There's a SGX (Singapore Exchange) clause that if a company had made 3 years consecutive losses and has less than US$40 million capitalization, the company can be delisted from SGX. Creative Technology quickly announced that they have US$180 million and so will not be delisted from SGX.
This is an interesting article from Business Times, in which the author talked about a wide topic ranging from Creative's past mp3 player war with Apple to the recent launch of the latest Sound Blaster Recon3D.
Creative Technology on the watch list of the Singapore Exchange? Even the hint of such a possibility would have once been unthinkable.
This isn't a struggling SME or S-chip. This is Creative, once a market darling, and a bag ayer for Singapore. This is the Creative of Sim Wong Hot), the poster boy of local entrepreneurship, the company that invented the famous Sound Blasters which let computers talk and sing, dominated the global market in sound cards and, in 1992, became the first Singapore firm to list on Nasdaq in the US.
But on Wednesday, Creative notified shareholders that it had posted pre-tax losses for the past three consecutive years. It drew their attention to SGX rules under which companies are put on a watch list if they suffer pre-tax losses for three straight fiscal years and their average daily market capitalization for the past 120 trading days dips below S$40 million. And such companies face a possible desisting if they cannot restore their financial health within 24 months of being on the list.
For its financial year ended June 2011, Creative suffered a pre-tax loss of US$51.9
million, on top of a pre-tax loss of US$46.7 million in FY2010. It posted a net loss of US$47.2 million in FY2011, widening from : net loss of US$38.8 million in the previous year.
Creative shares fell 9 cents to S$1.50 yesterday. With a market capitalization of S$187.1 million, it remains above the watch list threshold of S$40 million.
Still, the company's constant struggle to stay in the black, quarter to quarter, makes for sad reading.
Yet, it has to be said that this comes as no surprise to those who have been tracking the company since its heyday. Creative's problems are not just the making of the fickle technology market or economic conditions.
Think back to 1994, when Creative launched its initial public offering (IPO) in Singapore. It was lauded and welcomed as the local boy coming home after having made it overseas. Singapore investors were asked to pay 5$25,80 for each Creative share, sold in one board lot of 50 shares.
And the offer was well oversubscribed.
Yet, even amid the euphoria then, warnings were sounded. Some industry observers cautioned that Creative's growth might be stymied by the trend of PC makers incorporatingby sound capabilities directly into the PC. In the long term, this would eat into Creative's margins. It will have to sell its components to other large companies, losing in the process the profit accrued from sales and marketing
activities, they said.
The bottom line was that Creative was too dependent on one key product. The company was in danger Of being a ''one trick pony'' - a label which Mr Sim took issue with.
But that has turned out to be Creative's tragedy. Until today, it has failed to produce another hit product like the Sound Blaster.
And it has failed to respond with a successfully executed diversification of its earnings base.
Along the way, it seemed too to have lost touch with market realities.
There was much fanfare in November 2004 when Mr Sim declared war in the MP3 market and zeroed his sights on US giant Apple Computer. Creative, said Mr Sim, wanted to seize 40 per cent of the global MP3 players - estimated at about 60 million units - by selling some 24 million digital music players.
It was a bold statement, and it captured the headlines. For a while, Creative basked in the limelight, reporting strong sales and good reviews of its Zen Micro MP3 players. - Mr Sim even took swipes at Apple: when Apple launched its (pod Shuffle, he laughed it 'huge disappointment'. It took just six months for these words to come back to haunt Creative, when that costly ambition sent profits reeling, Not for the first or last time, the firm failed to deliver on its own hype.
For most of the recent past years, Creative has been stumbling between profitable and loss-making quarters, cost cutting and jobs cutbacks. It has been busy, without making breakthrough. The company has been working on rolling out mobile processors in its Stemcell line, in the hope of attracting phone and tablet computer manufacturers. It has been working on the OEM (original equipment manufacturer) track after its own brand of products met with lukewarm consumer response. It raised interest in the market with its Zii mobile platform in 2008, but fell behind competitors such as Apple and Microsoft in the portable media player market. In 2008 it slashed 2,700 jobs - nearly half of its global workforce - when it sold off its Malaysian manufacturing subsidiary.
Recently, Creative announced several new products at a Berlin show, including the next generation of Sound Blaster gaming - headsets, the Sound Blaster Recon3D audio platform and sound cards, and the Creative ZEN X-Fi3 music, photo and video player. Would these be the game changers that will reverse Creative's fortunes? Based on past record, one can't just bet for sure. The more likely immediate outlook makes for grimmer reading. In its June FY2011 results, the firm warned investors that it would likely post another loss in the current quarter. Sales in FY2011 had fallen by 16.1 per cent to US$231 million, with delines in all the three major markets in which it operates - Asia-pacific, the Americas and Europe.
The answer to Creative's woes probably goes beyond new products. It has, if it could be put that way, run out of inspiration. And the fix has to be more fundamental, more
sweeping, and has to take place deep within the company itself. While its markets have r rapidly evolved, Creative appeared to have j been left behind. A new way of thinking, a new leadership perhaps, and a new culture, are probably what the company needs most.
- Business Times
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