Creative finally sold off all of their manufacturing facilities. The first one was the factory in Malacca with 80% of its stake sold to a undisclosed 3rd party in 2008.
Personally, I do not think this is bad news, instead, its a good move. Here's how I feel:
Actually, Creative has been quite conservative in its business strategy in terms of outsourcing. The strategic direction of disposing manufacturing facilities is quite common in many big names such as Apple, Dell and Thomson Multimedia, etc. The main reason why they did it was to concentrate on their marketing, product design, R&D and product development. They do not need to manage their manufacturing activities such as supplier management, inventory management, warehouse storage, etc. Outsourcing to external parties will take away this heavy workload off their shoulder and allow them to concentrate on critical and more important stuff.
Besides, it will also improve the company's cash flow and will release more cash and fund for Zii or other new product development.
On 05 May 2010, Creative Technology Ltd (“Creative”) announced that it has entered into an agreement to dispose an 80.1% equity interest in Creative Technology (Qingdao) Ltd (“CTQD”), a wholly-owned subsidiary in China. CTQD owns a 287,000 square feet factory in Qingdao where it undertakes manufacturing operations for Creative. This transaction is in line with the strategic direction that Creative has undertaken to dispose of its manufacturing facilities.
Completion of this transaction is expected to take place by 30 June 2010, and is subject to a due diligence exercise by the purchaser and the obtaining of various regulatory approvals in China to effect the change of ownership.
The consideration to be received by Creative from this disposal is approximately US$13 million in cash which is calculated based on a willing buyer, willing seller basis taking into account the adjusted net asset value of CTQD. The book value of the net assets being disposed is approximately US$11 million. Creative expects to recognise a gain of approximately US$2 million from the disposal.
The transaction is not expected to have material impact on the financial position of the Creative group for the current financial year.
None of the Directors or controlling shareholders of Creative has any interest, direct or indirect, in the above transaction.