Published January 23, 2009

Creative posts Q2 net loss of US$32.4m

By ONG BOON KIAT

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THE troubled start to Creative Technology's financial year dragged into its second quarter, with the company yesterday announcing its biggest loss in 11 quarters.

Tough times: Creative expects the difficult market environment to continue to deteriorate and is evaluating the structure of its field organisations to cut expenses

Net loss for the three months to Dec 31, 2008, was US$32.4 million, with loss per share of US$0.44.

This compares with net income of US$7.6 million with earnings per share of US$0.09 for the year-ago period.

Sales plunged 41 per cent to US$155.7 million, the tech group's lowest quarterly revenue showings over the Christmas shopping period since its FY1993.

Half-year loss came to US$64.6 million, on sales of US$296.9 million. The previous corresponding period saw net income of US$8.9 million on sales of US$447 million.

The sobering Q2 sales were within Creative's earlier projection of a revenue range of between US$140 million and US$160 million.

Creative said that deteriorating market conditions led it to cut inventory in the second quarter to US$57.3 million, or 45 per cent lower than its previous quarter, which hit gross margins.

The company said that it incurred 'significant' currency exchange losses due to the depreciation of a number of currencies against the US dollar. It also suffered an investment loss of US$3.5 million.

Creative's personal digital entertainment products continue to garner the lion's share of sales, accounting for 54 per cent of total revenue in Q2.

Creative president and chief operating officer Craig McHugh said in a statement that the company expects the 'difficult' market environment to continue to deteriorate.

Creative is 'evaluating' the structure of its field organisations to cut operating expenses, he added.

The company recently revealed that it had slashed head count by 47 per cent - or 2,700 employees - in the 12-month period to June 30, 2008.

It attributed the bulk of the job cuts to the sale of its Malaysian manufacturing subsidiary in July 2007.

One bright spot for the maker of portable music players, computer sound cards and Apple iPod accessories is its foray this month into a new computer chip technology targeted at electronics device and PC manufacturers, dubbed Zii.

Creative shares closed five cents lower yesterday at S$4.