PLANTRONICS, INC. PART I, ITEM 1. FINANCIAL STATEMENTS

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE

1. BASIS OF PRESENTATION. PRESENTATION

The accompanying interim condensed consolidated financial statements of Plantronics, Inc. ("Plantronics," the "Company""we", "our", or the "Registrant") have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. These financial statements have been prepared in conformity with generally accepted accounting principles, consistent in all material respects with those applied in the Company'sour Annual Report on Form 10-K for the year ended March 31, 2000.2001. The interim financial information is unaudited, but reflects all normal recurring adjustments which are, in the opinion of management, necessary to provide a fair statement of results for the interim periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. Certain prior period balances have been reclassified to conform to the current period presentation. The interim financial statements should be read in conjunctionconnection with the financial statements in the Company'sour Annual Report on Form 10-K for the fiscal year ended March 31, 2000 and the Company's Amended Registration Statement on Form S-3 filed on June 13, 2000. NOTE 2001.

2. PERIODS PRESENTED. The Company'sPRESENTED

Our fiscal year-end is the Saturday closest to March 31 and the third fiscal quarter-end is the last Saturday in December. For purposes of presentation, the Company haswe have indicated itsour accounting year ending on March 31, or the month-end for interim quarterly periods. Plantronics'Our fiscal quarters ended December 31, 19992000, and December 31, 20002001, consisted of thirteen weeks each. NOTE

3. DETAILS OF CERTAIN BALANCE SHEET COMPONENTS (IN THOUSANDS):

March 31, December 31, 2000 2000 --------- ------------ Accounts receivable, net: Accounts receivable from customers $ 50,625 $ 70,496 Allowance for doubtful accounts (2,144) (2,293) -------- -------- $ 48,481 $ 68,203 ======== ======== Inventory, net: Finished goods $ 17,887 $ 28,729 Work in process 1,540 1,620 Purchased parts 14,325 20,023 -------- -------- $ 33,752 $ 50,372 ======== ======== Property, plant and equipment, net: Land $ 4,693 $ 4,693 Buildings and improvements (useful lives: 7-30 years) 11,296 14,180 Machinery and equipment (useful lives: 2-10 years) 38,341 46,201 -------- -------- 54,330 65,074 Less accumulated depreciation (30,753) (34,733) -------- -------- $ 23,577 $ 30,341 ======== ========

NOTE

                                                              March 31,   December 31,
                                                               2001          2001
                                                           ------------  ------------
Accounts receivable, net:
    Accounts receivable from customers .................. $     62,876  $     48,433
    Less: allowance for doubtful accounts ...............       (2,673)       (2,864)
                                                           ------------  ------------
                                                          $     60,203  $     45,569
                                                           ============  ============

Inventory, net:
    Finished goods ...................................... $     27,040  $     19,959
    Work in process .....................................        1,280           999
    Purchased parts .....................................       19,915        17,037
                                                           ------------  ------------
                                                          $     48,235  $     37,995
                                                           ============  ============

Property, plant and equipment, net:
    Land ................................................ $      4,693  $      4,693
    Buildings and improvements (useful lives: 7-30 years)       14,692        15,805
    Machinery and equipment (useful lives: 2-10 years) ..       49,891        52,072
                                                           ------------  ------------
                                                                69,276        72,570
    Less: accumulated depreciation ......................      (36,593)      (37,756)
                                                           ------------  ------------
                                                          $     32,683  $     34,814
                                                           ============  ============

Accrued liabilities:
    Employee benefits ................................... $      9,730  $     11,262
    Accrued advertising and sales and marketing .........        5,836         5,995
    Warranty accrual ....................................        6,619         6,748
    Accrued other .......................................        8,608        10,118
                                                           ------------  ------------
                                                          $     30,793  $     34,123
                                                           ============  ============

4. FOREIGN CURRENCY TRANSACTIONS. TRANSACTIONS

The Company's functional currency for allof our foreign sales and marketing and research and development operations is the local currency of the respective operations. The functional currency of the Mexican manufacturing operations and European sales and logistics headquarters is the U.S. dollar. Accordingly all revenues and cost of sales related to foreign operations are recorded using the U.S. dollar as functional currency. The assets and liabilities of the subsidiaries whose functional currencies are other than the U.S. dollar are translated into U.S. dollars at the current exchange rate in effect at the balance sheet date. Income and expense items are translated using the average exchange rate for the period. Cumulative translation adjustments are included in accumulated other comprehensive income (loss), which is reflected as a separate component of stockholders' equity. Foreign currency transaction gains and losses resulting from the remeasurement of the financial statements of foreign subsidiaries into U.S. dollars are included in other expense (income)the results of operations.

Beginning in the consolidated statementfirst quarter of fiscal year 2002, we entered into foreign currency forward-exchange contracts, which typically mature in one month, to hedge the exposure to foreign currency fluctuations of expected foreign currency-denominated receivables, payables and cash balances. We record on the balance sheet at each reporting period the fair value of our forward-exchange contracts and record any fair value adjustments in results of operations. Gains and losses resulting fromassociated with currency rate changes on the contracts are recorded in results of operations, as other income (expense), offsetting transaction gains and losses on the related assets and liabilities.

During the first quarter of fiscal year 2002, we adopted SFAS No. 133 (Accounting for Derivative Instruments and Hedging Activities), as amended by SFAS No. 138 (Accounting for Certain Derivative Instruments and Certain Hedging Activities), which did not have a material impact on our financial position.

As of December 31, 2001, we had approximately $1.8 million of foreign currency forward-exchange contracts outstanding, denominated in the Euro, as a hedge against our forecasted foreign currency-denominated receivables, payables and cash balances. The following table summarizes our net currency position, and approximate U.S. dollar equivalent (in thousands), at December 31, 2001:

           Local Currency    Equivalent   Position
          ----------------  ------------ -----------
EUR                 2,042  $      1,800     Sell

Foreign currency transactions, are also includednet of the effect of hedging activity, resulted in other expense (income). Aggregate exchange gains ina net loss of $0.2 million for the fiscal quarter ended December 31, 2000 were2001, included in other income (expense) in the results of operations, compared to net gains of approximately $0.1 million. Aggregate exchange lossesmillion in the comparable periodquarter ended December 31, 1999 were immaterial. For the nine months ended December 31, 2000, aggregate exchange losses were $1.2 million, compared to losses of $0.6 million for the nine months ended December 31, 1999. 5 6 PLANTRONICS, INC. PART I, ITEM 1. FINANCIAL STATEMENTS NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 2000.

5. COMPUTATION OF EARNINGS PER COMMON SHARE. SHARE

Basic earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per common share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period. Dilutive common equivalent shares consist only of stock options.

In computing diluted earnings per common share, the average stock price for the period is used in determining the number of shares assumed to be purchased from exercise of stock options.

Following is a reconciliation of the numerators and denominators of the basic and diluted EPS:

QUARTER ENDED NINE MONTHS ENDED --------------------------- --------------------------- (in thousands, except earnings per share) DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1999 2000 1999 2000 ------------ ------------ ------------ ------------ Net income $15,409 $21,308 $45,729 $62,152 ======= ======= ======= ======= Weighted average shares - basic 48,999 49,233 49,737 49,098 Effect of dilutive securities - employee stock options 3,057 4,124 3,501 4,174 ------- ------- ------- ------- Weighted average shares - diluted 52,056 53,357 53,238 53,272 ======= ======= ======= ======= Net earnings per common share - basic $ 0.31 $ 0.43 $ 0.92 $ 1.27 ======= ======= ======= ======= Net earnings per common share - diluted $ 0.30 $ 0.40 $ 0.86 $ 1.17 ======= ======= ======= =======

NOTE 6. STOCKHOLDERS' EQUITY AND STOCK SPLIT. On June 29, 2000, our Board of Directors approved a three-for-one split of the Company's common stock, effected as a stock dividend. All stockholders of record on July 18, 2000 (the "Record Date") received two additional shares for each share owned on the Record Date. Shares resulting from the split were distributed by the transfer agent on August 8, 2000. All share and per-share numbers contained herein for all periods presented reflect this stock split, unless otherwise noted. NOTE 7. INCOME TAXES. Income tax provisions for interim periods are based on the Company's estimated annual income tax rate. The Company recorded income tax expenses of $ 7.3 million and $ 9.1 million for the three months ended

                                                    Three Months Ended     Nine Months Ended
                                                       December 31,          1999 and December 31,
                                                  --------------------  --------------------
(In thousands, except earnings per share)            2000       respectively, and2001       2000       2001
                                                  ---------  ---------  ---------  ---------
Net income...................................... $  21.5 million and21,308  $  26.6
million for10,507  $  62,152  $  25,453
                                                  =========  =========  =========  =========

Weighted average shares - basic.................    49,233     46,897     49,098     47,650
Effect of dilutive securities - employee
   stock options................................     4,124      2,223      4,174      1,904
                                                  ---------  ---------  ---------  ---------
Weighted average shares - diluted...............    53,357     49,120     53,272     49,554
                                                  =========  =========  =========  =========

Net earnings per common share - basic........... $    0.43  $    0.22  $    1.27  $    0.53
                                                  =========  =========  =========  =========

