Plantronics Has Nothing to Show from Ad Spend
Plantronics (PLT) spent $11 million on an advertising campaign in FY2006, according to their recently filed 10K. However, a look at the segment results suggest they have very little to show for it.
Working on the hypothesis that the advertising is geared toward their consumer-related business lines (the office and call center market is a duopoly between Plantronics and GN Netcom), a look at the segment data is disheartening:
Office and call center: + 21.9 percent
Mobile: – 4.9 percent
Gaming/Computer: – 10.4 percent
Other: – 1.3 percent
So the sales improved where the advertising dollars weren’t spent and declined where they were. It begs the question as to whether the last deal their head of marketing (hired in 2005) closed was getting himself hired.
What’s more, $11 million is not chump change for Plantronics, whose total cash flow from operations was $78 million. With 49 million shares outstanding it translates into about $0.16 in earnings per share. It’s valuation would look even more attractive had the earnings been $0.16 higher.
So given all this, at least the ad spending will be lower in FY07, right? Nope. The company is expecting it to rise to $19 million. Yikes.
William Trent currently has a short position in put options related to Office Depot (ODP).
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