Members Login
Username 
 
Password 
    Remember Me  
REITData -> TalkStock -> SGX - Stocks -> Creative
Post Info TOPIC: Creative
KK


Guru

Status: Offline
Posts: 1236
Date:
Creative - OCBC
Permalink  

8 Aug 07

Poor sounding 4Q07 results

Dismal 4Q07 results. Creative Technology turned in another set of dismal 4Q07 results, with revenue down 28.4% YoY and 10.1% QoQ to just US$165.2m, which the company attributed to poorer-than-expected sales in the US. And despite efforts to reduce operating costs, the company posted a net loss of US$19.3m, which included a restructuring charge of US$2.4m. We were looking for revenue to come in at US$193.0m and a net loss of US$7.7m.

For the full year, revenue only came up to US$914.9m, down 18.9%. While Creative turned in a net profit of US$28.2m versus a net loss of US$118.2m in FY06, it included a US$100m payment from Apple for use of the ZEN patent in its products. Excluding the payment, Creative actually turned in a net loss of US$53.8m from its core operations. Again, the performance was much worse than our forecast of a US$42.2m net loss on revenue of US$1,042.7m.

PDE was the worst performing segment. On a segmental basis, its PDE division was the worst performer, down 37.2% YoY at US$94.2m, which management attributed to a "transition" from HDD-based to Flashbased MP3 players, especially in the US. Others segment was also weaker, down 20.5% at US$16.5m, while Audio fell 17.4% to US$24.8m. Only its Speakers division was relatively flat at US$29.7m.

Profitability only in 2Q08. While we are pleased with the efforts that Creative has made to reduce operating costs, our earlier worries of having to sit through at least another quarter of pain were confirmed. Management is only targeting to get closer to break even in the current quarter and return to profitability by the end of the calendar year, or 2Q08. But our main concern is that it may just be a spike due to the traditional holiday season. Although Creative hinted that it has several new products in the pipeline, targeting the high-end speakers/headset segment and the Madefor-iPod Program, we do not see a "killer" product among them that will drive sales and ensure continued profitability.

Waning market interest. While we expect FY08 to be the turnaround year for Creative's core operations, the risk of disappointment remains high. Furthermore, market interest and following of the company have been waning, with daily average traded volume slipping to 181,851 shares this year, versus 230,808 in 2006 and 391,374 in 2005, and there is also a risk that interest could fall further should Creative be excluded from the new 30-stock STI index. As such, we are suspending coverage of the stock.

__________________
KK


Guru

Status: Offline
Posts: 1236
Date:
Creative - SGX
Permalink  

CREATIVE ANNOUNCES Q4 FY07 FINANCIAL RESULTS

Creatives Previously Announced Voluntary Delisting from NASDAQ Proceeding as Planned

SINGAPORE Aug. 8, 2007 Creative Technology Ltd., a worldwide leader in digital

entertainment products, today announced financial results for the fourth quarter of fiscal year 2007 and the full 2007 fiscal year, ended June 30, 2007. All financial results are stated in U.S. dollars.

Revenues for the fourth quarter were $165.2 million, compared to revenues of $230.9 million for the same quarter last year. Revenues for the 2007 fiscal year were $914.9 million, compared to revenues of $1.1 billion for the previous fiscal year. Net loss for the fourth quarter was $19.3 million, with a loss per share of $0.23, including

restructuring charges of $2.4 million. This compares to a net loss of $12.7 million with a loss per share of $0.15 for the same period last year, including a $10.0 million tax credit.

Net income for the 2007 fiscal year was $28.2 million, with earnings per share of $0.34, including a $100 million paid-up license from Apple for its use of the ZEN Patent in its products. This compares to a net loss of $118.2 million with a loss per share of $1.42 for the previous fiscal year.

The paid-up license from Apple for use of the ZEN Patent in its products was previously included in Creatives revenues for the second quarter of fiscal year 2007, ended December 31, 2006. However, taking into consideration recent comments the Company received from the United States Securities and Exchange Commission, the Company has now classified the entire $100 million as non-operating other income in the cumulative twelve months consolidated statements of operations.

During the quarter, although we were able to reduce our operating expenses to $51.3 million, we still suffered an operating loss, primarily resulting from a drop in sales in the U.S. market, said Craig McHugh, president of Creative Labs, Inc. Despite the lower sales in the U.S., we were able to reduce our inventory by 12 percent from the previous quarter and by 43 percent year-over-year. This helped us to keep our strong cash position at $250 million, even after paying off $75 million of our long-term debt in the period. Looking forward, we will continue to push to bring our operating expenses in line with our gross margins and revenues as we target to get closer to break-even in the current quarter and return to profitability by the

end of the calendar year.

During the fourth quarter, Creative announced its plans to voluntarily delist the Companys Ordinary Shares from the NASDAQ Global Market, with August 31, 2007 as the last day of trading on NASDAQ. The Companys listing on the Singapore Exchange Securities Trading Limited (SGX-ST), where Creative has the vast majority of its trading volume, will become its sole exchange listing. To view the press releases pertaining to the voluntary delisting, visit www.creative.com/corporate/investor.



__________________
KK


Guru

Status: Offline
Posts: 1236
Date:
Creative - BT
Permalink  

14 Jun 07

Creative Tech says to delist from Nasdaq

Singapore-listed Creative Technology said it plans to voluntarily delist its shares from the Nasdaq, citing administrative overhead and reporting costs.

The company, which makes Nomad and Zen MP3 players, said August 1 will be its last day of trading on the Nasdaq.

Creative's current primary listing on the Singapore Exchange Securities Trading Ltd would become its sole exchange listing. -- REUTERS

__________________
KK


Guru

Status: Offline
Posts: 1236
Date:
Creative - OCBC
Permalink  

6 Jun 07

Recent sell-down brings value

Valuations are not demanding. Creative Technology has underperformed the market since reporting a poor set of 3Q07 results in early May, falling nearly 26% within a month to hit a 10-year low of S$6.90 on 30 May. And at current levels, the valuations are not demanding, with a Price to FY07F NTA of 1.0x and a P/E of 10.4x FY07F EPS. Hence, we believe that the downside risk from here looks pretty limited and based on valuations, we are upgrading our recommendation from Hold to BUY. However, Creative may still be facing a long road to full recovery, as such, we will be lowering our fair value from S$9.90 to S$8.50, now based on 1.2x (versus 1.4x previously) blended FY07/FY08F blended NTA.