Net earnings per common share - diluted......... $    0.40  $    0.21  $    1.17  $    0.51
                                                  =========  =========  =========  =========

6. COMPREHENSIVE INCOME

Comprehensive income includes charges or credits to equity that are not the nine months endedresult of transactions with owners. The components of comprehensive income, net of tax, are as follows (in thousands):

                                                    Three Months Ended     Nine Months Ended
                                                       December 31,          1999 and December 31,
                                                  --------------------  --------------------
                                                     2000       respectively. The effective2001       2000       2001
                                                  ---------  ---------  ---------  ---------
Net income...................................... $  21,308  $  10,507  $  62,152  $  25,453
Other comprehensive income tax rate varies from the U.S. federal
statutory income tax rate primarily because of variations(loss):
  Change in accumulated translation adjustments.        --       (191)        --        100
                                                  ---------  ---------  ---------  ---------
Total........................................... $  21,308  $  10,316  $  62,152  $  25,553
                                                  =========  =========  =========  =========

7. SEGMENTS AND ENTERPRISE-WIDE DISCLOSURES

SEGMENTS. We are engaged in the tax rates on foreign income. NOTE 8. COMPREHENSIVE INCOME. Comprehensive income was the same as net income for all periods presented. Accumulated other comprehensive income presented in the accompanying condensed consolidated balance sheets consists of cumulative translation adjustments from local currencies to the functional currency in prior years. NOTE 9. SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. OPERATING SEGMENT We organize the reporting segments based on geographic areas. The nature of our products (telecommunications equipment), development, manufacturing,design, manufacture, marketing and servicing are similarsales of telecommunications equipment including headsets, telephone headset systems, and other specialty telecommunications products. We consider ourselves to operate in each geographic area.one business segment. We evaluate segment performance basedhave organized our operations to focus on profit or lossthree principal markets: call center and office products, mobile and computer products, and other specialty products. The following table presents net revenue by market (in thousands):

                                                    Three Months Ended     Nine Months Ended
                                                       December 31,          December 31,
                                                  --------------------  --------------------
                                                     2000       2001       2000       2001
                                                  ---------  ---------  ---------  ---------
Net revenues from operations before interest expense,
foreign exchange gainsunaffiliated customers:
   Call center and lossesoffice....................... $  83,542  $  56,009  $ 250,818  $ 180,009
   Mobile and income taxes.computer..........................    19,381     23,058     48,258     52,576
   Other specialty products.....................     3,795      3,144     11,934      7,255
                                                  ---------  ---------  ---------  ---------
                                                 $ 106,718  $  82,211  $ 311,010  $ 239,840
                                                  =========  =========  =========  =========

MAJOR CUSTOMERS. No one customer accounted for 10% or more of total revenue from consolidated sales for the quarters ended December 31, 19992000 and 2000. 6 7 PLANTRONICS, INC. PART I, ITEM 1. FINANCIAL STATEMENTS NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 2001.

GEOGRAPHIC SEGMENTSINFORMATION. In geographical reporting, revenues are attributed to the geographical location of the sales and service organizations. Costs directlyThe following table presents net revenues and indirectly incurredlong lived assets by geographic area (in thousands):

                                      Three Months Ended         Nine Months Ended
                                         December 31,              December 31,
                                    ------------------------  -----------------------
                                       2000         2001         2000        2001
                                    -----------  -----------  ----------  -----------
Net revenues from unaffiliated
customers:
   United States.................. $    75,801  $    58,413  $  214,768  $   165,765
   International..................      30,917       23,798      96,242       74,075
                                    -----------  -----------  ----------  -----------
                                   $   106,718  $    82,211  $  311,010  $   239,840
                                    ===========  ===========  ==========  ===========



                                       March 31,  December 31,
                                        2001         2001
                                    -----------  -----------
Long lived assets:
   United States.................. $    19,980  $    22,336
   International..................      12,703       12,478
                                    -----------  -----------
                                   $    32,683  $    34,814
                                    ===========  ===========

8. RECENT ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations." SFAS 141 requires the purchase method of accounting for business combinations initiated after June 30, 2001, eliminates the pooling-of-interests method, and changes the criteria to recognize intangible assets apart from goodwill. The adoption of SFAS 141 did not have a significant impact on our financial position and results of operations.

In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS 142 requires, among other things, the discontinuance of goodwill amortization and the testing for impairment of goodwill at least annually. The adoption of SFAS 142 in generatingthe first quarter of the year ending March 30, 2002 did not have a material effect on our financial position and results of operations.

In April 2001, the FASB's Emerging Issues Task Force released Issue No. 00-25, "Vendor Income Statement Characterization of Consideration Paid to a Reseller of the Vendor's Products" ("EITF 00-25"), which will apply to us beginning in our fourth fiscal quarter. EITF 00-25 requires that consideration paid by a vendor to a reseller should be classified on the vendor's income statement as a reduction of revenue unless a separate identifiable benefit is received by the vendor, the fair value of the benefit can be reasonably estimated and the consideration does not exceed such value. We typically give various promotional consideration to our retailers and distributors, which we currently classify as sales and marketing expense. Because we are unable to clearly separate the benefits received from most of the promotional consideration we pay to our distributors and retailers, the majority of such consideration will be reclassified as a reduction of revenue, and financial statements for prior periods presented for comparative purposes will be reclassified to comply with the new requirements.  For our fourth fiscal quarter we estimate that the effect on revenues will be approximately $2.4 million offset by an equivalent reduction in selling, general and administrative expense. On a year-to-date basis through the end of our third fiscal quarter of 2002, we estimate the effects on revenue to be a reduction of $7.3 million offset by the same reduction in selling, general and administrative expense. There is no impact on operating margin, net income or EPS for this accounting change. 

On October 3, 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS 144 supercedes SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS 144 applies to all long-lived assets (including discontinued operations) and consequently amends Accounting Principles Board Opinion No. 30, "Reporting Results of Operations Reporting the Effects of Disposal of a Segment of a Business". SFAS 144 develops one accounting model for long-lived assets that are similarly assigned.

---------------------------- ---------------------------- QUARTER ENDED NINE MONTHS ENDED ---------------------------- ---------------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1999 2000 1999 2000 ------------ ------------ ------------ ------------ Net revenues from unaffiliated customers: United States $ 51,360 $ 75,801 $148,807 $214,768 International 24,699 30,917 74,005 96,242 -------- -------- -------- -------- $ 76,059 $106,718 $222,812 $311,010 ======== ======== ======== ======== -------- -------- -------- -------- Intersegment revenues $ 24,696 $ 38,496 $ 69,645 $108,112 ======== ======== ======== ======== Operating profit: United States $ 14,691 $ 21,432 $ 43,564 $ 61,071 International 7,393 8,183 22,447 27,358 -------- -------- -------- -------- $ 22,084 $ 29,615 $ 66,011 $ 88,429 ======== ======== ======== ========

MARCH 31, DECEMBER 31, 2000 2000 --------- ------------ Property, plant and equipment, net: United States $ 15,371 $ 18,762 International 8,206 11,579 -------- -------- $ 23,577 $ 30,341 ======== ========

7 8 PLANTRONICS, INC. PART I, to be disposed of by sale. SFAS 144 requires that long-lived assets that are to be disposed of by sale be measured at the lower of book value or fair value less cost to sell. Additionally, SFAS 144 expands the scope of discontinued operations to include all components of an entity with operations that (1) can be distinguished from the rest of the entity and (2) will be eliminated from the ongoing operations of the entity in a disposal transaction. SFAS 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001. We do not expect the adoption of SFAS 144 to have a significant impact on its financial statements.

9. GOODWILL AND INTANGIBLES

During the first quarter of fiscal year 2002, we early-adopted Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets". In accordance with SFAS 142, we discontinued goodwill amortization and tested goodwill for impairment as of April 1, 2001. No impairment loss appeared necessary. We will continue to test goodwill for impairment at least annually. Other intangible assets continue to be amortized over their expected useful life of three to five years.

The following table presents net income on a comparable basis, after adjustment for goodwill amortization (in thousands):

                                      Three Months Ended         Nine Months Ended
                                         December 31,              December 31,
                                    ------------------------  -----------------------
                                       2000         2001         2000        2001
                                    -----------  -----------  ----------  -----------
Reported net income............... $    21,308  $    10,507  $   62,152  $    25,453
 Add back : goodwill amortization.         174           --         521           --
                                    -----------  -----------  ----------  -----------
 Adjusted net income.............. $    21,482  $    10,507  $   62,673  $    25,453
                                    ===========  ===========  ==========  ===========
Basic earnings per share:
 As reported...................... $      0.43  $      0.22  $     1.27  $      0.53
 As adjusted...................... $      0.44  $      0.22  $     1.28  $      0.53

Diluted earnings per share:
 As reported...................... $      0.40  $      0.21  $     1.17  $      0.51
 As adjusted...................... $      0.40  $      0.21  $     1.18  $      0.51

10. SUBSEQUENT EVENTS

Subsequent to the end of the quarter we acquired Ameriphone, a leading supplier of amplified telephones and other solutions to address the needs of individuals with hearing impairment and other special needs. The sum of net assets, including goodwill and intangibles, less cash acquired was approximately $10.5 million, and was fully paid in cash. We have not yet finalized the allocation of purchase price.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CERTAIN FORWARD LOOKINGFORWARD-LOOKING INFORMATION:

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements may generally be identified by the use of such words as "expect," "anticipate," "believe," "intend," "plan," "will," or "shall," and include, the statement relatedbut are not necessarily limited to, the sufficiencyall of cash to fund operations for at least the next 12 months set out in the last paragraph in the subsection headed "Liquidity" under Financial Condition and certain statements marked below with an asterisk ("*") in the section titled "Risk Factors Affecting Future Operating Results.". In addition, the Companywe may from time to time make oral forward-looking statements. These forward-looking statements are based on current expectations and entail various risks and uncertainties. The Company'sOur actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth below under "Risk Factors Affecting Future Operating Results." The following discussions titled "Results of Operations" and "Financial Condition" should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report, the Company'sherein, our annual report on Form 10-K, as well as the section below entitled "Risk Factors Affecting Future Operating Results." We disclaim any obligation to update any forward-looking statements as a result of developments occurring after the date of this Quarterly Report.

