Buyers over the moon about headsets

Plantronics finds clients will pay more for headsets than for mobiles, writes Karlin Lillington

You might not have heard of headset company Plantronics before, but you have, literally, heard it.

One of those low-key technology firms that has been around since 1961, Plantronics made the headset used by Apollo astronaut Neil Armstrong on the first moon landing back in 1969.

So, when the world heard him say: "One small step for man, one giant leap for mankind", they heard him say it courtesy of Plantronics.

"The product used on the moon is still a product available today," says Mr Neil Salton, Europe, Middle East and Africa (EMEA) marketing manager, Plantronics UK. The firm has a long-standing partnership with NASA, which used the headsets on all its moon missions and continues to use them in the current space programme, he says.

The company - rather unconventionally headquartered in California surfing town Santa Cruz - also continues to make the pilot headsets it was initially known for (Plantronics took its name from a blend of "plane" and "electronics"). And the unconventionality doesn't end there - the founders, both amateur pilots, initially intended to introduce their firm as a golf cart manufacturer.

But golfing's loss is the mobile user's gain. These days, the company is far better known as a maker of ultra-cool headsets for mobile phones - small, appropriately space-agey looking silver and black gizmos that loop over your ear or head, many of them wireless devices using the Bluetooth wireless protocol.

It also is a major supplier to call centres (its original core market) and to the corporate sector.

It formed its European business unit, based in Britain, in 1986, just as the call centre phenomenon took off in Europe, and went public on the New York Stock Exchange in 1994.

Now, it's staking a lot of its future on Bluetooth, once touted at the height of the dotcom boom as the wireless technology that would change the world - or at least let the world buy a can of Coke from an airport vending machine using a mobile phone.

But don't snigger quite yet. While Bluetooth has had enormous teething problems, centred on security issues and the fact that it often fails to allow devices to talk to one another as seamlessly as once claimed, it has found a modest success story in headsets. Its relatively short range means it is perfect for use with landlines or mobiles and sales suggest that those who spend their working lives glued to a phone love both the comfort of a small, hands-free set and being able to go wireless.

"In Europe, the opportunity is here, and the opportunity is now," says Mr Kevin Carey, EMEA senior product manager, Plantronics UK. A million Bluetooth-enabled mobiles were sold in 2002; that should hit five million this year, and 50 million by 2007. "Seventy per cent of all handsets sold in 2006 will be Bluetooth enabled," he adds, with the bulk of that market concentrated in Europe.

The company's hope is that, once you have the Bluetooth handset, then you'll add a slim Plantronics Bluetooth headset (or, as it calls it, "communication device").

Its research - and it does a lot of primary research into consumer trends, with partners like the University of Surrey - indicates that people are willing to spend more on a headset than on their mobile.

Plantronics is also spending on design research, hoping that European design flair will help it create headsets that don't make people feel nerdish.

This is a central concern as it aims hard at the corporate office market with a new, €400 headset for desktop phones that lets office workers roam up to 100 metres away from their landline. Whether Fiona from marketing would ever agree to be seen in clunky, old-style headsets drove Plantronics to come up with an almost chic device that nestles on a hip recharge unit when not in use.

The new headset also significantly ups the talk time for the headset to six hours, according to Plantronics. One of Bluetooth's shortcomings is its hunger for battery power.

Though style may seem a minor concern, Plantronics believes this issue is at the heart of whether headsets will go mass market with both office and mobile phone users.

Only 4 per cent of Europeans have used a headset, though 60 million Europeans use the phone for more than two hours a day, Mr Salton says.

Plantronics has plenty of data to argue the business case for headsets, as well. Employees spend as much as 60 per cent of their time away from their desk, and up to 70 per cent of calls fail to get through to the intended recipient on the first try. Yet 51 per cent of British employers expect their employees to be contactable all day. Unsurprisingly, Mr Salton thinks his headsets are the answer, and says studies show headsets can save an employee up to 1.5 hours per day.

About 75 per cent of existing sales already go into the business market, split between call centres and the general corporate sector. The consumer market is full of possibility, and Plantronics is trying to look at the best ways to expose consumers to the headsets. To date, that's mostly been through mobile phone stores, since most consumers, if they're in the market for a headset, will buy it at the same time that they buy their mobile.

Six to 8 per cent of Plantronics' revenue goes back into research and development at the firm, with what Mr Salton calls "a disproportionately large amount going into primary research". With headsets increasingly being sold as a lifestyle rather than utilitarian choice, a significant lump is dedicated to sales and marketing research, too.

It seems like money well spent. The company has done well even through the downturn, hitting a sweet spot with relatively inexpensive peripheral devices that consumers and businesses are willing to spend for, as opposed to big technology outlays.

In fiscal 2003, Plantronics revenue grew by 8.5 per cent, while operating income increased 32 per cent. Those figures have left several analysts bullish on the company. With a potential market of the 96 per cent of phone users who haven't yet given a headset a whirl, Plantronics has it all to play for.