At least another quarter of pain. One reason for the long road to recovery is that the Apr to Jun quarter is traditionally a slow one for Creative and with still some restructuring to be done, we expect the company to remain in the red. However, we may see further improvements in margins, aided by cheap NAND flash prices. In addition, sales should start to pick up in the Jul to Sep period going into the holiday season. Already, we are starting to see a slew of new products from Creative, both in the MP3 player as well as audio accessories space. And consumers, buoyed by the recent gains from the equity markets around the world, may be in the mood to splurge on electronic gadgets like MP3 players and related accessories.

More X-Fi deals could be the clincher. Even though Creative has launched several X-Fi enabled products under its brand, the seemingly slow progress made by the company in the licensing of its X-Fi technology, especially into the consumer electronics space, has been disappointing. We think that Creative does have a superior technology and if it can tie-up with large consumer electronics manufacturers, licensing should provide a steady income stream. Still on X-Fi, we understand that Creative has recently licensed its technology to Auzentech Inc, a maker of high-end sound cards, making it the first third-party vendor to use the X-Fi chipset on its upcoming Auzen X-Fi Prelude. It is still early days yet but if the positive response to the Auzen card from the online community is anything to go by, it may cannibalize the sale of Creative's X-Fi cards.

__________________
KK


Guru

Status: Offline
Posts: 1236
Date:
Creative - CIMB
Permalink  

3-May-07

Show me the products

Below expectations. 3Q07 net loss of US$23.6m came in worse than consensus and our estimates of US$19m-20m losses, as higher-than-expected sales were overwhelmed by higher-than-expected R&D charges and lower-than-expected gross margins. 9M07 net profit of US$47.5m (including exceptionals) represents 105% of our previous full-year forecast.

Sales slipped 19% yoy to US$183m in 3Q07. This marks the fifth consecutive quarter of yoy decline. PDE sales, which accounted for 52% of group sales, plunged 29% yoy, in sharp contrast to Apples flat yoy growth during the same period. Audio sales, however, surprised us with a 7% yoy improvement, reversing from five consecutive quarters of yoy decline. We believe sales were lifted partly by X-Fi products.

EBITDA margins remained at negative 10.3%, as the current run rate and gross margins (of slightly above 20%) were still insufficient to support its cost structure. 3Q07 earnings were further dragged down by US$3.5m of restructuring charges related to a 10% cut in the global workforce. Creative also incurred an investment loss of US$1.3m during the quarter.

Balance sheet continued to improve. Creative continued to work down its inventory, which slipped 24% qoq to US$153m as at end-3Q07, which in turn helped to strengthen its cash position. Creative ended the quarter with about US$84m of net cash, up from US$25m in the previous quarter.

We still cannot see any light at the end of the tunnel. We expect Creative to report another two quarters of losses before returning to the black during the seasonally strongest quarter in 2QFY08 (year-end Christmas sales). In the meantime, the company can only continue to contain operating costs to check its operating losses. We have yet to see products from Creative that excite us despite managements persistent belief of killer products in the making.

Forecasts cut, maintain Underperform. We have cut our FY07 earnings again by 25% to factor in the 3Q07 disappointment and lower sales assumptions for 4Q07. We have kept our FY08-09 numbers for the time being. Our target price, still based on 1.2x P/BV, has been trimmed from US$8.65 to US$8.40. Maintain Underperform as we see few catalysts for a near-term re-rating.

__________________
KK


Guru

Status: Offline
Posts: 1236
Date:
Creative - BT
Permalink  

3-May-07

Time's running out for Creative to play a new tune

THE tune heard from Creative Technology yesterday continued to be a depressing one, as it reported a worse-than expected set of results.

In January, Craig McHugh, president of Creative Labs Inc, had given a more upbeat forecast. He had said that the company was targetting to be 'about break-even' for its third fiscal quarter ended March 31, and was aiming to be profitable for the remaining quarters of 2007, excluding restructuring charges.

But for the first three months of the current calendar year, Creative missed its 'about break-even' target, and posted a loss of US$23.6 million, which included about US$3 million in restructuring charges.

The music got even more downbeat yesterday, as Mr McHugh muted the profitability tune that Creative was previously singing and said that it was now 'targeting to be profitable in the second half of the calendar year'. This implies that Creative does not expect to start its profitable streak in the current fourth fiscal quarter.

So Creative missed sales targets, cut prices on its digital media players, cut its workforce by 10 per cent last quarter and planned to take on another US$3 million in restructuring charges this quarter.

Which inevitably leaves shareholders and investors wondering: when will the good times begin?

To its credit, the company did say it was looking to reduce its operating expenses to about US$50 million, and that it was managing inventory better. But in the consumer electronics space that it is in, that's definitely not going to suffice. Just like its competition, Creative is also now relying more on electronics manufacturing service (EMS) providers or contract manufacturers - something it should have done earlier, as competition among these vendors remains keen, and margins in the EMS industry are thin.

Thus, rather than investing and managing production facilities, Creative can now focus on investing time and resources in key areas like research and development - an approach that its wholly-owned subsidiary 3Dlabs is adopting.

3Dlabs specialises in producing graphics processors and is 'fabless', which means that it comes up with the designs for the chips, but gets other companies to do the manufacturing. The company also holds some promise for Creative, as it has been focusing on the mobile device space, which is increasingly incorporating more features that demand more horsepower from graphics processors, such as in handling global positioning system navigation and terrestrial digital television broadcasts. However, despite the apparent potential synergies, Creative has yet to surprise the market with announcements of product tie-ups with 3Dlabs.

There are also market rumours that Creative could be looking into the LCD TV space. Unlike the maturing MP3 player market, the LCD TV market is certainly booming, and if Creative integrates some of its proprietary technology like its X-Fi audio processor, or perhaps license the technology to LCD TV vendors, it could be looking at differentiating its product from the increasingly commoditised LCD TV market.

Compared with the quarter a year ago, revenue from its audio products grew 6 per cent and speakers inched up one per cent, while its other products (such as keyboards, webcams and the like) fell 19 per cent. And Creative's foray into iPod accessories has so far met with limited success, going by these results.All eyes will certainly be on Creative's 'key product introductions' this quarter - which had better not be more 'iPod killers'; otherwise, fewer investors will bother looking Creative's way. After four out of five quarters of losses, Creative doesn't have the luxury of time.

-- Edited by KK at 19:33, 2007-05-03

__________________
KK


Guru

Status: Offline
Posts: 1236
Date:
Permalink  

3-May-07

Creative reports Q3 net loss of US$23.6m

CREATIVE Technology Ltd, whose music players compete with Apple Inc's iPods, reported its fourth loss in five quarters after the company said it missed sales estimates in the US and Asia. The net loss narrowed to US$23.6 million in the fiscal third quarter ended March 31, from US$114.3 million a year earlier, the Singapore-based maker of Zen and MuVo music players said yesterday. The loss a year earlier was widened by a US$41.6 million one-time restructuring charge for a unit.

