Creative Reported US$21.8 million loss in Fiscal year 2014 ~ Creative Labs Zen MP3 Players Sound Blaster Card
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Thursday, October 16, 2014

Creative Reported US$21.8 million loss in Fiscal year 2014

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Sound Blaster Roar was very successful this year and the response from the consumers were very positive. However, that did not prevent Creative from making a loss. It closes fiscal year 2014 will a loss of US$21.8 million, US$5 million more than US$16 million in fiscal year 2013.

Creative Chairman Message

Dear Shareholders,
In fiscal 2014, we have continued with introducing new products in the key product categories, and saw the successful launch of some new exciting products in the latter part of the fiscal year, which I will cover in greater length below. However, revenue contributions from these products during the year were not significant enough to offset the decline in revenues from existing products resulting from the challenging market conditions. The difficult and uncertain market conditions for the company’s products continued to adversely affect product sales and the financial performance of the Group.

Sales for fiscal year 2014 were US$116 million compared to US$165 million for fiscal year 2013. Gross profit as a percentage of sales was 26% in fiscal 2014 compared to 33% in fiscal 2013. Net loss for fiscal 2014 was US$22 million, compared to a net profit of US$17 million in fiscal 2013. Sales and gross profit for fiscal 2013 included a US$20 million licensing income received for the licensing of certain technologies relating to high performance GPU technology. Net results for the Group in fiscal 2013 also included a US$27 million gain on the divestment of a subsidiary. Excluding these one-time items in fiscal 2013, while sales were lower in fiscal 2014, operating and net results for the Group had improved slightly due to higher gross profit margin and a reduction in operating expenses. Further highlights of the Group’s financial performance are detailed in the “Financial Highlights and Review” section of the annual report.

During the year, despite the very challenging market conditions, we continued to push forward with ongoing research and development in key product categories that are strategic to our business – placing a strong focus on the core audio technology behind the Sound Blaster brand and the applications of its technology into the Sound Blaster family of products that includes ultra high performance sound cards and other external audio solutions, innovative wireless sound systems and premium gaming headsets.

In particular, I would like to highlight a new innovative product from this development effort, the Sound Blaster Roar, which has enjoyed a very positive reception since its launch and has turned out to be one of our most well received new products in recent years. It has the potential to be the next Sound Blaster.

The Sound Blaster Roar is a new concept, booklet-size, 5-driver high performance portable Bluetooth wireless speaker that delivers astoundingly powerful, spacious and precise audio that blows people away the moment they hear it. Sneak previewed at CES Las Vegas in January, the highly innovative Sound Blaster Roar created tremendous buzz and received positive early reviews from the media and general public alike. It was a roaring success at its launch in Singapore and has achieved an impressive sales record of ‘1-unit-sold-per-30-seconds’ at a recent consumer electronics show here. The sleek and compact speaker garnered an overwhelming number of rave reviews internationally – scoring 5-out-of-5-stars in numerous major product reviews. At its recent launches in the US, Europe, China and Japan, the reception to the Sound Blaster Roar was just as overwhelming. More information on this product is provided in the cover pages of this annual report.

Another key potential game changing product is the recently announced Sound Blaster X7.
Audio content for games, music and movies has changed so incredibly in detail and complexity in this day and age, and consumed on so many platforms – PCs, laptops, smart devices, TVs and game consoles to name a few – and by many different generations of users. In designing the Sound Blaster X7, our goal is to allow all these users of all these platforms to enjoy the best audio in the way it is meant to be heard, and in the way they want to hear it.

The Sound Blaster X7 combines the full force of Creative’s renowned 24-bit Sound Blaster processing (up to 192kHz), coupled with a high-resolution 127dB digital-to-analog converter (DAC), a 100-watt amplifier with top-notch audiophile-grade components, and wireless, optical, multi-platform connectivity to deliver the clearest, and most powerful high-resolution audio experience. Comprising a whole slew of great features to cover all aspects of usage on different platforms, the Sound Blaster X7 is to-date the most powerful and technologically advanced audio solution that Creative has ever created. It is the ultimate all-encompassing audiophile upgrade for serious gamers.

In addition to the Sound Blaster X7, we launched the new ultra high performance and portable Sound Blaster E-Series, comprising the professional-grade Sound Blaster E5, and the smaller but very powerful Sound Blaster E3 and Sound Blaster E1 audio solutions. The Sound Blaster E5, a 24bit/192kHz high resolution 120dB USB DAC and portable headphone amplifier, is engineered to deliver bit-perfect audio, allowing mobile users of smart phones and tablets, as well as users of PCs and Macs, to experience audio as the artists intended.

Another new interesting product deserving mention is a very small weatherproof and fun portable wireless speaker, the Creative MUVO mini. The Creative MUVO mini is specially designed to be able to withstand rain, sand and dust, so that users can bring them into the great outdoors to enjoy their digital entertainment content anywhere, anytime.
On another front, I mentioned last year that we would be looking into steps to monetize our formidable collection of over 100 patents in the field of 3D graphics and media processing. Earlier this year, a subsidiary, ZiiLabs Inc., Ltd. commenced action
for patent infringement in the United States against two major companies. That case is ongoing.

Looking ahead, for the current fiscal year, while the Group expects market conditions to remain uncertain and challenging, the introduction of new and exciting products which I mentioned earlier, particularly the Sound Blaster Roar, is expected to
provide good potential revenue growth opportunities for the Group and position us to re-grow our business.

Thank you.

Sim Wong Hoo

Chairman & Chief Executive Officer

We want to hear from you, please feel free to let us know in the comments section below.


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