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Saturday, January 3, 2009

Creative Slashes Half Its Workforce

Singapore staff unaffected but challenges remain

CREATIVE Technology, which makes Zen MP3 players as well as accessories for Apple’s iPod, eliminated 2,700 jobs, or almost half its global workforce, in the last fiscal year after demand for its own music players tumbled.

The company had 3,100 full-time workers at the end of last June, down 47 per cent from a year earlier, Creative said in its annual report filed with the Singapore Exchange.

The more-than-1,000 staff in its headquarters here were largely unscathed by the cuts, which were attributed mainly to the sale of one of Creative’s units in Malaysia last year. “The bulk of the reduction in worldwide workforce was due to the sale of Cubic Electronics, the manufacturing subsidiary of Creative in Malaysia in July 2007.

In Singapore, there is no significant change in our overall employment figure.

We are still looking to hire more R&D engineers,” a Creative spokesperson told Today.

Still the extent of the job cuts underlined the challenges Creative has been facing in the last three years, when it was hit by cut-throat competition, resulting in falling sales, razor-thin margins and slipping bottom lines. In the last fiscal year ended June 30, Creative posted a net loss of US$19.7 million ($28.5 million) on sales of US$736.8 million, the lowest revenue in five years.

Creative joins Chartered Semiconductor Manufacturing and Philips Electronics in cutting jobs as demand for electronics falters amid the worldwide recession.

The Government said yesterday that the economy may shrink by as much as 2 per cent this year, twice as much as it had projected on Nov 21, as slumping demand from the United States and Europe undermines exports.

Credit Suisse analyst Lim Keng Hock said in a research report last month that Creative’s balance sheet could be weakened during the downturn. He estimated Creative would suffer an annual free cash flow deficit of between US$30 million and US$50 million and erode its US$250 million in cash holdings.

“Until it can show a turnaround in its operations, we are happy to sideline the
stock even though valuations are very compelling,” said Mr Lim.

Others see opportunities in Creative’s troubles. DBS Vickers thinks the Singapore icon will make an attractive takeover target.

“A potential buyer can extract cash by firstly shutting down its loss-making retail business, then paying off debts with the company’s cash and, last but not least, monetising Creative’s rich library of intellectual properties,” it said in a research note last month.

Creative shares ended the first trading day of the new year down 1.2 per cent at
$4.25. The stock dropped 32 per cent last year.

via Today


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