Creative said it will trim operating expenses 20 per cent by the end of September, after job cuts earlier this year. The company is seeking to boost earnings by supplying Cupertino, California-based Apple with iPod accessories and providing outsourced production.

'The company is biting the bullet and taking some short-term pain,' Tan Ai Teng, an analyst at DBS Vickers Research in Singapore, said before the results. 'They are changing their strategy by getting out of the battle for market share with Apple, and starting to go for profitability.' She has a 'fully valued' rating on Creative and a price target of $7.70.

Sales fell 19 per cent to US$183.8 million in the quarter and were 'below expectations' in the US and Asia, Craig McHugh, president of the US unit Creative Labs Inc, said on a conference call. Revenue from personal digital entertainment products, including music players, fell 38 per cent as unit sales declined and the company cut prices, he said.

The share of sales from the Americas fell to 32 per cent from 41 per cent a year earlier, while the portion from Europe increased to 49 per cent from 38 per cent. The share from Asia and other regions slipped to 19 per cent from 21 per cent. Operating loss, or sales minus the cost of goods sold and administrative expenses, narrowed to US$24.6 million from US$118.3 million a year earlier. Creative aims to cut operating expenses to about US$50 million by the first quarter ending September, from US$62.6 million in the three months ended March 31.

The third-quarter expenses included US$3 million to reduce employee numbers.

Creative received US$100 million from Apple in October to settle a patent dispute. That helped it post a record US$92 million net income in the three months to Dec 31. - Bloomberg



__________________
tfwee


Veteran

Status: Offline
Posts: 581
Date:
RE: Creative
Permalink  

Extracted from UOB Kay Hian.

Snippet - Creative Technology

Another quarter of losses Creative reported net loss for 3Q07 at US$23.6m. This is in line with its profit warning that it will incur operating losses of about US$20m. Worldwide revenues contracted 18.5% to US$183.8m due to sales in the US and Asia coming in below expectations.

Creative reduced headcount by approximately 10% at the end of the quarter. This resulted in restructuring charges of about US$3m. Creative targets to reduce operating expenses from US$59.6m in 3Q07 to about US$50m by 1Q08.

Creative has reduced inventory from US$201.2m at Dec 06 to US$153.4m at Mar 07. This helped to strengthen cash position to US$292.5m. Creative utilised US$75m of its cash balance to pay down US$175m syndicated term loan to US$100m after the close of the quarter.


-- Edited by tfwee at 15:12, 2007-05-02

__________________
Fortune favors the Bold
tfwee


Veteran

Status: Offline
Posts: 581
Date:
Permalink  

Creative Technology Ltd. launched a collection of Creative X-Fi® Xtreme Fidelity" enabled products for the home at the  X-Fi Your Home  press event in the showflat of the prestigious Icon Condominium. X-Fi Xtreme Fidelity is the new audio standard from Creative that is designed to dramatically enhance any music or audio. It features the X-Fi Crystalizer that restores the detail and vibrance to compressed music and movies and the X-Fi CMSS-3D that expands stereo MP3s and digital movies into surround sound over multichannel speakers, stereo speakers or even headphones. Taking the X-Fi technology to a new level, Creative shows how the collection of X-Fi products may be integrated into the home setting and in every lifestyle. From the living room to the study room to the bedroom, users can now enjoy great sound quality with Creative s award-winning X-Fi technology.


__________________
Fortune favors the Bold
KK


Guru

Status: Offline
Posts: 1236
Date:
Creative - DBS
Permalink  

3-Apr-2007

Losing its Zen?

Disappointing guidance. Creative Technology projects an operating loss of approximately US$20m for 3Q07, worse than our projection of US$12.4m operating loss and the companys previous expectations of profitable quarters before restructuring charges for the rest of the year. Although gross margins are expected to be above 20%, it is a challenge maintaining profitability in the future with sliding revenue and lower operating leverage.

Weaker than expected demand. 3Q07 sales are expected to come in at approximately US$180m compared to our revenue forecast of US$256m and gross margin projection of 21%. The company attributed operating loss to lower than expected sales for Creative products in Asia and the United States, and restructuring charges worldwide relating to cost reduction efforts in the quarter. We believe poor sales are broad-based from portable media players to made-for-Apple products.

Earnings downgrade. We have widened our loss forecast for 3Q07 and 4Q07 from US$12m and US$8.5m to US$17.5m and US$11.1m respectively. For the full year, we have cut Creatives net earnings by 20% to US$42.5m.

Still an uphill fight. We believe Creatives performance for the next few quarters will remain lacklustre or continue to slide as we enter the traditionally softer 1H season. But more importantly, we think Creative urgently needs a killer app to regain consumers interests and sustain growth for the long term. Downgrade to Fully Valued with lowered target price of US$7.70, peg to 1xP/BV.

__________________
KK


Guru

Status: Offline
Posts: 1236
Date:
Creative - Credit Suisse
Permalink  

2-Apr-2007

3Q07 to fall short of guidance due to disappointing sales

Creative has cut its 3Q07 guidance and now expects an operating loss of US$20 mn for 3Q07. This is below its initial guidance of breakeven, and our projection of US$1 mn net profit.

3Q07 core sales is expected to fall 45% Q/Q to US$180 mn (we expected US$248 mn) while gross margin is expected to be above 20% (we are expecting 21%).

The shortfall is due to lower than expected sales in Asia and the US, and also included some restructuring charges.

We believe sales are weak as the company has not been actively releasing new MP3 players, while in an environment where flash prices are falling rapidly, distributors are not keen to take on new inventory, preferring instead to wait for lower prices.

This warning reinforces our Underperform rating. Unless Creative comes out with compelling new designs, we expect the outlook to remain tough for the company. With losses looming, we believe the stock could retest the trough of 1x book (about S$9).

__________________
KK


Guru

Status: Offline
Posts: 1236
Date:
Creative - OCBC
Permalink  

2-Apr-2007

Warns of US$20m operating 3Q07 loss

Warns of 3Q07 operating loss. Creative Technology has warned that it expects to post an operating loss of US$20m for 3Q07, citing lower-than expected sales of its products in both Asia and US, as well as restructuring charges worldwide relating to cost reduction efforts in the quarter. Creative had earlier guided for a softer quarter during its 2Q07 results briefing, it was expecting to break even before a restructuring charge of US$4.4m and some other costs, so the size of the operating loss comes as a surprise to us.

