“MP3 music player maker Creative’s U.S. patent lawsuit against Apple has boosted the loss-making Singapore firm’s shares, but analysts fear it will disrupt management turnaround efforts. Creative Technology Ltd., the world’s number-two MP3 player maker, whose Nomad and Zen players compete with Apple Computer Inc.’s market-leading iPod, filed patent complaints against Apple in federal court and with a U.S. trade agency on Monday,” Jennifer Tan reports for Reuters. “The company is seeking an injunction and increased damages for alleged violation of its ‘Zen’ patent. It is also seeking an exclusion order and a cease-and-desist order against Apple that would prohibit the U.S. firm from selling, marketing or importing its popular iPod portable music players into the U.S.”
“Kim Eng Securities analyst Gregory Yap said Apple was unlikely to give up its lucrative iPod business without a long, expensive fight — time and money that loss-making Creative cannot afford to waste. ‘Creative’s suit against Apple may bring relief to the share price in the short term, but in the long term, it will distract and divert management attention and company resources when both are needed to turn around the ailing business,’ he said. Earlier this month, Creative swung to a larger-than-expected quarterly net loss of $114.3 million in its fiscal third quarter ended March, compared with a $15.9 million profit a year ago, after a plunge in music player prices squeezed margins and forced it to write down its inventory,” Tan reports. “While Creative struggles, market leader Apple last month posted a forecast-beating 41 percent jump in quarterly profit and said iPod sales topped 8.5 million. According to research firm International Data Corp., Creative was ranked second after Apple in the global flash memory-based MP3 player market in 2005, with a 4.7 percent share against Apple’s 16.9 percent, and number two in the hard-drive music player market with a 15.8 percent share against Apple’s 72.2 percent.”
Tan reports, “Creative is expected to post a net loss of $116.6 million for the full year ending June 30, according to the average forecast from 10 analysts polled by Reuters Estimates.”
Full article here.
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