RESULTS OF OPERATIONS:

The following table sets forth items from the Unaudited Condensed Consolidated Statements of Operations as a percentage of net sales.

------------------------------ ------------------------------ Quarter Ended Nine Months Ended ------------------------------ ------------------------------ December 31, December 31, December 31, December 31, 1999 2000 1999 2000 ------------ ------------ ------------ ------------ Net sales 100.0% 100.0% 100.0% 100.0% Cost of sales 40.7 44.3 41.0 43.8 ------------ ------------ ------------ ------------ Gross profit 59.3 55.7 59.0 56.2 ------------ ------------ ------------ ------------ Research, development and engineering 6.7 6.7 7.0 6.3 Selling, general and administrative 23.6 21.2 22.4 21.5 ------------ ------------ ------------ ------------ Total operating expenses 30.3 27.9 29.4 27.8 ------------ ------------ ------------ ------------ Operating income 29.0 27.8 29.6 28.4 Other (income) expense (0.8) (0.7) (0.6) (0.1) ------------ ------------ ------------ ------------ Income before income taxes 29.8 28.5 30.2 28.5 Income tax expense 9.5 8.5 9.7 8.5 ------------ ------------ ------------ ------------ Net income 20.3% 20.0% 20.5% 20.0% ============ ============ ============ ============

                                                    Three Months Ended     Nine Months Ended
                                                       December 31,          December 31,
                                                  --------------------  --------------------
                                                     2000       2001       2000       2001
                                                  ---------  ---------  ---------  ---------
Net sales ......................................     100.0 %    100.0 %    100.0 %    100.0 %
Cost of sales ..................................      44.3       51.8       43.8       51.4
                                                  ---------  ---------  ---------  ---------
    Gross profit ...............................      55.7       48.2       56.2       48.6
                                                  ---------  ---------  ---------  ---------
Operating expenses:
    Research, development and engineering ......       6.7        8.4        6.3        9.5
    Selling, general and administrative ........      21.2       26.8       21.5       26.5
                                                  ---------  ---------  ---------  ---------
           Total operating expenses ............      27.9       35.2       27.8       36.0
                                                  ---------  ---------  ---------  ---------
Operating income ...............................      27.8       13.0       28.4       12.6
Interest and other income, net .................       0.7        0.4        0.1        0.6
                                                  ---------  ---------  ---------  ---------
Income before income taxes .....................      28.5       13.4       28.5       13.2
Income tax expense .............................       8.5        0.6        8.5        2.6
                                                  ---------  ---------  ---------  ---------
Net income .....................................      20.0 %     12.8 %     20.0 %     10.6 %
                                                  =========  =========  =========  =========

Net Sales. Net sales for the quarter ended December 31, 2000 increased2001, decreased by 40.3%23% to $106.7$82.2 million, compared to $76.1$106.7 million for the quarter ended December 31, 1999.2000. Net sales for the nine months ended December 31, 20002001 were $311.0$239.8 million compared to $222.8$311.0 million for the nine months ended December 31, 1999, an increase2000, a decrease of 39.6%23%. In comparisonCompared to the prior year, quarterly revenues declined in all major geographies and channels, with the exception of our OEM and Mobile businesses. The growth in our Mobile business was the result of a strong seasonal effect, media publicity associated with carrier safety campaigns, and strong orders from carriers. We believe, however, that the level of orders from our carriers was higher than the level of underlying demand, and that our fourth quarter mobile revenues will therefore be down sequentially. The overall decrease in quarterly revenues versus a year ago periods, all of our channels, marketswas driven by the continuing recession in the U.S. and major geographic territories experienced increasesthe general economic slowdown in demand, with the most significant growthother countries in sales of our mobile and computer products. Duewhich we do business.

Our business continues to be impacted by a slowdown in businessglobal telecom and IT spending. We are also concerned that the recession that began in March of 2001 will continue or last longer than originally anticipated and may continue to adversely affect product demand. The December 2001, sales level reported by our distributors declined more steeply than is typical and now represents the lowest single month in the last several years. In addition to the lagging economy, we anticipate that our fourth quarter revenues will be affected by a number of factors, including the effect of an accounting change mandated by the Emerging Issues Task Force of the Financial Accounting Standards Board, "EITF 00-25" (Note 8), the acquisition of Ameriphone (Note 10), and the timing of certain orders that may have benefited us in our call centerthird quarter. We currently believe that our revenues and office markets, which we believe is tied to general economic conditions, revenues forearnings in the fourth fiscal quarter of 20012002 are anticipatedlikely to be down slightly fromlower than the third fiscal quarter of 2001.* quarter.

Gross Profit. Gross profit for the quarter ended December 31, 2000 increased 31.8%2001, decreased 33% to $39.6 million (48.2% of net sales), compared to $59.4 million compared to $45.1 million(55.7% of net sales) for the quarter ended December 31, 1999.2000. Gross profit for the nine months ended December 31, 2000first three quarters of fiscal 2002 was $174.8$116.5 million, an increasea decrease of 32.9%33% over the comparable period of fiscal 2000. For2001. The decline in gross margin percent from the quarter ended December 31, 2000,prior year was due to a combination of factors. The largest factor was our product mix as we sold more of products that have lower gross profit was 55.7%margins than the corporate average, particularly our mobile products. Fixed overhead spending as a percent of netrevenue increased, driven by lower sales a decrease of 3.6 percentage points compared to the prior year's quarter. As a percent of total revenues, our retail channel has grown, especially revenues for mobile products. Warranty costs are higher in this sales channel due to the typically higher returns from consumers in particular. We anticipate that gross 8 9 PLANTRONICS, INC. PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS profit of 59.3% of net sales for the quarter ended December 31, 1999. While cost reduction efforts continuedmargins will continue to be successful, they were offsetaffected by the unfavorable impact of European foreign exchange rates during the quarter as well as by the strong growth of new product offerings with lower margins for computer, mobile and certain small office and residential applications. The Company expects these items may continue to unfavorably impact our gross margin percentagefactors in the fourth quarter of fiscal 2001.* quarter.

Research, Development and Engineering. Research, development and engineering expenses for the quarter ended December 31, 2000 increased 39.7%2001, decreased 3% to $7.1$6.9 million (6.7%(8.4% of net sales), compared to $5.1$7.1 million (6.7% of net sales) for the quarter ended December 31, 1999.2000. Expenses for the nine months ended December 31, 20002001, were $19.5$22.8 million compared to $15.7$19.5 million for the nine months ended December 31, 1999. The increase in these expenses is due to increased investments in2000. We have focused on broadening our office, mobile and computer product lines and for new technology initiatives such as Bluetoothcontinuing our investment in Bluetooth™ and other wireless products. technologies.

Selling, General and Administrative. Selling, general and administrative expenses for the quarter ended December 31, 2000 increased 26.8%2001, decreased 3% to $22.7$22.1 million (21.2%(26.8% of net sales), compared to $17.9$22.7 million (23.6%(21.2% of net sales) for the quarter ended December 31, 1999.2000. For the nine months ended December 31, 2000,2001, expenses were $66.8$63.4 million, an increasea decrease of $16.9$3.4 million over the nine months ended December 31, 1999. Sales and marketing expense increased substantially2000. The overall dollar decrease in the level of spending between years was due to a number of factors. Marketing spending increased compared to the prior year's quarter for marketing campaigns designed to help increase the sales andof cellular headsets given the hands-free legislation which went into effect in New York in December, as well as other marketing programs for our mobile products, international sales and marketing programs, and sales and promotion expensecampaigns organized around driver safety primarily in the retail channel.U.S. This increase was offset by a decrease in sales spending, primarily as a result of lower revenues. General and administrative expenses decreasedincreased as a percentage of net sales from the year ago quarter, and nine months. mainly driven by the decline in revenues.