3Q sales expected around US$180m. In addition, Creative expects to post sales of just US$180m for the quarter, which is a 57% tumble from 2Q07 sales of US$424.4m (includes US$100m settlement from Apple). Even then, it is a 20% drop from the US$225.7m posted a year ago. We were expecting sales to be flat YoY and down 46.5% QoQ. Creative appears to have kept its gross margin above 20% but it comes as no consolation.

Outlook remains muted. While we think that these restructuring costs are unlikely to be repeated, the lower-than-expected sales suggest that Creative has gained little traction from its inclusion into the Made-for-iPod program accessories eco-system and at the same time feeling more heat in the highly-competitive MP3 player market.

Revises FY07 estimates lower. In view of the latest profit warning, which we fear may not be the last, as the fourth quarter also tends to be quite slow for Creative, we are revising down our FY07 estimates. For sales, we are now only eyeing US$1.0b for the year, down 9.5% from our earlier number of US$1.1b, while core net loss is expected to come in around US$26m, up sharply from our previous forecast of US$4.6m. This excludes the US$82m payout from Apple.

Cuts fair value to S$10.40. The company has been talking about pursuing licensing pacts with other players in the MP3 market and licensing its X-Fi technology to the consumer electronic space but we think Creative still has its work cut out for it as historically execution has not been its strongest suite. It also lacks a killer product. We are revising our fair value from S$11.20 to S$10.40, still based on 1.4x blended FY07/08F NTA. We are maintaining our HOLD rating but mainly due to valuation as we do not see any near-term upside.

__________________
tfwee


Veteran

Status: Offline
Posts: 581
Date:
RE: Creative
Permalink  

Creative Technology announced that it is projecting an operating loss of approximately $20 million for the third quarter of its 2007 fiscal year, ending March 31, 2007. The operating loss is due to lower than expected sales in Asia and the United States, and restructuring charges worldwide relating to cost reduction efforts in the quarter. Sales are expected to come in at approximately $180 million, with gross margins above 20%.

__________________
Fortune favors the Bold
KK


Guru

Status: Offline
Posts: 1236
Date:
Creative - DBSVickers
Permalink  

31-Jan-2007

Still early phase of recovery

Net profit of US$92.1m was broadly in line with our forecast of US$96m but higher than consensus estimates of US$87.3m. Operating profit excluding licensing gain and US$4.4m of restructuring charges and investment gain for both periods would be US$14.3m, up from US$1.3m in 2Q6 and a loss of US$21m last quarter. Gross margins net of one time gain was 21.7%, matching 21.8% a year ago period and an improvement over 15% in 1Q07. This is boosted primarily by lower memory costs of flash-based MP3 and to a lesser extent, restructuring benefits.

But core product demand still weak. 2Q07 sales of US$424.4m included a US$100m paid up license fee from Apple. Excluding licensing gain, all core product segments fell yoy. Audio (mainly sound cards) registered the sharpest decline of 36% yoy as new launches like Xmod and Xdock failed to gain traction. Personal Digital Entertainment also fell 16% y-oy possibly due to further market share loss. This segment remained the largest contributor accounting for 68% of revenue.

Still driving down cost structure to stay profitable. In the near term, seasonality and continued restructuring expenses would affect Q3 results. It remains to be seen if the company can sustain gross margin since management has indicated profitable quarters for the whole year before restructuring charges.

Raising forecast but HOLD maintained. We have raised FY07 net profit forecast to US$65.3m to reflect higher margin assumption for the subsequent quarters. Our target price of S$10.20 is still based on previous peg of 1.3xP/BV, the average valuation when Creative was turning profitable in FY03.

__________________
KK


Guru

Status: Offline
Posts: 1236
Date:
Creative
Permalink  

BT, Published January 10, 2007

Creative unveils first iPod accessory

The Xdock Wireless enhances compressed digital music

CREATIVE Technology yesterday unveiled its first iPod-specific accessory that confirmed its entrance into the growing iPod accessory market and the expansion of its accessories business.

While Creative has previously sold accessories such as speakers and earphones that work with most portable digital music players, including the iPod, the Creative Xdock Wireless unveiled yesterday is its first accessory designed specifically for the world's best-selling portable digital music player from its former arch-rival Apple, under Apple's 'Made for iPod' partner programme.

The Creative Xdock Wireless enables an iPod to play music in Xtreme Fidelity - a proprietary Creative audio enhancement technology that is touted to improve the quality of compressed digital music and enable it to sound better than compact discs. The device can also wirelessly broadcast the music played from the iPod, and when used with multiple Creative X-Fi Wireless Receivers, it enables users to listen to music from the iPod in different rooms. Both products are expected to be available from March, with the Creative Xdock Wireless priced at S$299 and the Creative X-Fi Wireless Receiver at S$149.

In the past two years, Creative has gone from an ardent competitor of Apple to being its partner. In August last year, Creative announced that it will make accessories for the iPod. Belkin, a leader in the iPod accessory market, had previously estimated its customers spend US$100 to US$150 on two or three accessories for their iPods.



__________________
KK


Guru

Status: Offline
Posts: 1236
Date:
Permalink  

Extracts fm SGX Announcement,

Creative Announces Change in Director’s Shareholding

SINGAPORE – November 22, 2006 – Creative Technology Ltd (NASDAQ: CREAF), a worldwide leader in digital entertainment products, today announced that Sim Wong Hoo, chairman and CEO of Creative Technology Ltd, has sold 2 million of his Creative shares to Chay Kwong Soon, a co-founder of the company. With this sale, Sim Wong Hoo’s shareholding in the company will be reduced from 31.15% to 28.75%.



__________________
KK


Guru

Status: Offline
Posts: 1236
Date:
Creative - DBSVickers
Permalink  

Extracts fm DBSVickers report dated 1-Nov-06,

Still Lacking Growth Drivers

Disappointing 1Q07. Gross margin was a dismal 15% compared to our expectation for margins to improve to 22.8% from 20% that was recorded in 1Q06. SG&A expenses as a percentage of sales was 17%, still higher than 1Q06 although it was an improvement from last quarter’s 18.5%.

One-off gains to boost 2Q. Creative is expected to book US$100m (US$82m net of tax) license payment from Apple and US$5m gains from the sale of 80.1% stake in its manufacturing unit in Malaysia. Operationally, management targets to achieve gross margin of >20% with sales of higher margin flash-based MP3 players and further reduction in operating expenses as well as exiting lower growth businesses. Longer term, Creative plans to outsource manufacturing so that the company can reduce manufacturing overheads and working capital needs to focus more on product development, sales and marketing.

