Creative struggles against iPod
The Singapore-listed firm chalked up an annual net loss of 118.2 million US dollars compared with a 588,000 dollar profit in the previous year, amid market forecasts for a full-year loss of 128.7 million to 140.0 million dollars.
Despite the full-year loss, Creative was upbeat the company could return to profitability by the end of 2006 amid ongoing efforts to trim expenses and hopes of a boost from the launch of new products.
"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.
He also pointed out that operating expenses were reduced by 17 percent from the previous quarter.
"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," he said.
Sales in the year to June totalled 1.13 billion dollars, down from 1.22 billion dollars in the previous year.
For the fourth quarter ended June, Creative narrowed its losses to 12.7 million dollars from 31.9 million dollars last year, partly due to a 10-million dollar tax writeback.
Carey Wong, a technology analyst with OCBC Investment Research, said he was keeping his "hold" recommendation on Creative stocks, which closed 20 cents down on Thursday to 8.45 Singapore dollars apiece.
While there seemed to be a recovery in the personal digital assistant (PDA) segment, the other products remained weak.
Wong said the firm faces increasingly tougher competition, especially with the entry of companies such as Microsoft into the MP3 player market.
Microsoft last month confirmed rumours it planned to launch an "iPod killer," and said its challenge to Apple Computer’s dominant MP3 player would hit the market this year.
Zune, Microsoft’s new "music and entertainment project", is aimed at taking market share away from the massively successful and overwhelmingly dominant iPod MP3 digital music player.
Creative has recently launched a series of new products, including the ZEN V and ZEN V Plus MP3 photo and video player, and the Sound Blaster X-Fi.
But Wong said "we don’t really see a killer product on any of this segment – meaning something that will really grab attention and give Creative that extra push."
Founded in 1981, Creative gained global fame for its SoundBlaster card that allowed personal computers to be used as home entertainment units but it has struggled recently after venturing into consumer electronics.
Creative has targeted the MP3 player market as a key to growth but has found it difficult to match Apple’s iconic iPod which dominates sales in the crucial US market.
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