant's Registration Statement on Form S-8 (as amended) (File No. 333-19351), filed on March 25, 1997).

~~10.11.3~~	Plantronics, Inc. Basic Deferred Compensation Plan Participant Election (incorporated herein by reference from Exhibit (4.7) to the Registrant's Registration Statement on Form S-8 (as amended) (File No. 333-19351), filed on March 25, 1997).

10.12.1*	Employment Agreement dated as of July 4, 1999 between Registrant and Ken Kannappan (incorporated herein by reference from Exhibit (10.15) to the Registrant's Annual Report on Form 10-K405 (File No. 001-12696), filed on June 1, 2000).

10.12.2*	Employment Agreement dated as of November 1996 between Registrant and Don Houston (incorporated herein by reference from Exhibit (10.14.2) to the Registrant's Annual Report on Form 10-K (File No. 001-12696), filed on June 2, 2003).

10.12.3*	Employment Agreement dated as of April 1997 between Registrant and Barbara Scherer (incorporated herein by reference from Exhibit (10.14.4) to the Registrant's Annual Report on Form 10-K (File No. 001-12696), filed on June 2, 2003).

10.12.4*	Employment Agreement dated as of June 2003 between Registrant and Philip Vanhoutte (incorporated herein by reference from Exhibit (10.12.4) to the Registrant's Annual Report on Form 10-K (File No. 001-12696), filed on May 31, 2005).

10.12.5*	Employment Agreement dated as of May 2001 between Registrant and Joyce Shimizu (incorporated herein by reference from Exhibit (10.14.5) to the Registrant's Annual Report on Form 10-K (File No. 001-12696), filed on June 2, 2003).

~~10.13.1~~	Credit Agreement dated as of July 31, 2003 between Registrant and Wells Fargo Bank N.A. (incorporated herein by reference from Exhibit (10.1) of the Registrant's Quarterly Report on Form 10-Q (File No. 001-12696), filed on November 7, 2003).

~~10.13.2~~	~~Credit Agreement Amendment No. 1 dated as of August, 1, 2004, between Registrant and~~ ~~Wells Fargo Bank N.A. (incorporated herein by reference from Exhibit (10.15.2) to the~~ ~~Registrant’s Quarterly Report on Form 10-Q (File No. 001- 12696), filed on November 5, 2004).~~

~~10.13.3~~	Credit Agreement Amendment No.2 dated as of July 11, 2005, between Registrant and Wells Fargo Bank National Association (incorporated herein by reference from Exhibit (10.15.1) to the Registrants Form 8-K (File No. 001-12696), filed on July 15, 2005).

~~10.13.4~~	Credit Agreement Amendment No.3 dated as of August 11, 2005, between Registrant and Wells Fargo Bank National Association (incorporated herein by reference from Exhibit (10.2) to the Registrants Form 8-K (File No. 001-12696), filed on November 23, 2005).

~~10.13.5~~	Credit Agreement Amendment No.4 dated as of November 17, 2005, between Registrant and Wells Fargo Bank National Association (incorporated herein by reference from Exhibit (10.1) to the Registrants Form 8-K (File No. 001-12696), filed on November 23, 2005).

10.14*	Restricted Stock Award Agreement dated as of October 12, 2004, between Registrant and certain of its executive officers (incorporated herein by reference from Exhibit (10.1) of the Registrant's Current Report on Form 8-K (File No. 001-12696), filed on October 14, 2004).

14	~~Worldwide Code of Business Conduct and Ethics (incorporated herein by reference from Exhibit (14) of the Registrant's Current Report on Form 10-K (File No. 001-12696), filed on May 31, 2005).~~

~~31.1~~	~~CEO’s Certification Pursuant to Rule 13a-14(a)/15d-14(a)~~

~~31.2~~	~~CFO’s Certification Pursuant to Rule 13a-14(a)/15d-14(a)~~

~~32.1~~	~~Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the CEO and CFO~~

*	~~Indicates a management contract or compensatory plan, contract or arrangement in which any Director or any Executive Officer participates.~~