Plantronics recently reported earnings for its third quarter ending 12/31/08 and from the call there is a good amount you can learn about what is happening in communications. It should be noted that entire markets cannot be judged by a single company but since they play in so many markets, it is worth analyzing what they see happening to their business.

On the call, the company mentioned net revenues were down year over year for the quarter at $182.8 million compared with $232.8. The company says office, audio/entertainment and contact center sales were at the low end of expectations.

The company sees unified communications as a bright spot and they expect softphone growth to drive demand for more headsets.

Here is an important quote from Ken Kannappan, President and CEO:

We expect that the current environment will delay widespread implementations, with virtually all communication infrastructure players committed to UC, we believe that most IT organizations have embraced UC in their long-term planning.

Our headsets play a critical role in the successful deployment of UC, as the PC has no effective audio I/O. The built-in microphone and speaker are not private in an open plan office in the notebook for an office environment and don’t offer good audio quality. This forces a choice of purchasing a headset like a USB and handset for the PC or using an IP phone for voice calls.

Clearly, the second and third options do provide the benefits, familiarity in a hand set and key pad. But the headset is more portable, hygienic, ergonomic and a practical solution for mobile usage. Furthermore, the headset allows someone to listen to streaming media for training and other growing received applications where holding a handset to listen would be absurd.

The company further expects the office and contact center to slow by 35-40% with wireless products experiencing a greater decline. According to Kannappan , “In difficult economic times, voluntary turnover declines amongst the businesses and financial professionals who are the greatest adopters of our wireless products. This dramatically reduces replacement sales. In addition, heightened budget scrutiny is extending cost controls all the way to headset purchases.”

After reading through the transcript and a Q&A session with analysts there seem to be two positives here. The first is the UC/softphone market where Plantronics looks to increasing sales in the future. In addition, the company thinks it is taking share from the competition but this may be a subjective observation by management as no independent analyst firm has a complete handle on all channels of headset distribution according to management.

I find it tough to disagree with Kannappan. As we get a sense of normalcy in business – and I am not even sure how this is to be defined anymore, companies will look to improve productivity and efficiency and you just can’t imagine a world of communications which is state of the art with video, IM sessions and avatars – with end-users on handsets. It just seems beyond obvious that headsets will become the rule not the exception in the global corporate and consumer world.

Until then, the companies who do adopt UC early will have a tremendous productivity and efficiency advantage over the slow-movers. And in such competitive markets a slight increase in productivity can make a huge financial difference.

Other areas of future growth for Plantronics not mentioned on the call include the pre-K, pregnant yoga and of course the business scuba headset market which is booming