Beleaguered Creative may have to write off unsold stock as losses loom

“Singapore-based Creative Technology Ltd., whose Nomad and Zen digital audio players compete against Apple’s iPod, may have to write off unsold stock and continue making losses, as consumer demand for MP3 players softens and stiff competition squeezes margins,” Reuters reports. “Nasdaq-listed Creative slashed its quarterly sales and gross margin outlook late on Monday, citing weaker-than-expected demand and lower-than-expected selling prices for MP3 devices, knocking its shares down 10 percent.”

“Creative warned of an operating loss for the current fiscal fourth quarter to June 30 and cut its sales forecast for the period to about US$300 million, up 50 percent year-on-year but below its April forecast for a 65-80 percent increase to $330-$360 million. ‘There’s a very high likelihood Creative will have to suffer an inventory write-down — they missed their sales forecast by at least $30 million, and they could be looking at unsold inventory of $15-$20 million for the quarter,’ said OCBC Securities analyst Rohan Suppiah, who has a ‘sell’ call on the stock,” Reuters reports.

“Creative has produced some of the strongest contenders to the iPod, but Apple still leads the disk drive music player market,” Reuters reports. “Analysts estimate Apple, which shipped 5.31 million iPods in the March quarter, has a 60-70 percent market share, compared with 22-25 percent for Creative. Analysts are skeptical that Creative can compete effectively against the consumer electronics giants, given its smaller marketing budget and distribution reach… But Creative Chief Executive Sim Wong Hoo said he intends to beat the iPod in terms of sales and has earmarked $100 million for the company’s worldwide marketing spending this year,” Reuters reports.

Full article here.

MacDailyNews Take: Why is it that it seems that every time we’re in an electronics store, marked-down, previously-opened and returned Creative players grace the shelves while the iPod displays always have a crowd of people asking salespeople questions and buying iPods? Would you buy a returned plastic package that’s been taped back together at a discount?

Related MacDailyNews articles:
Creative Tech’s reduced outlook drags on Apple, PortalPlayer, SigmaTel – June 27, 2005
Creative Tech cuts sales outlook, drags Apple down in early trading – June 27, 2005
Apple passed 20 million iPods sold milestone in early June – June 24, 2005
Creative Technology shares slide to lowest mark in almost two years – May 18, 2005
Apple squeezes and Creative’s profit plunges 72-percent – April 23, 2005
Apple iPod pressure forces Creative to drop prices on music players – March 01, 2005
Creative’s self-declared ‘MP3 player war’ against Apple isn’t going very well – January 20, 2005
Creative CEO: Apple iPod shuffle ‘a big let-down, worse than the cheapest Chinese player’ – January 12, 2005
Creative declares ‘war’ on Apple iPod, shoots for 40% market share of MP3 players – December 21, 2004
Creative Technology declares ‘MP3 War’ against market-dominating Apple iPod – November 17, 2004
Mossberg: Dell, Rio, Creative ‘iPod mini killers’ lag badly behind Apple iPod mini – October 27, 2004
Creative pushes to become ‘Pepsi’ to Apple’s ‘Coke’ in digital music player market – August 07, 2004

37 Comments

  1. I posted this in another thread but it fits better here. Creative has a mind-boggling 27 models on the market (vs. three for Apple). Here’s the link if you want to see what’s coming soon to a landfill near you:

    http://www.creative.com/products/welcome.asp?category=213

    Hopefully they’ll spend some of that $100 million marketing budget on hiring a few ad copy-writers. Here’s their description of the Jukebox 2: “Boasting a superior battery life and big in features, it streams quality audio to the listening ears.”

    Quality audio to the listening ears? I’m sold!

  2. When you’re making interactive electronic devices you are only as good as your associated software. If you’re teamed up with Microsoft you’re screwed. If you’re teamed up with Real you’re screwed. Apple really knows how to design software.

    If Apple ever makes a cell phone OS, watch out.

  3. Hi all,

    I hope that Apple wins the MP3 war… but there are more battles left to be fought before Apple can declare victory.

    My personal feeling is that the WMA-based solutions will dwindle down until there are only one or two WMA-based companies left in the marketplace. Then, Microsoft will throw their full support behind these two companies in a bid to lessen Apple’s dominance in the music sector.

    …Just my US$0.02, for whatever they’re worth.

    Regards,

    newmsubob

  4. HIFI Magazine in Finland tested 14 MP3 players including Creative, iPod Suffle, iPod Mini, Sony and iPod “maXi”.
    Apple got the highest points concerning quality of the sound and usability. Apple was the clear winner of that test.
    Even the Suffle was praised because of it´s sound quality.

    I am happy with my 60G iPod Photo. I would never change it to anything that is produced by “Creative”.

  5. At what point does the US government decide that Apple’s modus operandi is anti-competitive?

    If Microsoft’s alleged ban on loading other companies’ browsers & media players onto Windows computers earned them a trip through the anti-trust machine, then Apple’s documented refusal to allow non-iTMS DRM on their iPods must qualify, no?

  6. “it streams quality audio to the listening ears”

    Despite being Singapore-based, that copy sounds like it came from someone who is not comfortable with Engrish, er English. That’s okay for manuals, but not for advertising.

  7. Winston – thanks for the link. Looking at that page for a few minutes overwhelmed me. I couldn’t figure out a good way to compare them. It was a pain to figure out what each one offered. It’s no wonder no one is buying them – those few people who do want one are still trying to figure out which one they want. With all those models and all those different colors, their inventory tracking must be a nightmare. Half of them have 10 colors to choose from. They’ve got over 100 versions of those things.

  8. To: PC Apologist – Right after Microsoft allows Quicktime to be preloaded on all XP machines.

    To MDN: Hey, I bought my 40 gig iPod from Best Buy right after Christmas for 1/3 off its price. Only missing the $20 firewire cable to save almost $200. Now if I could figure out how to do that kinda thing in buying a house, I’m in business (long as it’s legal).

  9. Creative ad—Express yourself with the MP3 player that lets you, thanks to dramatic Creative Stik-Ons™.

    Great I’ll get one for my 3 year old grand-daughter, she loves stick-ons.

  10. Winston –
    For the record, apple offers somewhere between 7 and 13 ipod models:
    512mb shuffle
    1gb shuffle
    4gb ipod mini (Each color has its own model number, so this could be counted as 4 models)
    6gb ipod mini (Each color has its own model number, so this could be counted as 4 models)
    20gb ipod
    20gb ipod U2
    60gb ipod

    7 different models to choose from with 13 different model numbers, and they just got rid of 2 others.

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