Creative Tech Expects Q3 Operating Loss ~ Creative Labs Zen MP3 Players Sound Blaster Card
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Tuesday, March 25, 2008

Creative Tech Expects Q3 Operating Loss

CEO slashes prices, looks to sell HQ in a bid to boost profits.

SINGAPORE firm Creative Technology forecast the lowest sales in almost five years and said it will lose money on operations in the current third quarter.

Revenue may drop 18 per cent to US$150 million ($208 million) in the three months ending March 31, lower than an unspecified target. Creative expects to have an operating loss, or sales minus the cost of goods sold and administrative expenses, because currency exchange rates resulted in higher than-expected expenses.

Chief executive officer Sim Wong Hoo, 52, has cut prices of its Zen digital music players by as much as half to revive sales amid waning consumer demand. Creative, which also makes accessories for Apple’s iPod, said it is also selling its headquarters in Singapore for $250 million and other investments to boost profits.

“It’s not surprising that the quarter is weak — but it’s even weaker than expected,” said DBS Group research analyst Tan Ai Teng, who rates Creative a “hold”. “It doesn’t look particularly hopeful going forward and it’s still going to be challenging.”

Creative reiterated it expects to be profitable in the third quarter. The maker of Muvo digital music players posted a net loss of US$23.6 million on sales of
US$183.8 million a year earlier. Creative expects to make a gain of $200 million from the sale of its headquarters. That will be amortised and recognised over five years. Creative said it will rent the property from the unidentified buyer.

Creative closed unchanged at $6.25 on the Singapore stock exchange, while the benchmark Straits Times Index rose 3.6 per cent.

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