Maintain Hold, TP S$10.30. We have revised FY07 forecast and expect a net profit of US$54.4m compared to a loss of US$19.7m previously. Our target price of S$10.30 is based on 1.3x P/BV, the average valuation when Creative was turning profitable in FY03.



__________________
KK


Guru

Status: Offline
Posts: 1236
Date:
Creative - CIMB
Permalink  

Extracts fm CIMB report dated 31-Oct-06,

No music to the ears


  • Below expectations. 1Q07 net loss of US$21m was wider-than our expectations of US$7.6m due largely to lower-than-expected recovery in gross margin.
  • Sales declined 14% yoy to US$241.5m, marking the third consecutive quarter of yoy decline. All product segments posted yoy declines, reflecting the difficult environment for its core businesses. PDE sales formed 70% of group revenue in 1Q07 (-9% yoy), followed by audio (10%; -34%), speaker (13%; -14%), and other sales (7%; -25%). PDE products continued to face stiff competition from those belonging to Apple and other CE OEMs, while demand for audio cards continued to falter.
  • EBITDA margin slipped 6.2% pts yoy to remain in negative territory. This was a result of lower sales and gross margins, which overshadowed a reduced opex ratio. Creative posted another quarter of losses, which is in line with our expectations.
  • Back to net borrowing. Creative slipped back to US$20m net borrowing as a result higher inventory days and losses incurred during the quarter. We believe Creative has stocked up inventory ahead of its busiest quarter.
  • No signs of sustained recovery. Although we are pleased with Creative’s good progress in bringing down its operating costs (eg. Effort to sell its manufacturing facility in Malaysia), we remain negative on its core operations. Demand for its audio products has been waning, and we see competition in the MP3 player market intensifying with Microsoft joining the game. We still cannot find any new “killer” products from Creative that could sustain its earnings recovery. Although Creative will soon be launching Apple accessories, we view these as “me too” products. We also believe the retail price of US$79.99 for its recently launched Xmod (enhanced sound quality) is too high for mass adoption, especially for flash memory-based MP3 players.
  • Cutting forecasts, downgrade to Underperform. We have cut our FY07 numbers by 49% to factor in the wider-than-expected losses in 1Q and lower gross margin assumptions, but have kept our FY08-09 numbers unchanged for now. We have also downgraded our rating from Trading Buy to Underperform given that the share price has performed well since our upgrade, and is above our revised target price of S$9.50. Our target continues to peg Creative at 1.2x P/BV - the level it was trading at when its losses started to narrow in FY02-03. Although we expect trading interest in Creative to return as we approach the year-end season, we see little excitement from its core earnings, and believe interest will wane as we enter 2007.


__________________
KK


Guru

Status: Offline
Posts: 1236
Date:
Creative
Permalink  

BT, October 31, 2006, 7.47 am (Singapore time)

Creative Tech posts 3rd straight quarterly loss

SEATTLE - Creative Technology, the maker of Nomad and Zen digital music players, on Monday reported its third straight quarter of losses as it struggles in a competitive market dominated by Apple Computer's iPod. Singapore-based Creative reported a net loss of US$21 million, or 25 cents per diluted share, in its fiscal first quarter ended Sept 30, compared with a net profit of US$691,000 in the year-ago period. First-quarter sales fell 14 per cent to US$241.5 million.

Creative said in August that it was targeting gross margins of at least 20 per cent by the end of this calendar year and would slash operating expenses aggressively in a bid to return to profit. It registered a gross margin of 14.8 per cent in the first quarter.

The company also said it agreed to sell an 80.1 per cent stake of a manufacturing operation in Malaysia for US$40 million in cash, which will result in a profit of US$5 million on completion of the deal in about three months.

Creative also said the company will now reap an after-tax profit of US$82 million this quarter and an EPS boost of 98 cents, up from an August estimate of 85 cents, from a one-time license payment from Apple.

Creative also competes with South Korea's Samsung Electronics, which produces the Yepp players, Japan's Sony and South Korea's Reigncom, whose iRiver players have won good reviews. Mobile handset makers Nokia and Motorola also are adding MP3 functions to high-end music phones. -- REUTERS



__________________
KK


Guru

Status: Offline
Posts: 1236
Date:
Creative - UOBKayHian
Permalink  

Extracts fm UOB Kay Hian Report dated 24-Aug-06,

Settlement provides US$100m license payment

Settlement provides US$100m license payment. Creative and Apple have jointly announced a broad settlement ending all legal dispute between the two companies, including five lawsuits pending. Apple will pay Creative US$100m for a paid-up license to use Creative’s awarded patents in all Apple products. In addition, Creative has joined Apple’s “Made for iPod” programme and will be announcing its iPod accessories products later this year. This represents new market opportunity for Creative’s speaker systems, earphones and headphones.

A positive surprise. The settlement removes the uncertainty from a prolonged litigation process. The one-time licensing payment of US$100m will contribute EPS of US$0.85 in 1Q07 and is recognition of Creative’s proprietary intellectual properties and technologies. We expect the positive development to create buying interest for the stock. Other makers of MP3 players may also have to consider licensing the technology from Creative or work with Creative. However, our current estimated NTA/share is S$8.10 at end-FY07 after adjusting for the US$100m license payment. Maintain SELL with fair price at S$8.10.



__________________
KK


Guru

Status: Offline
Posts: 1236
Date:
Creative
Permalink  

Apple to Pay $100 Million to End Creative Dispute

Aug. 23 (Bloomberg) -- Apple Computer Inc. will pay Creative Technology Ltd. $100 million to end lawsuits over technology needed to navigate through songs on Apple's popular iPod music player.

Creative's shares soared.

The money gives Apple a fully paid license to Creative's patent, which covers technology that permits IPod users to select songs on the hand-held devices. In addition, Creative is joining Apple's ``Made for iPod'' program and will be announcing accessories for the music players, the companies said today in a joint statement.

Apple, whose iPod music player controls about 77 percent of the U.S. market for such devices, and Singapore-based Creative began suing each other in California, Texas and Wisconsin in April. They also filed complaints with the U.S. International Trade Commission in Washington, each accusing the other of infringing patents related to the devices.

``Apple's been the primary innovator in the digital music revolution,'' said Steve Dowling, an Apple spokesman. ``Creative was very fortunate to have been granted this early patent and we just wanted to move beyond and get back to innovating without several years of protracted litigation that would have cost as much as settlement.''

Creative spokesman Phil O'Shaughnessy didn't immediately return a call seeking comment.