Operating Income. Operating income for the quarter ended December 31, 2000 increased 34.1%2001, decreased 64% to $10.7 million (13.0% of net sales), compared to $29.6 million compared to $22.1 million(27.8% of net sales) for the quarter ended December 31, 1999. However as a percent of net sales, operating income decreased 1.2 percentage points to 27.8% of net sales for the quarter ended December 31, 2000 compared to 29.0% of net sales for the quarter ended December 31, 1999.2000. For the nine months ended December 31, 2000,2001, operating income was $88.4$30.3 million compared to $66.0$88.4 million for the nine months ended December 31, 1999.2000. The decrease relativewas primarily driven by a decrease in revenues and gross margin. Management decided to net sales was duehold operating expenses at approximately the same levels as they had been to focus on expanding our wireless product portfolio in anticipation of demand for these products when the decline in gross margin coupled with substantial increases in saleseconomy recovers. This led to higher operating expenses as a percent of revenue, which contributed to lower operating margins and marketing expenditures. profit.

Interest and Other Expense (Income),Income, Net. Interest expense for the first nine months of fiscal 2001 has been minimal. In November 2000, the Company renewed its credit agreement with a major bank under which we have the right to borrow up to $100 million. There are currently no borrowings under this agreement. Interest income and other expense (income)income for the quarter ended December 31, 2000 increased to ($0.8)2001, was $0.4 million in income compared to ($0.6)$0.8 million in income for the quarter ended December 31, 1999.2000. The net $0.4 million decrease in income was primarily due to reductions in interest income of $0.3 million and foreign exchange losses due to declining foreign exchange rates. Interest income and other expense (income)income for the nine months ended December 31, 20002001, was ($0.4)$1.5 million in income compared to ($1.3)$0.4 million in income for the nine months ended December 31, 1999.2000. The net $1.1 million increase over the year ago quarterin income was primarily due to a $0.8 million reduction of foreign exchange gains as describedloss due to implementation of a hedging program in Note 4. Forfiscal 2002 and to a $0.4 million expense in the nine months ended December 31, 2000, the decreaseprior year in income over the comparable periodconnection with a secondary offering of stock by one of our stockholders.

Interest expense for fiscal 2000 was attributable2002 is expected to foreign exchange losses as described in Note 4. be minimal.* In November 1999, we entered into a credit agreement with a major bank. In November 2001, we renewed this agreement at $75 million with a new expiration date of January 15, 2003. We currently have no borrowings under this agreement.

Income Tax Expense. Income tax expense for the quarter ended December 31, 20002001, was $9.1$0.5 million compared to $7.3$9.1 million for the quarter ended December 31, 1999 and represented2000. During our third fiscal quarter of 2002, we successfully completed a routine state tax rates of 30% and 32%, respectively. The decreaseaudit which resulted in thea favorable tax adjustment. Excluding this favorable tax adjustment, our overall tax rate wasdecreased from 30% to 28% due to increased sales anddeclining profits in lowerhigher tax jurisdictions.

FINANCIAL CONDITION: Liquidity. As of December 31, 2000, the Company had working capital of $128.7 million, including $61.5 million of cash and cash equivalents and marketable securities, compared with working capital of $78.3 million, including $45.3 million of cash and cash equivalents and marketable securities, at March 31, 2000.

Operating Activities. During the nine months ended December 31, 2000,2001, we generated $42.2$63.6 million of cash from operating activities, due primarily to $25.5 million in net income, decreases of $14.6 and $10.2 million in accounts receivable and inventory, respectively, increases of $2.8 and $3.3 million in accounts payable and accrued liabilities, respectively, and an increase of $2.0 million in income taxes payable. In comparison, we generated $43.3 million in cash from operating activities for the nine months ended December 31, 2000, due primarily to $62.2 million in net income, a tax benefit on stock options exercised of approximately $10.1 million and an increase in income taxes payable of $6.3 million, offset by increases of $19.9$19.7 and $16.6 million in accounts receivable and inventory, respectively. In comparison, we generated $56.2respectively, and decreases of $2.5 and $2.0 million in cash from operating activities foraccounts payable and accrued liabilities, respectively.

Investing Activities. During the nine months ended December 31, 1999, due mainly to $45.72001, we purchased marketable securities of $14.5 million and received proceeds from maturities of marketable securities of $19.1 million. Capital expenditures of $8.4 million in net income, a tax benefit onthe nine months ended December 31, 2001, were incurred principally in tooling and equipment for new products, furniture and fixtures and leasehold improvements for facilities expansion.

Financing Activities. In the nine months ended December 31, 2001, we repurchased 2,482,621 shares of our common stock options 9 10 PLANTRONICS, INC. PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS exercised of $6.8for $48.4 million and an increase in income taxes payablereissued through employee benefit plans 66,269 shares of $7.5our treasury stock for $1.3 million. Increases in inventory were offset by favorable changes in other current assets and accounts receivable and liabilities. The Company has a $100.0 million revolving credit facility, including a $10.0 million letter-of-credit subfacility, with a major bank. During the quarter we renewed the line of credit and both the revolving credit facility and the letter of credit subfacility mature on November 25, 2001. As of December 31, 2000,2001, 239,000 shares remained under the repurchase plan authorized during the quarter. We received $0.9 million in proceeds from the exercise of stock options during the nine months ended December 31, 2001.

Subsequent to the end of the quarter, we completed the repurchase of all remaining shares under the plan. On January 25, 2002, we announced a new 1,000,000 share stock repurchase program.

Liquidity. As of December 31, 2001, we had working capital of $113.7 million, including $82.7 million of cash and cash equivalents and marketable securities, compared with working capital of $136.8 million, including $73.9 million of cash and cash equivalents and marketable securities, at March 31, 2001. Subsequent to the end of the quarter, we purchased Ameriphone, a leading supplier of amplified telephones and other solutions to address the needs of individuals with hearing impairment and other special needs. The sum of net assets, including goodwill and intangibles, less cash acquired was approximately $10.5 million. The consideration net of cash acquired, was fully paid in cash. We believe this acquisition will not have a material impact on our liquidity.

In November 2001, we renewed our revolving credit facility with a major bank at $75 million, including a letter of credit subfacility. The renewed facility and subfacility both expire on January 15, 2003. As of February 8, 2002, we have no cash borrowings under the revolving credit facility and $0.7 million outstanding under the letter-of-creditletter of credit subfacility. The amounts outstanding under the letter-of-creditletter of credit subfacility were principally associated with purchases of inventory. The terms of the credit facility contain covenants that materially limit our ability to incur debt and pay dividends, among other matters. These covenants may adversely affect our financial positionus to the extent we cannot comply with them. We are currently in compliance with the covenants under this agreement.

We believe that our current cash balance and cash provided by operations, together with available borrowing capacity under our revolving credit facility and letter-of-creditletter of credit subfacility, will be sufficient to fund operations for at least the next 12twelve months.* Investing Activities. Capital expenditures of $10.7 million in the nine months ended December 31, 2000 were incurred principally in tooling, improvements related to facilities expansion and investments in computer and software upgrades. Financing Activities. In the nine months ended December 31, 2000, we reissued through employee benefit plans 84,347 shares of our treasury stock for approximately $2.3 million and repurchased 737,100 shares of our common stock for approximately $25.5 million. As of December 31, 2000, 317,621 shares remained under the repurchase plan authorized on November 15, 2000. We received approximately $8.0 million in proceeds from the exercise of stock options during the nine months ended December 31, 2000. The maximum aggregate number of shares that may be issued under the 1993 Stock Plan is 18,927,726 shares.

RISK FACTORS AFFECTING FUTURE OPERATING RESULTS

Investors or potential investors in theour stock of Plantronics should carefully consider the risks described below. The performance of Plantronicsour stock will reflect the performance of our business relative to, among other things, our competition, general economic and market conditions, and industry conditions. You should carefully consider the following factors in connection with any investment in Plantronicsour stock. Our business, financial condition and results of operations could be materially adversely affected if any of the risks occur. IfShould any or all of the following risks occur,materialize, the trading price of Plantronicsour stock could decline and an investor could lose all or part of his or her investment. A GENERAL

THE CONTINUING GLOBAL ECONOMIC SLOWDOWN COULD RESULT IN A FURTHER REDUCTION IN OVERALL DEMAND FOR OUR PRODUCTS AND POTENTIAL UNCOLLECTABLE CUSTOMER RECEIVABLES, BOTH OF WHICH WOULD MATERIALLY ADVERSELY AFFECT OUR RESULTS RESULTS.

While our markets are generallyhave not exhibited highly cyclical behavior historically, our sales are affected by overall economic activity. If there is a slowing in nationalthese trends are worse or international economic growth or a recession, there could be a reduction in the overall level of demand for our products. Thislonger than presently anticipated, this could cause us not to achievemeet the levels of sales required to achieve our anticipatedprojected financial results, which could in turn materially adversely affect the market price of our stock. Also, if the overall economy slows or there is a recession,continues to slow further this could affect the financial health of certain purchasers of our products, potentially resulting in the failure of such purchasers to pay amounts that they owe to us. Due to the current slowdown in the economy, the credit risks relating to these resellers/customers have increased. We are in the process of implementing programs to assist us in monitoring and mitigating these risks, but there can be no assurance that such programs will be effective in reducing our credit risks. We also continue to monitor credit exposures from weakened financial conditions in certain geographic regions and the impact that such conditions may have on the worldwide economy. We have recently experienced some losses due to us. 10 11 PLANTRONICS, INC. PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS customers failing to meet their obligations. Although these losses have not been significant, future payment defaults by customers could harm our business and have a material adverse effect on our operating results and financial condition.

