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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Grommit who wrote (12708)	6/28/2001 7:43:06 PM
From: 249443	Read Replies (1) \| Respond to of 78752

Plantronics: Not So Fast! thestreet.com Herb Greenberg wrote the below column excerpt from today's realmoney.com. Herb is one writer who has saved me significant amounts of money: by pointing out, ad nauseum, problems with Lucent, LHSP, Cree, etc. -- all in the past year. This is one person's view, but Herb has a lot of respect from short sellers and money managers. Just another perspective. ____________________________________________________________ "One-hit wonder?: Don't look now but Plantronics (PLT:NYSE - news - commentary), the headset maker, has been rapidly rising on the hype that New York's new ban on using cell phones while driving will boost demand for headsets. And who is the likely winner? Among public companies, all fingers are pointing to Plantronics. Maybe it will be a winner, but not the winner. Reality, for Plantronics, is that its cell-phone headset business last year, while up 200%, accounted for only about 12% of Plantronics' sales. The rest of its business includes sales to telemarketers, which have been hit by a sharp slowdown, and sales to offices, which a spokeswoman says "is difficult to call" because of the economy. In fact, sales have been slowing so much that Plantronics issued two earnings warnings in the March quarter, with a big reduction in guidance for the current quarter. Not good for a company like Plantronics, which Tom Chanos, of Badger Consultants, calls a one-hit wonder. Sure, it makes more than one kind of headset, but "they are all still headsets," says Chanos, who has a sell rating on Plantronics. ( Other notable sells by Chanos, in this column, included Dell (DELL:Nasdaq - news - commentary), before its big dive, and Teligent (TGNT:Nasdaq - news - commentary), long before it filed for bankruptcy. ) Making Plantronics extra vulnerable are its gross margins. While falling for two years, they're still a respectable 50%, which means they have plenty of room to drop as competitors with lower prices enter what may very well evolve into a hot market for a commodity product. A spokeswoman, however, says Plantronics isn't worried about competition because it has "very strong and long relationships with a very broad range of distributors," including exclusive agreements that could block newcomers. Maybe, but that doesn't preclude cell-phone makers (under pressure themselves) from striking deals directly with competitors, or those same competitors from going to distributors that don't have nonexclusive deals. And as for the New York cell-phone law, it doesn't go into effect for several months. The whole situation is strangely reminiscent of the big run up in Bell Sports, the bike-helmet maker, when it was thought that every state was going to create laws making it illegal for kids to ride bikes without helmets. Turns out competitors cashed in on the craze with cheap knockoffs, and Bell's booming stock turned into a bust. The company, deeply in debt, eventually was sold..."