Exclusive: Creative CEO Sim Wong Hoo Urge "To Believe In The Impossible" ~ Creative Labs Zen MP3 Players Sound Blaster Card
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Saturday, October 18, 2008

Exclusive: Creative CEO Sim Wong Hoo Urge "To Believe In The Impossible"

Creative CEO Sim Wong Hoo Urge
This is a very interesting message from Creative Chairman and CEO Sim Wong Hoo. He promises an entire new range of products and new business model from the new Creative, scheduled to release in the next quarter. Wow, what could it be? Car audio system? no more zen mp3 player? or are they going to scale down on its mp3 players product line and focus on a something that will set a new trend in the industry. Tell us what do you think about this message?

Creative Chairman's Message:
Creative is a company that is known to thrive in adversity. The adversities we are now facing, both internally and externally, will serve to propel us forward, albeit more carefully.

We have a very clear vision of what we want to achieve. We just have to be a lot more focused. We are finally seeing the light ahead of us. The path ahead could undoubtedly still be thorny and challenging, but we have the technology and financial resources to clear the way.

The vision I am talking about is to create a totally new Creative, with a new product line and a new business model, whilst leveraging on the technologies we have mustered over the years, which will again see Creative set a new trend in the industry and open up new opportunities for all.

I am very excited about this new vision, which we will unveil in the next quarter, and anxiously awaits to tell you about it.

Let me now give you a recap of the financial performance for the past fiscal year.

Fiscal 2008 continued to be another extremely difficult and challenging year for Creative.

We had planned to focus on returning to profitability by focusing on several key areas on both the product and operations fronts.

While we started the fiscal year making significant progress in such areas of focus, our plans were shortly thereafter affected by the adverse and uncertain macroeconomic conditions, starting with the sub-prime and housing problems in the US. The ensuing turmoil has during the fiscal year extended to cover other markets, and developed into the current crisis in the global financial markets. These uncertainties have also exacerbated problems facing our products in the weakening US consumer market.

These negative market developments have caused a reduction in revenues and adversely affected planned improvements in margins. In response to these developments, in the second half of the fiscal year, we have taken action to restructure the company with a series of cost-cutting measures to streamline the business operations of the company and reduce operating expenses, the result of which is reflected in the financial results for the year.

Sales for fiscal year 2008 were $737 million, a reduction of 19% compared to $915 million for the fiscal year 2007. Gross profit as a percentage of sales was 22% in fiscal 2008, compared to 19% in fiscal 2007. Net loss for fiscal 2008 was $20 million, compared to a net income of $2~ million in fiscal 2007. Net loss for fiscal 2008 included $12 million of restructuring charges, while net income for fiscal 2007 included a $100 million paid-up license from Apple for its use of the ZEN Patent in its products.

Creative sold its headquarters building in Singapore, Creative Resource, in June 2008 at a sale price of $181 million, with a leaseback of the whole building for a period of five years with an option for additional periods of three years and two years. Creative made a gain on the sale of the building of $148 million. Although the sale was completed in June 2008, and legal title has been transferred to the buyer, and sale proceeds have been received, for US GAAP accounting purposes, this sale has not been recognized in the accounts for fiscal year 2008. In accordance with US GAAP, the gain on sale of building will be recognized in the accounts only at the end of the initial five year lease term.

In July 2008, Creative repaid the entire $100 million outstanding balance of its syndicated term loan. With this repayment, Creative is now practically debt-free, with no outstanding bank borrowing. This has positioned us well to take advantage of the opportunities offered by the new product line and business model that I mentioned earlier.

Finally, I would like to thank all of you for your patience with Creative. We need this wide breathing space to prepare the company for the exciting opportunities ahead. I believe it will be something you will be very proud of. To Believe in the Impossible.

Thank you.

Sim Wong Hoo
Chairman & Chief Executive Officer


Varuna Singh said...

Wow thats just some great optimism and determination!
This is pretty cool !

I think Creative are going a whole over all management change and all that.. and I'm soo glad its positive and focused for them.

Varuna Singh said...

also, where did you get this :D ?

Creative Fan said...

its cool right? hehe i hope it appear on google news :) new business model? drop the manufacturing sectors and focus on product marketing, etc? many possibilities

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