PLT - AH report by J.P. Morgan
: 1 of 2 N.Y. Ban on Cell Phones Held By Drivers Should Benefit PLT --
05:04pm EDT 26-Jun-01 J.P. Morgan (Joe Arsenio II) PLT
**** JP Morgan/JP Morgan H&Q **** JP Morgan/JP Morgan H&Q ****
Company: Plantronics, Inc.
Price: 19.34
Recommendation: Market Performer
Notes: a, b, f
Analyst: Joe Arsenio II 415-439-3339
Associate: Jeffrey S. Tha 415-371-4045
Date: 6/26/01
1 of 2 N.Y. Ban on Cell Phones Held By Drivers Should Benefit PLT
NY becomes the first state to ban holding cell phones while driving.
Two dozen other states in the U.S. are considering similar legislation.
Depending on how quickly other states adopt the ban on holding cell phones
while driving, our mobile segment projections (~50% YOY growth) may increase.
We estimate current worldwide mobile headset penetration to be only 5-10%.
We remain neutral on Plantronics in the near-term, pending improvement in its
core business.
2000 A 2001 A 2002 E
Q1 EPS $0.28 $0.38 $0.15
Q2 EPS 0.28 0.39 0.25
Q3 EPS 0.30 0.40 0.26
Q4 EPS 0.36 0.22 0.33
FY EPS 1.22 1.38 1.00
FY REVS (M) 315.0 401.0 397.5
CY EPS 1.53 0.88E NE
CY P/E 13 22 NE
FY Ends Mar Current Price $19.34
52-Week Range $16-56 Market Cap (M) $1,022
Shares Out (M) 52.85 Book Value $3.27
Cash & Sec./Share $1.40 3-Year EPS Growth 20%
CY01 P/E-to-Growth na
NY becomes the first state to ban holding cell phones while driving.
We believe that Plantronics should be an obvious beneficiary of New York
State''s ban on hand-held cell phone use in automobiles. Both the N.Y. State
Assembly and Senate have passed the "hands-free" law, and the Governor has
promised to sign the bill. The new law will begin November 1, and for 30
days, violators will get a warning. Beginning December 1, holding cell phones
(on the ear) while driving will be viewed as a traffic violation, with fines
of up to $100 (or about the same cost as a new cell phone).
Mobile products currently constitute a small portion of the overall
revenue mix.
Plantronics derived $14 million (~16%) out of an aggregate $90 million in
revenues during the March quarter from its mobile segment. While still not a
significant contributor to revenues, we expect the mobile segment, which
displayed 195% (triple) YOY growth in FY2001 (Mar.), should continue growing
rapidly. We currently project mobile revenues will contribute approximately
$69 million in FY2002, reflecting 50% YOY growth. Depending on how quickly
other states adopt the ban on holding cell phones while driving, we believe
that our mobile segment projections may be conservative for FY02 and beyond.
Plantronics has been aggressively maneuvering into the mobile headset
market.
PLT entered the mobile headset market about two years ago and has been
expanding its product line to include earbud models as well as more
traditional headset configurations to be used "on the go" i.e. autos, etc.
Plantronics now offers over half a dozen different models (including earbud).
The company has also announced that it plans to introduce a Bluetooth enabled
headset to the market in the second half of 2001, which should coincide with
the market introduction of Bluetooth enabled cell phones.
We estimate current worldwide mobile headset penetration to be only 5-10%.
There are an estimated 700 million cellular subscribers worldwide, that are
growing at a rate of over 25% annually. Furthermore, it is estimated that 15%
of subscribers are in the U.S. We believe that the improved ease of use
presented by headset-equipped mobile phones, in addition to the enactment in
certain countries (or states) of "hands free" laws requiring the use of
headsets with mobile phones while driving (UK, Germany, Denmark, Italy, Spain,
and now New York state), will help drive increased headset adoption. We note
that over three dozen other states in the U.S. (including New Jersey) are
considering similar legislation.
We remain neutral on Plantronics in the near-term, pending improvement in
its core business.
We are projecting F1Q (Jun.) revenue and earnings to sequentially decline to
$81 million and $0.15/sh., from $90 million and $0.22/sh. in March. We
downgraded PLT to Market Performer in late March after the company "double
faulted" and reduced their outlook for the March quarter for the second time
based upon macro-economic weakness in their core Call Center segment. However
the NY State news is an undeniable positive and should improve PLT''s longer-
term outlook, particularly as more states climb aboard the "hands-free"
bandwagon. While we are not changing our rating, which will require an
improvement in the core business, we believe that some value/growth (GARP)
accounts may take this "first-step" in U.S. legislation as a signal to begin
to build a position. Stability in the Call Center and Office segments would
allow the growth in the Mobile and Computer (CASD) sectors to become more
visible. Overall this is a step in the right direction for PLT which has many
well known cash-flow virtues and about a 50% share of the headset market
worldwide.
Plantronics is expected to report F1Q (Jun.) earnings on July 17th after
market closes.
First Call Corporation, a Thomson Financial company.
All rights reserved. 888.558.2500
Symbols:
US;PLT
26-Jun-2001 21:04:57 GMT
Source FC - First Call Research Notes
Categories:
BKR/JO FCIN/TELECM FCSU/COM GEO/US GEO/NME FCSU/MMN
-- JO: 2 of 2 N.Y. Ban on Cell Phones Held By Drivers Should Benefit PLT --
05:04pm EDT 26-Jun-01 J.P. Morgan (Joe Arsenio II) PLT
**** JP Morgan/JP Morgan H&Q **** JP Morgan/JP Morgan H&Q ****
Company: Plantronics, Inc.
Price: 19.34
Recommendation: Market Performer
Notes: a, b, f
Analyst: Joe Arsenio II 415-439-3339
Associate: Jeffrey S. Tha 415-371-4045
Date: 6/26/01
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