RSSCreative Reports Wider than Expected Loss
By Ed Oswald | Published August 11, 2005, 1:23 PM
Creative late Wednesday admitted that disappointing sales of its MP3 player line dragged down the rest of the company, causing a wider than expected quarterly loss. However, the Singapore electronics maker said it expected to return to profitability by years end with two new MP3 players with multimedia capabilities, and a refocus on its traditional computer hardware business.
Also bringing down profits was a decline in the value of Creative's inventory and downward price pressures from its rivals. Apple during the quarter ending June 30 was able to lower prices across its line, causing rivals like Creative to follow suit.
"We had set our targets higher for unit volume and average selling prices for our MP3 players than we achieved in the period. Missing our targets caused us to miss our revenue goals and we were not able to reduce our inventory levels as rapidly and as much as we had expected," Craig McHugh, president of Creative Labs said in a statement.
The company reported a loss of $31.9 million or 38 cents per share versus a gain of $6.6 million or eight cents a share in the year ago quarter. Analysts had been expecting an average loss of $7.2 million for the quarter.
Apple, on the other hand, beat the Street, posting a $320 million profit on sales of $3.52 billion. During the same quarter, 6.2 million iPods were shipped - 1 million more than market forecasts were expecting.
Analysts say the road ahead for Creative will not get any easier. With continued intensification of the market, if Creative is not able to move inventory fast enough it may have to write off obsolete players, causing financials to worsen.
But there are better times ahead according to Creative. The company plans to introduce its highly anticipated Zen Micro Photo in September, and will soon begin shipping the multimedia-capable Zen Vision as well. Also, the company pointed to its traditional businesses in computer hardware where it plans to introduce several new sound cards to the market.
"While we continue to work diligently through our inventory position and are very focused on returning to profitability, we are not hesitating in driving our company forward," Sim Wong Hoo, chairman and CEO of Creative said. "We believe that we will greatly strengthen our product offerings in our key product categories in time for this holiday season."
My comment about the software support -- before I went 100% laptop (and docking station with 2 USB 2 cards and external equipment) -- I had a SB Audigy and was disappointed that upgraded software was only available for newer models and that it seemed that they quickly dropped support.
With ATI Video Cards and most applications, the software tends to be universal to the company, easily accessible, and the value of your product continues to grow while building your desire for an upgrade from the same company.
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|Yeah, I'll have to agree with most of these comments. Bought an extigy not too long ago and they've already said they won't support it in windows 64bit. Now what kind of driver support is that? The least they should do is keep their current customers happy. Who's going to want to buy more of their products when they refuse to keep the ones you already have current.
Sad part about it is that they even support older cards than the extigy in 64 bit windows. I feel like I'm missing something. I just wish they had some kind of "real" competitor ie nvidia vs ati, cause I'd probably end up buying their sound cards instead or they might be forced to have better driver support at least.
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|Haven't Creative considered that one of the biggest reasons for the iPod's success is in the software?
iTunes is easy to use, fun to use, and does a fantastic job of managing a digital music library in such a way that the files feel like actual music downloads, not just little files in a huge directory.
I use WinAMP for my audio and absolutely love it. I like iTunes better for the way that it displays playlists - but don't use it because it's bloated.
If Creative get a little more creative and design a killer app to go with their Nomads that can be used both as a free stand-alone download and also packaged in -- then we're set to go!
Creative's software is terrible. It's as bad as Real's software. Both companies are suffering BADLY from BAD software.
I can't stress more - this site is where I download all of my software downloads. I've found so many amazing apps.
AOL were smart when they acquired Netscape and WinAMP, although they did not do anything intelligent (or timely) with them. Imagine if WinAMP v5 had a custom Creative Skin and a proper music store module? It would be amazing.
Creative's problem is not in their product. It's in image, which is largely due to their software.
And by the way, I don't own an iPod. My wife would love one. I own a Creative Nomad Zen Jukebox. The software is terrible and I haven't really used it all that much ... I have a nice WinAMP Plug-in that sort-of bridges the gap.