Creative's shares in the U.S. rose $1.65, or 27 percent, to $7.66 in extending trading. They earlier lost 5 cents to close at $6.01 in Nasdaq Stock Market composite trading and have fallen 29 percent this year. Shares of Apple, based in Cupertino, California, fell 6.4 percent this year, fell 31 cents to close at $67.31 at 4 p.m. New York time, before release of the statement.

The Apple cases are Apple Computer Inc. v. Creative Labs Inc., 06cv263, U.S. District Court, Western District of Wisconsin (Madison); and Apple Computer Inc. v Creative Technology Ltd., 06cv114, U.S. District Court for the Eastern District of Texas (Lufkin Division). The trade complaint against Creative is In the Matter of Portable Digital Media Players, 337-TA-576, U.S. International Trade Commission.

The Creative complaints are Creative Technology Ltd. v. Apple Computer Inc., 06cv3218, U.S. District Court, Northern District of California (San Francisco); and In the matter of Portable Digital Media Players, 337-TA-573, U.S. International Trade Commission.



__________________
KK


Guru

Status: Offline
Posts: 1236
Date:
Permalink  

BT, Published August 11, 2006

Creative Technology halves Q4 net losses to US$12.7m

Results better than expected; target for profitability by year-end

HELPED by a US$10 million tax credit and lower costs, Creative Technology more than halved net losses for its fourth-quarter ended June 30 to US$12.7 million, from US$31.9 million in the previous corresponding quarter. And the maker of consumer electronics and audio equipment is targeting a return to profitability by the end of this year.

The results also beat market expectations as Creative was expected to post a net loss of US$19.6 million, according to the median forecast of five analysts surveyed by Bloomberg News.

But the Q4 deficit brought full-year net losses to US$118.2 million, its largest in five years. In the preceding year, it saw a full-year net profit of US$588,000. The Q4 results followed a US$114.3 million net loss in Q3 resulting from a drop in flash memory prices and a US$41.6 million charge relating primarily to goodwill and restructuring charges. The first two quarters saw lower net profits. Q4 revenues dropped 24.4 per cent year-on-year to US$230.9 million, while revenues for the full year fell 8 per cent to about US$1.13 billion.

The company's full-year net loss would have been US$95.4 million excluding investment gains of US$18.9 million and the one-time US$41.6 million restructuring charges. This compares with a net income of US$8.6 million the preceding year, after excluding a non-cash impairment charge of US$65.2 million and investment gains of US$74.4 million.

'Although we posted a loss for the period and for the year, we made progress towards our goals during the fourth quarter', said Craig McHugh, president of Creative Labs Inc. Creative has reduced operating expenses by 17 per cent and net inventory levels by 15 per cent from the previous quarter, and had launched award-winning products like the media players Zen V and Zen V Plus in the period, he said. 'Based on our progress in the fourth quarter, our focus on reducing operating expenses and the market potential for our products, we are targeting return to profitability by the end of calendar year 2006 and continued profitability going forward,' he said.

Creative aims to raise its gross margin from 14 per cent in Q4 back to above 20 per cent this calendar year by 'desperately finding ways to reduce production cost by managing supply chain, procurement and inventory', Mr McHugh said. 'We are improving distribution strategies, especially with rising freight costs. We are examining product categories and will get out of non-profitable businesses,' he said.

Creative will also benefit from low flash memory prices, said Mr McHugh, calling the fall in prices a 'key reason' the company expects a return to the black. Competitors like Apple have a purchasing advantage on memory, which is now eliminated because of low flash memory prices; with lower costs, Creative has reduced prices for flash players and is seeing greater demand at these new prices, he said.

Creative's personal digital entertainment segment, which includes its MP3 and other media players, made up 65 per cent of sales in Q4, versus 60 per cent for 4Q05. Audiovisual products like speakers made up 30 per cent of sales. It plans to focus on high growth and high margin areas like wireless headphones and by making its X-Fi technology available to non-PC devices like set-top boxes and MP3 players, Mr McHugh said.

An analyst at a foreign bank said: 'At the margin, Creative is turning more positive, as flash memory prices are coming down. They have started to cut costs, which is helping them improve results.' He believes Creative will succeed in raising gross margins above 20 per cent and has upgraded the stock from 'neutral' to 'outperform'. Another analyst, Carey Wong at OCBC Investment Research, said Creative's net loss had 'improved dramatically' Q3. Full-year net losses were also better than OCBC's US$133.6 million net loss forecast, said the analyst, who is keeping a 'hold' rating on Creative and reviewing the $8.49 fair price.

Creative's share price fell 20 cents to close at $8.45 yesterday.



__________________
KK


Guru

Status: Offline
Posts: 1236
Date:
Permalink  


SINGAPORE – Aug. 10, 2006– Creative Technology Ltd. (NASDAQ: CREAF), a worldwide leader in digital entertainment products, today announced financial results for the fourth quarter of fiscal year 2006 and for the full fiscal year 2006, ended June 30, 2006. All financial results are stated in U.S. dollars.

Sales for the fourth quarter were $230.9 million, compared to sales of $305.4 million for the same quarter last year. Sales for the 2006 fiscal year were $1.1 billion, compared to $1.2 billion for the previous fiscal year.

Net loss for the fourth quarter was $12.7 million with a loss per share of $0.15, including a $10 million tax credit. This compares to a net loss of $31.9 million with a loss per share of $0.38 for the same quarter last year including an investment gain of $9.3 million. Excluding the investment gain, net loss for the same period last year was $41.2 million with a loss per share of $0.49.

Net loss for the 2006 fiscal year was $118.2 million, with loss per share of $1.42, including investment gains of $18.9 million and one-time charges of $41.6 million primarily related to goodwill and restructuring charges for 3Dlabs. Excluding the investment gains and one-time charges, net loss for the 2006 fiscal year was $95.4 million, with loss per share of $1.15.


This compares to net income of $0.6 million with EPS of $0.01 for the previous fiscal year, including a non-cash impairment charge of $65.2 million and investment gains of $74.4 million. Excluding the non-cash impairment charge and investment gain, net loss for the previous fiscal year was $8.6 million with a loss per share of $0.10.

“During the fourth quarter, although we posted a loss for the period and for the year, we made progress towards our goals,” said Craig McHugh, president of Creative Labs, Inc. “We reduced our operating expenses by 17 percent from the previous quarter. We further reduced our net inventory level in the period, with a 15 percent decrease from the previous quarter. In addition, we launched the ZEN V, and the ZEN V Plus MP3, photo and video player in the period. Based on our progress in the fourth quarter, our focus on reducing our operating expenses, and the market potential for our products, we are targeting our return to profitability by the end of this calendar year and continued profitability going forward.”