A SUBSTANTIAL PORTION OF OUR SALES COME FROM THE CALL CENTER MARKET AND A DECREASE OF DEMAND IN THAT MARKET COULD MATERIALLY ADVERSELY AFFECT OUR RESULTS.

We have historically derived, and continue to derive, a substantial portion of our net sales from the call center market. This market has grown significantly in recent years as new call centers have proliferated and existing call centers have expanded. In the third quarter of fiscal 2002, our sales in the call center market were below the level of sales in that market in comparable prior year periods. We do not believe that our decreasing sales are a result of market share gains by our competitors but, instead, believe that the sales slowdown is due to reduction in the level of overall market demand. While we believe thisthat the call center market is continuing towill grow* in the future periods, this growth could slow or revenues from this market could continue to decline duein response to various factors. For example, technological advances such as automated interactive voice response systems could reduce or eliminate the need for call center agents in certain applications. In addition, consumer resistance to telemarketing could materially adversely affect growth in the call center market. A continued deterioration in general economic conditions could result in a reduction in the establishment of new call centers and in capital investments to expand or upgrade existing centers, and we believe this is in expanding or upgrading existing centers. Due tofact negatively affecting our business. Because of our reliance on the call center market, we will be affected more by changes in the rate of call center establishment and expansion and the communications products that call center agents use than would a company serving a broader market. Any decrease in the demand for call 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.

WE ARE COUNTING ON THE OFFICE, MOBILE, COMPUTER AND RESIDENTIAL MARKETS TO DEVELOP, AND WE COULD BE MATERIALLY ADVERSELY AFFECTED IF THEY DO NOT DEVELOP AS WE EXPECT.

While the call center market is still a substantial portion of our business, we believe that our future prospects will depend in large part on the growth in demand for headsets in the office, mobile, computer and residential markets.* These communications headset markets are relatively new and undeveloped. Moreover, we do not have extensive experience in selling headset products to customers in these markets. If the demand for headsets in these markets fails to develop, or develops more slowly than we currently anticipate, or if we are unable to effectively market our products to customers in these markets, it would have a material adverse effect on the potential demand for our products and on our business, financial condition and results of operations. These headset markets are also subject to general economic conditions and if there is a continued slowing of national or international economic growth and the recession continues longer than we anticipated, 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.

OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY DUE TO A NUMBER OF CAUSES OUTSIDE OUR CONTROL.

Our quarterly results of operations may vary significantly in the future for a variety of reasons, including the following: -

• general economic conditions, compounded by the events on and following September 11^thand the war in Afghanistan;
• changes in demand for our products; - timing and size of orders from customers; - cancellations or delays of deliveries of components and subassemblies by our suppliers; - variances in the timing and amount of engineering and operating expenses; - distribution channel volume variations; - delays in shipments of our products; - product returns and customer credits; -
• insolvency of purchasers of our products or failure of purchasers of our products to pay amounts due to us; -
• timing and size of orders from customers;
• price erosion;
• cancellations, inability to ramp production or delays in deliveries of components and subassemblies by our suppliers;
• variances in the timing and amount of engineering and operating expenses;
• distribution channel mix variations;
• changes in the levels of cooperative advertising or market development funding required by retail resellers of our products;
• delays in shipments of our products;
• material product returns and customer credits;
• new product introductions by us or our competitors; -
• entrance of new competitors; 11 12 PLANTRONICS, INC. PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
• changes in actual or target inventory levels of our channel partners;
• increases in the costs of our raw materials, components and subassemblies; - price erosion; -
• changes in the mix of products sold by us; - and
• seasonal fluctuations in demand;demand and - general economic conditions. linearity of sales within the quarter (historically our fourth fiscal quarter has been back-end loaded, impairing our visibility to accurately forecast revenues based on run rates).

Each of the above factors is difficult to forecast and thus could have a material adverse effect on our business, financial condition and results of operations.

We generally ship most orders during the quarter in which they are received, and, consequently, we do not have a significant backlog of orders. As a result, quarterly net sales and operating results depend primarily on the volume and timing of orders received during the quarter. It is difficult to forecast orders for a given quarter. Since a large portion of our operating expenses, including rent, salaries and certain manufacturing expenses, are fixed and difficult to reduce or modify, if net sales do not meet our expectations, our business, financial condition and results of operations could be materially adversely affected.

Our operating results can also vary substantially in any period depending on the mix of products sold and the distribution channels through which they are sold. In the event that sales of lower margin products or sales through lower margin distribution channels in any period represent a disproportionate share of total sales during such period, our operating results would be materially adversely affected.

We believe that period-to-period comparisons of our operating results are not necessarily meaningful and should not be relied upon as indicative of future operating results. In addition, our operating results in a future quarter or quarters may fall below the expectations of securities analysts or investors, and, as a result, the price of our common stockCommon Stock might fall.

IF WE DO NOT MATCH PRODUCTION TO DEMAND WE WILL BE AT RISK OF LOSING BUSINESS OR OUR GROSS MARGINS COULD BE MATERIALLY ADVERSELY AFFECTED.

Historically, we have seen steady increases in customer demand for our products and have generally been able to increase production to meet thatincreasing demand. However, the demand for our products is dependent on many factors and such demand is inherently difficult to forecast. We have experienced sharp fluctuations in demand, especially for headsets for wireless and cellular phones. In addition, current global events, such as the war in Afghanistan, the terrorist scare in the U.S., and the anthrax concerns may cause the economy to be more volatile, making it more difficult to match supply and demand in the marketplace. Significant unanticipated fluctuations in demand could cause the following operating problems, among others: -

• If forecasted demand does not develop, we could have excess production or excess capacity. Excess production could result in higher inventories of finished products, components and subassemblies. If we were unable to sell these inventories, we would have to write off some or all of our inventories of obsolete products and unusable components and subassemblies. Excess manufacturing capacity could lead to higher production costs and lower margins.
• Significant reduction in production levels to address decreases in demand may leave us unprepared to meet a rapid increase in demand for our products.
• If demand increases beyond that forecasted, we would have to rapidly increase production. We depend on suppliers to provide additional volumes of components and subassemblies, and, therefore, 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 competitive sources of supply to meet their needs, there could be a long-term impact on our revenues. -
• Rapid increases in production levels to meet unanticipated demand could result in higher costs for components and subassemblies, 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. 12 13 PLANTRONICS, INC. PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - If forecasted demand does not develop, we could have excess production or excess capacity. Excess production could result in higher inventories of finished products, components and subassemblies. If we were unable to sell these inventories, we would have to write off some or all of our inventories of obsolete products and unusable components and subassemblies. Excess manufacturing capacity could lead to higher production costs and lower margins.

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

WE DEPEND ON OUR SUPPLIERS AND 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 capability to obtain timely deliveries of raw materials, components, subassemblies and products from our suppliers. We buy raw materials, components and subassemblies 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, subassemblies and finished products entails various risks, including the following: -

• We obtain certain raw materials, subassemblies, components and products from single suppliers, and alternate sources for these items are not readily available. To date, we have experienced only minor interruptions in the supply of these raw materials, subassemblies, components and products, none of which has significantly affected our results of operations. Current 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.
• Prices of raw materials, components and subassemblies 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. - We obtain certain subassemblies, components and products from single suppliers, and alternate sources for these items are not readily available. To date, we have experienced only minor interruptions in the supply of these subassemblies, components and products, none of which has significantly affected our results of operations. However, 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. -
• Due to the lead times required in order to obtain certain raw materials, subassemblies, 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, subassemblies, components and products. In the second quarter of fiscal 2001, we experienced a substantial rise in finished good inventories in part resulting from purchases of finished products from our suppliers in excess of demand. ThoseRelative to sales, inventory levels remained high inthrough the thirdfirst quarter of fiscal 2001.2002, but have been on the decline since that time. Failure in the future to match the timing of purchases of raw materials, subassemblies, components and products to demand would materially adversely affect our business, financial condition and results of operations. -
• Most of our suppliers are not obligated to continue to provide us with raw materials, components and subassemblies. 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. This would materially adversely affect our business, financial condition and results of operations.
• Although we generally use standard raw materials, parts and components for our products, the high development costs associated with emerging wireless technologies permits us to work with only a single source supplier of silicon chip-sets. 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 time to market schedules and could materially adversely affect our business, operating results and financial condition.

WE SELL OUR PRODUCTS THROUGH VARIOUS CHANNELS OF DISTRIBUTION AND A FAILURE OF THOSE CHANNELS TO OPERATE AS WE EXPECT COULD DECREASE OUR REVENUES.

We sell substantially all of our products through distributors, retailers, OEMs retailers and telephony service providers. Our existing relationships with these parties are nonexclusivenot 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, OEMs, retailers and telephony 13 14 PLANTRONICS, INC. PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS service providers or to expand our distribution channels could materially adversely affect our business, financial condition or results of operations.

Our distribution channels generally hold inventories of our products, determined in their own business judgment to be sufficient to meet their customer's delivery requirements. Such inventory levels are subject to market conditions, business judgment by the reseller and our ability to meet their time-to-ship needs. Rapid reductions by our distributors, OEMs, retailers and other customers in the levels of inventories held in our products could materially adversely affect our business, financial condition or results of operations.

