Apple’s iPod shine dims beleaguered Creative Technology’s outlook

“Creative Technology Ltd., whose Nomad and Zen MP3 players aim to compete with Apple’s iPod, probably swung to a quarterly loss and wrote off unsold stock, after consumer demand softened and stiff competition hit margins. Singapore-based Creative also suffered in the September quarter as Apple Computer Inc. cut prices by up to 20 percent to clear excess stockpiles, and analysts said Creative’s fundamentals are likely to worsen,” Jennifer Tan reports for Reuters.

“CLSA Asia-Pacific Markets analyst Atul Goyal who has set a 12-month price target of S$7.40, more than 40 [percent] below Friday’s closing price of S$12.90, estimated that Creative’s stockpiles stood at $451 million, or six months’ of sales. ‘Given the short product life-cycle for MP3 players, we believe a large part of this inventory is bound for a write-off,’ he added. Creative’s gross margin probably shrunk to below 20 percent in the June quarter, from 32.9 percent in the year-ago period, and compared with Apple’s iPod margin of around 20 percent, analysts said,” Tan reports.

“Last month, Apple beat expectations with quarterly profit jumping five-fold to $320 million. Revenue surged 75 percent to $3.52 billion. Creative has produced some of the strongest contenders to the iPod, but Apple still leads the disk-drive music player market. Analysts estimate it has about 60-70 percent market share, compared with up to a quarter for Creative… Creative Chief Executive Sim Wong Hoo pledged $100 million in worldwide marketing spending this year and promised to out-market its rivals, but analysts are sceptical that Creative has the resources to effectively compete against the bigger players. The stock has fallen 26 percent in the last 12 months, underperforming Apple shares which have nearly trebled in the same period,” Tan reports.

Full article here.

Related MacDailyNews articles:
Microsoft not buying stake in Creative Technology – August 02, 2005
Creative CEO Sim Wong Hoo adds fronts to war against Apple iPod – August 01, 2005
Analyst: Microsoft could buy Creative Technlogy in bid to compete with Apple iPod – July 14, 2005
Beleaguered Creative CEO Sim Wong Hoo ‘optimistic’ the company will survive ‘MP3 war’ – July 01, 2005
Beleaguered Creative may have to write off unsold stock as losses loom – June 28, 2005
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


  1. “Based on which hardware? “Short” relative to what?”

    The product cycle for consumer electronics being short. Apple changes the iPod line in less than 12 month cyclists. The folks trying to compete with the iPod have been changing their products more often trying to find the right mix.

  2. I’d like to point out that the real crusher for Creative is that they *really* screwed up estimates of demand for their competing MP3 products. Gauging demand for a new product is one of the hardest things to do in the modern market-place.

    Just something to keep in mind the next time Apple introduces a product and then promptly runs low as their pipeline empties prematurely. As a stockholder, I’d prefer they underestimate the demand rather than overestimating it and having to send 10 million units to a garbage heap somewhere in Taiwan.

  3. ” The folks trying to compete with the iPod have been changing their products more often trying to find the right mix.”

    They all have the same achillies heel. They don’t control the other end of the equation, which is the interface for managing the device. Therefore, they offer only half the solution.

    Until competitors realize that it’s the combination of iPod PLUS iTunes, they will always deliver a substandard solution.

    I am officially calling Creative’s CEO Sum Wong Ding Dong

    MW ‘talk’ as in the full solution for a digital music player must be good software that will effectively talk to the device.

  4. Sometimes you’re right… sometimes you’re Wong.

    MW: army… okay now I just KNOW these words are categorized and a given “subject” is chosen for each article so that the MW encourages silly posts based on wordplay. “Army” in an article about Creative’s “war” with Apple.

  5. I’ll never forgive Creative… Years ago they used anti-competeitve practices, and illegitimate law-suits (which they lost) to put a competitor with far superior technology, Aureal, out of business. In the end, Aureal had no choice but to sell off their assets and technology and Creative bought it up, and prompt buried everything to stick with their far inferior software based technology, which incidentally was predominatly Windows oriented.

    Screw the Singapore bastards! Screw em to hell!

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