__________________
tfwee


Veteran

Status: Offline
Posts: 581
Date:
Permalink  

Extracted from TALKING POINT Kay Hian

Facing formidable challenges

Creative Technology (CREAF SP)
Microsoft confirmed last Friday it is working on a music and entertainment product that competes with Apple Computer’s iPod and iTunes online music store. The product called Zune will play both music and video and allow users to wirelessly download music, something that iPod couldn’t do. The product will have an accompanying content service and will be launched in time for the Christmas shopping season later this year. Microsoft previously partnered Creative, Samsung and iRiver, who use Microsoft's Media Player software in some of their MP3 players. However, the partners have collectively failed to take market share away from Apple. Microsoft has therefore decided to build its own hardware to break Apple’s grip on the market. Microsoft’s entry into the MP3 space will allow it to gain some control over the flow of content into the digital home. Microsoft’s entry into the MP3 market will have tremendous repercussion on Creative Technology. The new product, dubbed “iPod killer” by the media, will cannibalise Creative’s market share. Microsoft has the marketing dollars and a
global distribution chain to post a credible challenge against Apple iPod. Apple won’t be standing still and will be launching new products this year as well. Unfortunately, Creative will have to compete on two fronts: facing Apple in a protracted legal battle and differentiating itself against competition from the largest software company in the world. The risk for Creative is to be sidelined with the limelight focused on two of the biggest giants in the computing world.

Maintain SELL for Creative with Fair price at S$8.00 or P/B 1x

__________________
Fortune favors the Bold
KK


Guru

Status: Offline
Posts: 1236
Date:
Permalink  

BT, Published June 16, 2006

Creative up as US ITC probes patent complaint

Complaint seeks to halt sales of iPods in the US by rival Apple

SHARES of Creative Technology rose after the maker of Zen digital music players said the US International Trade Commission will investigate its complaint that larger rival Apple Computer infringed its patent.

Creative's shares advanced 35 cents or 4.5 per cent to S$8.10 at the close in Singapore, the biggest gain since May 17. The stock has fallen 40 per cent this year, the second-worst performer on the 50-member Straits Times Index, which has lost 1.9 per cent.

The US decision may help soothe investors of Creative, whose market value has dropped by one-fifth since May, when the company posted a record quarterly net loss. Creative filed a complaint on May 15, seeking to halt sales of the iPod in the US and claiming the Apple device infringes a digital-player patent owned by Creative Labs, its US division.

'This may indicate merit in the complaint or it may just be procedural, but the stock has come down quite a lot and some may see buying opportunities there,' said Russell Tan, a Singapore-based analyst at NRA Capital Pte.


Creative said on Wednesday the US Trade Commission typically issues a ruling on the investigation in 12 to 15 months.

'If someone has to make an investment decision, it should not be based on an outcome that will happen after one-and-a-half years,' said Pranab Kumar Sarmah, head of electronics research at Daiwa Institute of Research in Hong Kong. 'It should be based on their valuations, and the driver for the shares will be the fundamentals and whether earnings will improve' for Creative.

Apple on May 15 claimed Creative Labs infringed four patents. Apple also sued in a federal court in Lufkin, Texas, on June 1, the same day it asked the International Trade Commission in Washington to block imports of Creative's music players.

NRA's Tan said Creative, which posted its worst-ever net loss in the third quarter ended March 31, may not win the battle for market share. The net loss was US$114.3 million, compared with a profit of US$15.9 million a year earlier. Sales dropped 32 per cent to US$225.7 million.

Creative said on May 3 its sales of music players fell 51 per cent in the third quarter from three months earlier.

'Even if they prevail with this suit, Apple could possibly just change the software and interface,' Mr Tan said. 'With Apple's 70-plus per cent market share versus Creative's 10 per cent, it's very unlikely this would make much of a difference.' - Bloomberg



__________________
tfwee


Veteran

Status: Offline
Posts: 581
Date:
Permalink  

Extracted From The Straits Times

Apple files fresh patent suit against Creative

US giant also seeks to stop importsof S'pore-based firm's MP3 players

By Bryan Lee
Jun 07, 2006
The Straits Times
CREATIVE Technology's legal battle with Apple Computer has escalated to new heights as the American giant opened two new fronts against its smaller rival in what observers say looks like a war of attrition.

Apple filed a complaint last Thursday with the United States International Trade Commission, seeking a halt in US imports of Creative's MP3 players which it alleges breached some of its patents.

Apple also launched in Texas on the same day, a second patent-infringement lawsuit against the Singapore-based firm, claiming that it has infringed three of its patents.

Apple's legal actions mirrored earlier actions by Creative, in what was described by observers as a tit-for-tat move.

They added that Apple's latest move was not surprising and shows the US firm intends to mount a big fight to defend its top money-making product.

While it is too early to say how the legal war will unfold, they said that a long and costly tussle is all the more certain now, especially as Creative will have to fight in three district courts and in Washington where the trade agency is based.

The latest developments come just three weeks after Creative fired the first salvo when it sued Apple in a Californian court for infringing one of its patents in Apple's best-selling iPod MP3 players.

Creative had, on the same basis, also sought an import ban from the US trade agency on iPods.

These actions, however, brought a swift initial response from Apple, which launched the same day, a countersuit in Wisconsin, alleging that Creative breached four of its patents in its Zen MP3 players.

Apple's latest lawsuit accuses Creative of infringing patents related to the display of data on a computer, the editing of data from a portable device, and the use of computer icons.

The US firm is seeking cash damages and a court order to stop further infringement.

'The latest suit is a statement of intent - it's going to be a no-holds-barred fight,' said Keystone Law Corp director Siew Kum Hong.

'Suing Creative in another court is clearly a move to drain Creative's resources. There's no good reason for Apple to file its first suit in Wisconsin and then another in Texas.'

Mr Jonathan Kok, a partner at Harry Elias Partnership, said Apple is retaliating against Creative's earlier moves. 'If Creative didn't sue Apple, Apple probably wouldn't be suing Creative now.'

The best outcome for both firms is an out-of-court settlement with both entering into a cross-licensing deal, he added.

Stock analysts were unable to conclude what effect the latest lawsuit will have on Creative's share price, but they noted that the stock is unlikely to do well, given the bearish sentiment in the general market.

Creative shares yesterday closed five cents lower at $8.85 - 10 cents down from last Thursday's close of $8.95.

Said UOB Kay Hian's Mr Jonathan Koh: 'The only certainty in this legal battle is that it will take up a lot of time and resources. Apple, being the larger company, has more resources to engage Creative on a sustained basis.'