We generally offer our customers certain credit terms, allowing them to pay for products purchased from us between thirty and sixty days or more after we ship the products. Our receipt of payment for our products depends on the financial liquidity of those customers. If significant customers or a significant number of customers experience liquidity problems, withthis could affect our ability to collect our accounts receivables,receivable, which could materially adversely affect our business, financial condition or results of operations.

WE HAVE STRONG COMPETITORS AND WILL LIKELY FACE ADDITIONAL COMPETITION IN THE FUTURE.

The markets for our products are highly competitive. We compete with a variety of companies in the various markets for communications headsets. Our single largest competitor is GN Netcom, a subsidiary of GN Great Nordic Ltd., a Danish telecommunications conglomerate withconglomerate. GN Great Nordic reported revenues of 5.41.68 billion Danish Krone (approximately $700U.S. $200 million) in calendar 1999. In 2000,the quarter ending September 30, 2001, while GN Netcom's revenues for the same period were 471 million Danish Krone (approximately U.S. $56 million). GN Netcom acquiredhas made several acquisitions over the years. We believe the acquisitions of Hello Direct and Jabra Corporation, a supplier of headsets in the mobile phone market, resulting in an entityhave provided GN Netcom with a broader mobile product offeringline and greater marketing presence than eitherthey had prior to these acquisitions.

We currently operate principally in a multilevel distribution model - we sell most of the two entities had separately. On October 4, 2000,our products to distributors who, in turn, resell to dealers or end-customers. GN Netcom's acquisitions indicate it may be moving towards a direct sales model. While we believe that our business and our customers benefit from our current distribution structure, if GN Netcom announced that it had signed an agreement to acquire Hello Direct, Inc., a retail channel selleror other competitors sell directly, they may offer lower prices which could materially adversely affect our business and results of communications products and a customeroperations. In the face of Plantronics. On October 25, 2000,current economic downturn, we announced that we terminatedare seeing lower prices from our contract for the supply of products to Hello Direct due to the impending acquisition of Hello Direct, Inc. bycompetitors, particularly GN Netcom. On November 8, 2000, GN Netcom announced that it had completed its tender for the shares of Hello Direct stock and that it planned to proceed promptly to complete that acquisition. It is not clear how this merger will affect us other than the termination of the product purchase contract, which we do not believe will have a material adverse affect.* However, the acquisition by GN Netcom of Hello Direct does give it a directly owned retail channel presence it did not have before the acquisition. On February 7, 2001,

Logitech International S.A., a manufacturer and seller of computer accessory products, announced that it had agreed to purchaseacquired Labtec Inc., a Vancouver, Washington-based provider of, among other products, headsets for use with computers. Ifcomputers, in March 2001. Following this acquisition, is completed, Labtec will havegained greater resources with which to compete with us than it didhad prior to its acquisition. being acquired by Logitech.

We anticipate that we will face additional competition from companies that currently do not offer communications headsets. This is particularly true in the office, mobile computer and residential markets. As these markets mature, we will face increasedIn fact, on September 11, 2001, Sony Corporation and Telefonaktiebolaget LM Ericsson announced that their respective boards approved the merger of their mobile business worldwide including telephone accessories such as telephone headsets and adapters. Recently, this Joint Venture announced the launch of its first product, a BluetoothÔ communications device which shipped in November 2001. We anticipate other competition from consumer electronics companies and other companies that currently manufacture and sell mobile phones or computer peripheral equipment. These new competitors are likely to be larger, offer broader product lines, bundle or integrate with other 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.

We anticipate that we will also face additional competition from companies, principally located in the Far East, which offer very low cost headset products, including products which are modeled on or direct copies of our products. These new competitors are likely to offer very low cost products which may result in price 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. 14 15 PLANTRONICS, INC. PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We believe that the market for lightweight communication headsets is showing some signs of commoditization. In particular, we believe that our competitors, especially GN Netcom, are increasingly choosing to compete on price. While this has long been true of competitors from the Far East, we think the trend is accelerating and that customers are also more receptive to lower cost products, even when the quality, service or total value of the offer may be notably lower as well.

Historically, our expertise in acoustics and design has allowed us to design, develop and manufacture products with the levels of sound quality enabling us to meet the needs of our customers. Due to technological advances, including but not limited to better digital signal processing, our current and future competitors may be able to develop products with the same or better audio quality at lower costs. These technological advances may allow current and future competitors to compete more effectively in terms of product quality or price that could materially adversely affect our business and results of operations.

We believe that important competitive factors for us are product reliability, product features, customer service and support, reputation, distribution, ability to meet delivery schedules, warranty terms, product life and price. If we do not compete successfully with respect to any of these or other factors it could materially adversely affect our business, financial condition and results of operations. IfFurther, if we do not successfully develop and market products that compete successfully with those of our competitors, it would materially adversely affect our business, financial condition and results of operations.

NEW PRODUCT DEVELOPMENT IS RISKY AND WE WILL BE MATERIALLY ADVERSELY AFFECTED IF WE DO NOT RESPOND TO CHANGING CUSTOMER REQUIREMENTS AND NEW TECHNOLOGIES.

Our product development efforts historically have been directed toward enhancement of existing products and development of new products that capitalize on our core capabilities. The success of new product introductions is dependent on a number of factors, including the proper selection of new product features, timely completion and introduction of new product designs, cost-effective manufacture of such products, quality of new products and market acceptance. To be successful in the future, we must develop new products, qualify these new products, successfully introduce these products to the market on a timely basis, and commence and sustain low-cost, volume production to meet customers' demands. Although we attempt to determine the specific needs of headset users in our target markets, because almost all of our sales are indirect, we may not always be able to timely and accurately predict end-user requirements. As a result, our products may not be timely developed, designed to address current or future end-user requirements, offered at competitive prices or accepted, which could materially adversely affect our business, financial condition and results of operations. Moreover, we generally incur substantial research and development costs before the technical feasibility and commercial viability of a new product can be ascertained. Accordingly, revenues from new products may not be sufficient to recover the associated development costs.

Historically, the technology used in lightweight communications headsets has evolved slowly. New products have primarily offered stylistic changes and quality improvements, rather than significant new technologies. We anticipate that theThe technology used in hands-freehands free communications devices, including our products, will begin to evolveis evolving more rapidly in the future.now than it has historically and we anticipate that this trend may accelerate. We believe that this is particularly true for our newer emerging technology products especially in the mobile, computer markets, residential and certain parts of the office mobilemarket. We believe products designed to serve these markets generally exhibit shorter lifecycles and residentialare increasingly based on open standards and protocols. The end markets whichserved are much larger than the traditional call center market. This combination of factors may require uslead to develop new headset technologiesincreased commoditization, as a greater number of competitors attempt to support cordlessintroduce products, or reverse engineer our products and wireless operation and to interface with new communications and computing devices. As a result, ouroffer similar but lower quality products at lower price points.

Our success depends upon our ability to enhance existing products, to respond to changing market requirements, and to develop and introduce in a timely manner new products that keep pace with technological developments. If we are unable to develop and introduce enhanced products or new products in a timely manner in response to changing market conditions or customer requirements, it will materially and adversely affect our business, financial condition and results of operations.

Due to the historically slow evolvementevolution of our products, we have generally been able to phase out obsolete products without significant impact to our operating margins. However, 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 obsolete products may result in reductions to our operating margins and materially adversely affect our earnings and results of operations.

CHANGES IN 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 demand for our products if the costs are passed along or a decrease in our margins. Compliance with regulatory restrictions may impact the technical quality and capabilities of our products, reducing their marketability. We are currently facing a substantial change in the regulations applicable to our products in the European Union and there is no certainty that we can meet those regulatory requirements in a timely and cost-effective manner. Failure to conform our products to these new European regulatory requirements would result in our inability to sell such products in Europe, resulting in a material adverse impact to our financial condition and results of operations. 15 16 PLANTRONICS, INC. PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

WE HAVE SIGNIFICANT FOREIGN OPERATIONS AND THERE ARE INHERENT RISKS IN OPERATING ABROAD.

In the first nine months of fiscal 2001,2002, approximately 30.9% of our net sales were derived from customers outside the United States. Approximately 33.5%31.2% of our net sales in fiscal 20002001 were derived from customers outside the United States, compared with approximately 30.5%33.5% of our net sales in fiscal 1999.2000. In addition, we conduct substantially allthe majority of our headset assembly operations in our manufacturing facility located in Mexico, and we obtain most of the components and subassemblies used in our products from various foreign suppliers. We also purchase a growing number of turn-key products directly from Asia. The inherent risks of international operations, particularlyeither 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: -

• cultural differences in the conduct of business; -
• greater difficulty in accounts receivable collection; -
• unexpected changes in regulatory requirements; -
• tariffs and other trade barriers; -
• economic and political conditions in each country; -
• management and operation of an enterprise spread over various countries; and -
• the burden of complying with a wide variety of foreign laws.

OUR FOREIGN OPERATIONS PUT US AT RISK OF LOSS IF THERE ARE MATERIAL CHANGES IN CURRENCY VALUES AS COMPARED TO THE U.S. DOLLAR.