I'd love iTunes to natively work with it (and BadApple needs some work as it doesn't really work well).
Creative - spend money on software.
http://www.creative.com/...product=12985&nav=2
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|That's too bad. I really like their sound cards (for recording music). Their newest one (can't think of the name right now) that's coming out soon will be the best consumer PC audio device available. I hope that's enough to keep them in business.
=/
They're also the only real threat to Apple's mp3 player monopoly.
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|That new processor?
More resampled drivel from a company that couldn't build a quality audiophile card to save their lives.
Thanks, if I want to record I'll buy cards from qualified vendors who know what they're doing like M-Audio or Terratec.
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|Creative ran off the tracks a long time ago - or perhaps they were never on them. Their soundcards are inferior to most other products these days (although their abuse of market power with positional audio is keeping them afloat), and their MP3 line is uninspiring. Their speakers? Well, they HAD some ok ones, but most PC speakers sound at best 'good' but not awe-inspiring.
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|"Their soundcards are inferior to most other products these days"
Umm.... you've never used the Audigy 2 ZS series cards have you? Their sound cards own everyone else on the market and are the best products produced by Creative IMO.
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|Yes I have. It's mushy junk compared to my M-Audio Revo and the drivers stink, like all CL sound card drivers.
If you think the ZS is good, I do believe you need to get out more and try other alternatives. A head to head against the Revo using quality speakers by Klipsch or high-end Altec Lansing is a no contest in the areas of music and movies.
M-Audio (the Revolution line), Terratec, Hercules (with their Fortissimo IV), AudioTrak and even Chaintech ALL eat the Audigy 2ZS and spit out the bones. It's a safe bet that if a sound card has an ENVY24 processor and quality DACs, the Audigy 2ZS slinks from the field of battle with its tail between its legs.
The alternatives cost less too and have better drivers (well, Terratec's are a bit dodgy but that's nothing new).
Some things never do change and Creative "audio quality" is one of them - it's never at the forefront.
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|I have to admit creative like 5 years ago had products in every area pretty much like speakers, video cards, sounds cards and the creative muvo is the last product I owned along with an audigy 2, back in 2002. I only hear about sounds cards now, sometimes that is. I think they will be selling out to nvidia or logitech soon. Logitech is definetely doing an excellent job in the hardware market I have their speakers, mouse and keyboard. It's pretty nice stuff, with a good price point.
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|Logitech build nice, cheap middle-of-the-road dreck for gaming. That's it, that's all.
There are few quality speaker manufacturers left in the PC market.
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|They think their mp3 player business is dragging them down? Their sound card business is rapidly becoming moot with the advent of more and more powerful onboard sound solutions and since Vista lacks hardware acceleration support for audio, they're done.
Fewer and fewer people are buying their sound cards. When Windows 2K was released, over 60% of the market had CL sound cards. Now it's more like less than 10% and still falling.
Add in their traditional pathetic customer and technical support (are you listening NOW, Harvey Fong?) and folks, we have a real winner!
The mp3 player line was an attempt to diversify before the axe falls. Guess it's not working out very well (tongue squarely in cheek).
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|A few things I see, true they don't update their firmwar for old customers(you need to keep them loyal and happy). Plus they need to advertise. Even though (in my opinion) the iPOD sucks, they have good marketing on the iPod Product.
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|If Creative wasn't so "creative" in spying on users of their products, they might have some goodwill to trade with.
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|What?
That's a pretty vicious accusation in the computer world. Can you quantify it with any examples/data?
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|Actually I stand corrected. I'm confusing Creative with Real Player (don't ask me why!)
I will say however, that the Creative webcam I bought a few years ago, whilst it worked ok, was a poorly constructed. The battery cover was so flimsy that it broke within a month. What they wanted to charge me to get it repaired absolutely vicious.
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|lol ok. Yeah I can understand Real Player.
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|That's because Creative don't pay attention current customers, no firmware upgrades to most players since last December.
Instead, they continue to roll out new products.
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