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Ahead Of The Bell: Plantronics Upgraded

The Associated Press

NEW YORK (AP) — A Morgan Keegan & Co. analyst upgraded Plantronics Inc. Friday after the headset maker announced that it will shutter a manufacturing plant in China and cut almost 700 jobs.

In a client note, Morgan Keegan analyst Tavis C. McCourt raised his rating to "Outperform" from "Market Perform." He said he thinks the company's management is working to improve Plantronics' cost structure and he is increasingly confident that its profitability and cash glow generation will improve in upcoming quarters.

Santa Cruz, Calif.-based Plantronics said late Thursday that it will outsource production of its Bluetooth headsets to GoerTek Inc., a current supplier in China, and close its manufacturing facility in Suzhou, China. The plan will result in the company cutting about 670 jobs, Plantronics said.

The company expects that these changes, combined with restructuring moves it announced in January that included layoffs, salary reductions and other cuts, will lower its operating expenses to $195 million in fiscal 2010. That compares with projected operating expenses of about $250 million for the current fiscal year, based on expenses recorded in the first half of the year.

Plantronics expects to have the plan completed by October, and predicted it will record $11 million to $13 million in related restructuring charges. About $6 million to $7 million of this will be in non-cash charges, while about $5 million to $6 million will be cash charges stemming mostly from employee termination benefits and other expenses.

Plantronics also anticipates recording about $2 million to $2.5 million in increased tax expenses related to the operation changes.

McCourt lowered his estimate for Plantronics' fiscal fourth quarter, but raised his estimate for fiscal 2010 to 75 cents per share from 35 cents per share. Excluding items, he expects profit $1.07 per share, up from a previous estimate of 68 cents per share.

He also said that he thinks the company's main headset business will bear $1.15 per share in adjusted earnings in 2010.