A significant portion of our business is conducted in currencies other than the U.S. dollar. Substantially all of our sales throughout Europe are transacted in local currencies. We are therefore exposed to risks associated with fluctuations in exchange rates that can affect our revenue and gross margins and can also generate currency transaction gains and losses. In calendar 2000,our prior fiscal year, the value of major European currencies dropped against the U.S. dollar.dollar, which adversely impacted our revenue and gross margin and also resulted in currency transaction losses. To date, we have partially but not fully reflected that change in currency value in our selling prices. In order to maintain a competitive price for our products in Europe, we may haveexpect to effectively reduce our current prices further, resulting in a lower margin on products sold in Europe. Continued change in the values of European currencies or changes in the values of other foreign currencies could have a material adverse effect on our business, financial condition and results of operations. OUR FOREIGN OPERATIONS PUT US AT RISK OF LOSS IF THERE ARE MATERIAL CHANGES IN CURRENCY VALUES AS COMPARED TO THE U.S. DOLLAR. A significant portion of

In our business is conducted in currencies other than the U.S. dollar. As a result, fluctuations in exchange rates create risk to us in both the sale of our products and our purchase of supplies. Fluctuations in the value of the currencies in whichcurrent fiscal year we conduct our business relative to the U.S. dollar have caused and will continue to cause currency transaction gains and losses. In calendar 2000, the value of major European currencies dropped against the U.S. dollar, resulting in currency transaction losses. Although we do not currently engage in any hedging activities to mitigate exchange rate risks, we continually evaluateintroduced programs designed to reduce our foreign currency exposure.net asset exposure and have successfully reduced transaction gains and losses that are accounted for in other income/expense. However, there can be no assurance that our hedging policy will be effective in continuing to reduce transaction gains and losses. Moreover, our economic exposure to foreign currency fluctuations has not changed and revenues and margins can be adversely impacted by such fluctuations. There can be no assurance that we will not continue to experience currency losses in the future, nor can we predict the effects of future exchange rate fluctuations on future operating results. To the extent that sales to our foreign customers increase or transactions in foreign currencies increase, our business, financial condition and results of operations could be materially adversely affected by exchange rate fluctuations.

THE TERRORIST ATTACKS ON NEW YORK CITY ON SEPTEMBER 11, 2001 MARKED A TURNING POINT IN CURRENT U.S. POLITICAL, MILITARY AND SECURITY STRATEGIES WHICH WE BELIEVE HAS AND MAY HAVE EXPERIENCED IN CALENDAR 2000 A NON-SUSTAINABLE INCREASE IN SALES AS A RESULT OF PENT-UP DEMAND FROM Y2K CONCERNS. Our results forCONTINUE TO ADVERSELY IMPACT OUR BUSINESS, BOTH DIRECTLY AND INDIRECTLY.

The events of September 11^th and the first halfU.S. military efforts in Afghanistan have contributed to a further slowing in the economy with additional layoffs in other industries resulting in a negative effect on our business. We believe that one direct impact of calendar year 2000 may not be indicativethe attacks is the reduction of longer-term market conditions. Our results of operations for that period, including the first and second quarters of fiscal 2001, may reflect a non-sustainable increase in sales as a result of purchases by call center agents in the travel and office customers who delayed investmentleisure industries. We are indirectly affected by the continuing concern on future terrorist attacks on U.S. soil, as well as concerns of the anthrax infection on the American and international public. We are unable to estimate the impact these events and their consequences have on our business, however, given the magnitude of these unprecedented events and the possible subsequent effects, we expect that there has been and may continue to be an adverse impact to our financial condition, our operations and our prospects as these events adversely affect the global economy in new call centers or information technologies due to concerns over the effects of Y2K. 16 17 PLANTRONICS, INC. PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS general.

IF THERE ARE PROBLEMS THAT AFFECT OUR PRINCIPAL MANUFACTURING FACILITY IN MEXICO, WE COULD FACE LOSSES IN REVENUES OR MATERIAL INCREASES IN COSTS OF OUR OPERATIONS. Substantially all

The majority of our manufacturing operations are currently performed in a single facility in Tijuana, Mexico. A fire, flood or earthquake, political unrest or other disaster or condition affecting our facility could have a material adverse effect on our business, financial condition and results of operations. While we have developed a disaster recovery plan and believe we are adequately insured with respect to this facility, we may not be able to implement the plan effectively or on a timely basis or recover under applicable insurance policies.

WE RELY ON A CONTINUOUS POWER SUPPLY TO CONDUCT OUR BUSINESS OPERATIONS AND CALIFORNIA'S CURRENTANOTHER ENERGY CRISIS IN CALIFORNIA COULD DISRUPT OR MAKE SUBSTANTIALLY MORE EXPENSIVE THE OPERATIONS AT OUR HEADQUARTERS FACILITY. California is in the midst of an energy crisis that could disrupt the conduct of sales, marketing, research and development, finance and other operations at our headquarters facilities.

In the event of an acute power shortage, California has, on some occasions, implemented, and may in the future continue to implement, rolling blackouts throughout California.the state. We have emergency back-up generators which keep our business information systems in operation but we do not have sufficient back-up generating capacity or alternate sources of power to keep our headquarters in full operation in the event of a blackout. If blackouts interrupt our power supply, we would be temporarily unable to continue full operations at our headquarters.

Our operations are also vulnerable to interruption by fire, earthquake, telecommunications failure and other events beyond our control. Our corporate headquarters are located near major earthquake faults. We do not carry business interruption insurance or carry financial reserves against business interruptions arising from electrical blackouts, although we do carry it for other causes. Any such interruption could damage our reputation, harm our ability to retain existing customers and to obtain new customers, and could result in lost revenue, any of which could substantially harm our business and results of operations.

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 proprietary technology. 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. Werights.We currently hold 36thirty-three United States patents and additional foreign patents and intend towill continue to seek patents on our inventions when we believe it to be appropriate. The process of seeking patent protection can be lengthy and expensive. Patents may not be issued in response to our applications, and patents that are issued may be invalidated, circumvented or challenged by others. If we are required to enforce our patents or other proprietary rights through litigation, the costs and diversion of management's attention could be substantial. In addition, the rights granted under any patents 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.

From time to time, third parties, including our competitors, may assert patent, copyright and other intellectual property rights against us. Such claims, if they are asserted, could result in costly litigation and diversion of management's attention. In addition, we may not ultimately prevail in any such litigation or be able to license any valid and infringed patents from such third parties on commercially reasonable terms, if at all. Any infringement claim or other litigation against us could materially adversely affect our business, financial condition and results of operations.

WE ARE EXPOSED TO POTENTIAL LAWSUITS ALLEGING DEFECTS IN OUR PRODUCTS.

The use of our products exposes us to the risk of product liability claims. Product liability 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 claims 17 18 PLANTRONICS, INC. PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS brought against us could have a material adverse effect upon our business, financial condition and results of operations.

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. IfWe have tested our headsets through independent laboratories and have found that use of our headsets reduces radio frequency emissions at the user's head to virtually zero. However, if research was to establish 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 our mobile headsets.

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.

WHILE WE BELIEVE WE COMPLY WITH ENVIRONMENTAL LAWS AND REGULATIONS, WE ARE STILL EXPOSED TO POTENTIAL RISKS FROM ENVIRONMENTAL MATTERS.

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. Although we believe that our current manufacturing operations comply in all material respects with applicable environmental laws and regulations, environmental legislation has been enacted and may in the future be enacted or interpreted to create environmental liability with respect to our facilities or operations. We have included in our financial statements a reserve of $1.5 million for possible environmental remediation of the site of one of our previous businesses. While no claims have been asserted against us in connection with this matter, such claims could be asserted in the future and any liability that might result could exceed the amount of the reserve.

WE HAVE ACQUIRED A COMPANY AND EXPECT TO MAKE FUTURE ACQUISITIONS AND ACQUISITIONS INVOLVE MATERIAL RISKS

On January 2, 2002, we acquired Ameriphone, Inc., a California corporation, in a cash transaction. We may in the future, in order to address the need to develop new products and technologies, and enter new markets, acquire other companies. There are inherent risks in the acquisition of another company that could materially adversely affect our business, financial condition and results of operations. The types of risks faced in connection with acquisitions include:

• cultural differences in the conduct of business;
• difficulties in integration of the operations, technologies, and products of the acquired company;
• the risk of diverting management's attention from normal daily operations of the business;
• potential difficulties in completing projects associated with purchased in- process research and development;
• risks of entering markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions;
• the abilities of representatives, distributors, OEM customers and other resellers which are retained by the acquired company or customers of the acquired company;
• differences in the business information systems of the companies;
• difficulties in integrating the operations, technologies, transactions and business information systems of the company; and
• the potential loss of key employees of the acquired company.

Mergers and acquisitions, particularly those of high-technology companies, are inherently risky, and no assurance can be given that the Ameriphone or future acquisitions will be successful and will not materially adversely affect our business, operating results or financial condition. We must also manage any such growth effectively. Failure to manage growth effectively and successfully integrate acquisitions made by us could materially harm our business and operating results.