__________________
Fortune favors the Bold
KK


Guru

Status: Offline
Posts: 1236
Date:
Permalink  

May 19 (Bloomberg) -- Shares of Creative Technology Ltd. fell after larger rival Apple Computer Inc. claimed the company infringed four patents, raising the stakes in the legal dispute over their competing digital music players.

Creative's stock dropped 2.7 percent to S$9.20 as of 9:45 a.m. in Singapore. Shares of the Singapore-based company, which makes the Zen music player, have fallen 32 percent this year, the worst performers on the 50-member Straits Times Index.

Apple claims Creative Labs, the U.S. division of Creative, infringes four patents for the display and interface of music players. The suit was filed in a Wisconsin federal court on May 15, the same day Creative filed a patent-infringement suit and a trade complaint against Apple.

The iPod, Apple's fastest growing product, controls about 77 percent of the U.S. market, according to Port Washington, New York-based market research company NPD Group Inc., compared with Creative's less than 10 percent. Creative reported its worst-ever quarterly loss in the three months ended March, with sales of its music players falling 51 percent in the fiscal third quarter from three months before.

The two companies had been in talks over the Creative patent ``over a period of months,'' Creative spokesman Phil O'Shaughnessy said in an e-mail. ``Creative proactively held discussions with Apple in our efforts to explore amicable solutions,'' he said. ``At no time during these discussions or at any other time did Apple mention to us the patents it raised in its lawsuit.''

The case is Apple Computer Inc. v. Creative Labs Inc., 06cv263, U.S. District Court, Western District of Wisconsin (Madison). The other cases are Creative Technology Ltd. v. Apple Computer Inc., 06cv3218, U.S. District Court, Northern District of California (San Francisco) and In the Matter of Certain Portable Digital Media Players, Components Thereof, and Products Containing the Same, U.S. International Trade Commission.



__________________
tfwee


Veteran

Status: Offline
Posts: 581
Date:
Permalink  

Snippet - Creative Technology

Filed complaint and lawsuit against Apple Computer

Creative has filed a complaint with the US International Trade Commission (ITC) requesting an investigation on whether Apple Computer has violated Section 337 of the Tariff Act of 1930 through importation of iPods and iPod Nanos into the US that infringe US Patent 6,928,433, which Creative refers to as the “Zen Patent”. Creative is seeking an exclusion order and cease and desist order against Apple Computer, which would prohibit Apple Computer from engaging in sales and marketing of infringing iPod and iPod Nano products. Creative has also filed a lawsuit against Apple Computer in the US District Court for the Northern District of California that seeks an injunction and increased damages for Apple Computers wilful infringement of the Zen Patent.

The US Patent Office issued the Zen Patent to Creative on August 9, 2005 for its invention of the user interface used by most portable MP3 players, including many of the Creative Zen and NOMAD® Jukebox MP3 players and competing players such as the iPod, iPod Nano and iPod mini.

__________________
Fortune favors the Bold
tfwee


Veteran

Status: Offline
Posts: 581
Date:
Permalink  


Extracted from Gregory Yap Yi Choy

Creative's patent infringement suit against Apple may bring some relief to the share price in the short term but in the long term, it will distract and divert management attention and company resources when both are needed to turn around the ailing business. Even more ominous is Creative CEO Sim Wong Hoo's threat to go after other MP3 makers that may be infringing in its navigation patent. How many infringers other than Apple could there be? Given the numerous knockoffs in the market, our guess would be a lot! But back to Apple.

Although Creative's patent filing apparently precedes Apple's own filing by more than a year, Apple is unlikely to give up this lucrative business (50m iPods sold since 2001) without a long expensive fight, time and money that indebted loss-making Creative cannot afford to waste. While the end-rewards can be significant, as seen in the US$612.5m that Research-in-Motion paid NTP this year to settle its Blackberry patent infringement suit, the relief will certainly not be immediate and will probably take longer than most people expect at this point to materialise.

The recent unanimous US Supreme Court decision to overturn the injunction on eBay against it using someone else's infringing technology despite being found guilty will make it more difficult for Creative to stop Apple from selling iPods even if Apple is found guilty. As the precedent-setting decision removes the threat of an automatic shutdown for the infringers if they are found guilty, alleged infringers are now more likely to take their chances in court.

On the other hand, we do sympathise with Creative management. They probably feel it is against shareholders' interests to have a potentially lucrative patent in their hands and not use it. But we continue to be sellers of Creative until the fundamental business improves.

__________________
Fortune favors the Bold
KK


Guru

Status: Offline
Posts: 1236
Date:
Creative - CIMB
Permalink  

Extracts fm CIMB Report dated 4-May-06,

Gloomy outlook remains


  • Below expectations. Although 3Q06 sales of US$226m were in line with expectations, Creative’s net loss of US$114m was worse than consensus and our estimates of US$94m and US$95m, respectively. Sales dropped by 32% yoy, its first yoy decline after 10 quarters of growth. In fact, all product segments posted yoy declines. We are also disappointed by the poor performance of its core audio products, whose sales declined more than 30% yoy after a slight improvement in 2QFY06. This suggests that even the X-Fi sound card is not doing well.
  • EBITDA margin swung into negative 33%, hurt by inventory write-downs as a result of the decline in NAND flash memory prices. Pretax profit was further dragged down by one-off restructuring charges associated with the refocus of its graphic business (from traditional professional workstations to the portable handheld market). As a result, Creative’s net loss widened to US$114m.
  • Inventory still high. Although inventory dipped 8% qoq, inventory days remained high at about 93 days. However, Creative exited the quarter with US$12m of net cash, helped by shorter debtor and inventory days.
  • Gloomy outlook remains. We expect the business environment for Creative to remain tough for at least two more quarters, and believe the group will remain in the red. Demand is only expected to pick up in 2QFY07, closer to Christmas. We remain negative on its prospects given the harsh competition in the MP3 player industry, the mature sound card market, and lack of new exciting products in the foreseeable future.
  • Further cut in FY06 forecasts; Underperform maintained. We have widened our net loss expectations for FY06 from US$88.7m to US$128.7m to factor in the worse-than-expected 3Q06 numbers and our downward revision in gross margin assumptions for 4Q06. Maintain Underperform and target price of S$8.45, based on 0.8x P/BV, its historical support level. We see few near-term catalysts, especially as Creative enters the lull season.


__________________
1 2 3  >  Last»  | Page of 3  sorted by
 
Quick Reply

Please log in to post quick replies.
REITData -> TalkStock -> SGX - Stocks -> Creative
Tweet this page Post to Digg Post to Del.icio.us


Create your own FREE Forum
Report Abuse 		Powered by ActiveBoard