Beleaguered Creative waves white flag, surrenders self-declared MP3 player war to Apple iPod

“MP3 player and sound card maker Creative Technology Ltd. is changing its tune – it now wants to focus on profitability rather than market share – but most analysts and fund managers remain wary of the stock saying it will take long for the new strategy to deliver results,” Carey Wong reports for Dow Jones Newswires. “Following the announcement of a weak first quarter net profit last week, five brokerages are keeping their Sell or Underperform ratings on Creative with target prices ranging from S$8.45 to S$11.10 – between 10% and 32% below the current share price.”

Wong reports, “The stock, which has fallen 50% so far this year, was Monday morning up 0.8% at S$12.60. ‘We’d like to focus on the profitability and not market share,’ chief executive Sim Wong Hoo said at the post-result briefing. The statement is a major shift from last November when Sim launched a US$100 million marketing campaign he predicted would give Creative a 40% share of the world’s MP3 player market. But the policy change may have been inevitable after it became clear that Creative’s existing strategy had little chance of success.”

Wong reports, “Analysts say the company’s MuVo and Zen brand MP3 players will garner only around a 14% share of the global MP3 market in calendar 2005, based on projected shipments, compared with 36% for Apple Computer Inc.’s iPod. Most of them noted that returning to sustainable profitability will be equally challenging for the company, which has provided limited information on how it will achieve its targets amid a negative environment.”

Full article here.

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So much for Creative’s “MP3 player war.” Instead of becoming the Pepsi to Apple’s Coke in the digital music player market, it looks like “Sim Wong Who?” will have to settle for the fizz-less “focusing on profitability and not market share.” Creative never amounted to anything more than a mosquito buzzing around the 800-pound Apple iPod gorilla’s head.

It’s hard to tell from the article what Wong means regarding the figure of 36% for iPod market share. Wong writes, “analysts say,” but which analysts and based upon what methodology? We suspect it refers to hard drive-based portable digital music players, but can’t be sure. What we do know is that IDC, for example, divides the MP3 market into four categories: Portable flash-based players, portable hard drive-based jukebox players, portable players that support MP3 CDs and mini discs, and an “other” category comprised of music phones, portable DVD players, gaming devices, and other devices that support compressed files. So, perhaps Wong is referring to one category of the MP3 market. Or maybe the unnamed analysts are just estimating or something? One thing we do know for sure, at least, is that Apple iPod models, before the iPod nano and new 5th generation iPod debuted, accounted for 75% of MP3 players sold in the U.S. in August 2005 according to NPD Techworld.

Related articles:
Beleaguered Creative shifts promotional efforts from music players to new sound card line – September 21, 2005
Apple debuts iPod nano, iTunes 5: how are Microsoft, Napster, Real, Creative, Sony feeling today? – September 08, 2005
Creative explores new way to beat Apple iPod: patent litigation – August 30, 2005
Creative plans ‘very vigorous defense’ of iPod navigation patent – August 31, 2005
Beleaguered Creative Technology’s ‘war’ on Apple iPod not faring well – August 15, 2005
Apple’s iPod shine dims beleaguered Creative Technology’s outlook – August 08, 2005
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
Apple’s understanding of what really counts makes iPod+iTunes impossible to beat – June 22, 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

33 Comments

  1. yoh, these 36% is worldwide marketshare. Here in germany the ipod is popular, but there are many others as well. In the US you might have an ipod only culture, but in europe and especially asia it’s not quite the same picture.

  2. This may be bad for apple as removing competition may lull them into a sense of complacency. The miniscule but ever present threat of competition is what pushed apple to replace the popular iPod mini with the Nano. They had to cannibalize their own products so that someone else didn’t do it for them … I hope that at least some competition remains to keep Apple on its toes and investing in new products

  3. you know, there is nothing wrong with healthy competition. you cant hate them for trying. Creative is a good company with Good products.. The Zen is a good product, but obviously the ipod is better/more popular. They make great speakers, and great sound cards. Let them live their life. Just because someone competes with apple doesnt mean everyone that likes apple has to hate them. I am PRO apple in almost everyway, but im not opposed to competition, or the mix of other products/ideas/companies.

  4. Omigod.. you mean.. Creative’s not a software company.. they are strapped to WMP or some such mediocre player, praying that whatever sense of affinity people had to their ‘business machines’ will rub off on their buying decisions at Best Buy.

    Ugh. I’m really sorry Creative. I hated you all this time, and it’s too bad you couldn’t hang around.

    On the bright side, it looks like the best, most affordable product is actually winning, and, that’s a mighty accomplishment.

    We actually have a competitive market.

    Even if Apple gets a 90% share, it won’t be a monopoly until iTunes becomes the dominant source for purchased music, which won’t be for a loooong time..

  5. Java,

    As long as Steve is there, complacency probably doesn’t have a chance. Remember, they JUST took the number one selling MP3 player in the world and discontinued it. Just >pop!< and it’s gone, replaced with the Nano. That’s not the act of a complacent company, that’s the act of a company that knows it has to BE ahead to STAY ahead.

    My gut feeling? Microsoft has put everyone on notice that either MS or a favored hardware maker is going to be producing the first TRUE iPod killer. They’ve been told either get out of the bizz now or be crushed between the rock of Apple and the hard place of Microsoft. This will be a hardware/software combination that will be “good enough” for many people and will be MS’s last chance to take back the home media mindshare from Apple.

    MDN Magic Word — deal
    The “deal” has been struck, and it wasn’t with Creative….

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