OUR BUSINESS COULD BE MATERIALLY ADVERSELY AFFECTED IF WE LOSE THE BENEFIT OF THE SERVICES OF KEN KANNAPPAN OR OTHER KEY PERSONNEL.

Our success depends to a significant extent upon the services of a limited number of executive officers and other key employees. The unanticipated loss of the services of our president and chief executive officer, Mr. Kannappan, or one or more of our other 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 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.

OUR STOCK PRICE MAY BE VOLATILE AND YOUR INVESTMENT IN PLANTRONICS STOCK COULD BE LOST.

The market price for our common stockCommon Stock may continue to be affected by a number of factors, including the announcement of new products or product enhancements by us or our competitors, the loss of services of one or more of our executive officers or other key employees, quarterly variations in our or our competitors' results of operations, changes in our published forecasts of future results of operations, changes in earnings estimates or recommendations by securities analysts, developments in our industry, sales of substantial numbers of shares of our common stockCommon Stock in the public market, general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors. In addition, stockStock prices for many companies, particularly in the technology sector, 18 19 PLANTRONICS, INC. PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS have experienced wide fluctuations that have often been unrelated to the operating performances of such companies. Such factors and fluctuations, as well as general economic, political and market conditions, such as recessions, maycould materially adversely affect the market price of our common stock. Common Stock.

ANTI-TAKEOVER PROVISIONS IN OUR CURRENT BY-LAWS OR WHICH COULD BE PUT INTO PLACE BY OUR BOARD OF DIRECTORS COULD AFFECT MARKET PRICES 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. Common Stock.

CITICORP VENTURE CAPITAL HAS SIGNIFICANT CONTROL OVER OUR BUSINESS.

Our largest stockholder, Citicorp Venture Capital, Ltd. ("CVC"), beneficially owns 8,604,1795,454,257 shares of our common stockCommon Stock (excluding any shares that may be owned by employees of CVC or its affiliates), which represents approximately 17.5%11.6% of our outstanding common stockCommon Stock as of December 31, 2000.2001. We also have an agreement with CVC under which it is entitled to have up to twothree of its designees serve on our Board of Directors, depending on the level of CVC's continuing stock ownership. Based on its current ownership of our outstanding Common Stock, CVC is entitled to designate two nominees. Messrs. Robert F. B. Logan, M. Saleem Muqaddam and John M. O'Mara are currently serving as CVC's designees underpursuant to that agreement (having been nominated for election in a period in which the agreement with CVC required us to nominate and support the election of three designees of CVC). In addition, our bylaws contain provisions that require a two-thirds (66 2/3%) supermajority vote of the Board of Directors to approve certain transactions, including amendments of our Certificate of Incorporation, certain provisions of our bylaws, mergers and sales of substantial assets, acquisitions of other companies and sales of capital stock. These provisions may have the effect of giving a small number of directors the ability to block such transactions. agreement.

WE HAVE SEVERAL SIGNIFICANT STOCKHOLDERS AND, GIVEN THE LOW TRADING VOLUME OF OUR STOCK, IF THEY SELL THEIR SHARES IN A SHORT PERIOD OF TIME, WE COULD SEE AN ADVERSE AFFECTEFFECT ON THE MARKET PRICES OF OUR STOCK.

As of December 31, 2000,February 8, 2002, we had 49,169,30446,374,134 shares of common stockCommon Stock outstanding and in the public market. All of these shares are freely tradable except for approximately 9,800,0009,080,064 shares held by affiliates of Plantronics (including CVC and the directors and officers of Plantronics). These approximately 9,800,0009,080,064 shares may be sold in reliance on Rule 144 under the Securities Act of 1933, as amended (the "Securities Act"), or pursuant to an effective registration statement filed with the Securities and Exchange Commission.

Some of our current stockholders, including CVC and certain of our directors, also have certain contractual rights to require Plantronicsus to register their shares for public sale. Approximately 7,900,0009,694,924 additional shares are subject to outstanding stock options as of December 31, 2000.February 8, 2002. As of December 31, 2000,February 8, 2002, Ms. Louise Cecil, the widow of our former CEO and Chairman, Robert S. Cecil, held options on approximately 450,000433,000 shares of our common stock,Common Stock, transferred to her by Mr. Cecil during his life. She has registered those shares for resale and can sell any or all of those shares at any time. Plantronics

Our stock is not heavily traded. OurThe average daily trading volume of our stock in twelve calendar month periods prior to December 31, 2000the third quarter of fiscal 2002 was 196,621approximately 277,255 shares per day with a median volume in that period of 117,850222,800 shares per day. Sales of a substantial number of shares of common stockour Common Stock in the public market by CVC or any of our officers, directors or other stockholders could adversely affect the prevailing market price of the common stockour Common Stock and impair our ability to raise capital through the sale of equity securities. 19 20 PART I,

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Plantronics considered

The following discusses our exposure to market risk related to changes in interest rates and foreign currency exchange rates. This discussion contains forward-looking statements that are subject to risks and uncertainties. Actual results could vary materially as a result of a number of factors including those set forth in "Risk Factors Affecting Future Operating Results".

INTEREST RATE RISK

At December 31, 2001, we had cash and cash equivalents totaling $74.1 million, compared to $60.5 million at March 31, 2001. At December 31, 2001, we had marketable securities totaling $8.6 million compared to $13.4 million at March 31, 2001. Cash equivalents have an original maturity of ninety days or less; marketable securities have an original maturity of greater than ninety days, but less than one year. We believe we are not currently exposed to significant interest rate risk as the provisionmajority of Financial Reporting Release No. 48 "Disclosureour combined cash and marketable securities balances were invested in securities or interest bearing accounts with maturities of Accounting Policiesless than ninety days. The average maturity period for Derivative Financial Instruments and Derivative Commodity Instruments, and Disclosure of Quantitative and Qualitative Information about Market Risk inherent in Derivative Financial Instruments, Other Financial Instruments and Derivative Commodity Instruments." Plantronics had no holdings of derivative financial or commodity instrumentsour investments at December 31, 2000. Plantronics believes it has minimal2001, was less than two months. The interest rates locked in on those investments ranged from 2.1% to 4.8%. Our investment policy requires that we only invest in deposit accounts, certificates of deposit or commercial paper with minimum ratings of A1/P1 and money market mutual funds with minimum ratings of AAA.

In November 2001, we renewed our revolving credit facility, including a letter of credit subfacility, with a major bank at $75 million. The renewed facility and subfacility both expire on January 15, 2003. As of February 8, 2002, we have no cash borrowings under the current revolving credit facility. If we choose to borrow under this facility in the future, and market interest rates rise, then our interest payments would increase accordingly.

FOREIGN CURRENCY EXCHANGE RATE RISK

In the first nine months of fiscal 2002, approximately 30.9% of our net sales were derived from customers outside the United States, with approximately 19% of total revenues denominated in foreign currencies, predominately the Great British Pound and the Euro. Beginning in the first quarter of fiscal 2002, we entered into foreign currency forward exchange contracts to hedge the foreign exchange exposure to financial market risksof certain forecasted receivables, payables and riskscash balances denominated in Great British Pounds and Euros. Gains and losses associated with currency rate changes on the contracts are recorded in results of operations, as other income (expenses), offsetting gains and losses on the related assets and liabilities. The success of the hedging program depends on forecasts of transaction activity in the various currencies. We have no assurance that exchange rate fluctuations will not materially adversely affect our business in the future.

At December 31, 2001, we had $1.8 million of forward-exchange contracts outstanding, denominated in Euros, as a hedge against forecasted foreign currency exchange rates at this time.* currency-denominated receivables, payables and cash balances.

PART II -II. -- OTHER INFORMATION

ITEM 1. NONE.

ITEM 2. NONE.

ITEM 3. NONE.

ITEM 4. NONE.

ITEM 5. NONE.

ITEM 6. EXHIBITS & REPORTS ON FORM 8-K

(a) Exhibits. NoThe following exhibits are filed as part of this Quarterly Report on Form 10-Q. 10-Q:

Exhibit Number	Description
3.1	Amended and Restated By-Laws
10.15	Second Amendment dated November 1, 2001 to Credit Agreement dated as of November 29, 1999 between Registrant and Wells Fargo Bank N.A., as amended by the First Amendment to the Credit Agreement dated as of November 27, 2000.

(b) Reports on Form 8-K. No reports on Form 8-K were filed by Registrant during the fiscal quarter ended December 31, 2000. Items 1, 2, 3, 4 and 5 are not applicable and have been omitted. 20 21 2001.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereuntothereunto duly authorized. PLANTRONICS, INC. ---------------------------------------------- (Registrant) FEBRUARY 13, 2000 By: /s/ BARBARA V. SCHERER - ------------------------- ------------------------------------------- (Date) (Signature) Barbara V. Scherer Senior Vice President - Finance and Administration and Chief Financial Officer (Principal Financial Officer and Duly Authorized Officer of the Registrant) 21

	PLANTRONICS, INC.

	(Registrant)

	By:	/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 INDEX

Exhibit Number	Description
3.1	Amended and Restated By-Laws
10.15	Second Amendment dated November 1, 2001 to Credit Agreement dated as of November 29, 1999 between Registrant and Wells Fargo Bank N.A., as amended by the First Amendment to the Credit Agreement dated as of November 27, 2000.