Published May 6, 2009

Creative posts net loss of US$41.8m for Q3

By ONG BOON KIAT

	Email this article
	Print article
	Feedback

CREATIVE Technology yesterday reported a net loss of US$41.8 million for its third quarter, against a profit of US$3 million for the year-ago period - which makes it three unprofitable quarters in a row. The results included US$11.2 million restructuring charges.

Net loss for the nine months to March 31, 2009, came to US$106.4 million, against a net profit of US$12 million for the previous nine-month period.

On a per share basis, Q3 net loss was 60 US cents, compared with earnings per share of 4 US cents for the year-ago quarter. Gross margin fell to 10.1 per cent, from 23.1 per cent.

Revenue fell 44.7 per cent to US$83.1 million, from US$150.3 million. This was marginally higher than Creative's earlier guidance for Q3 sales of US$80 million. This is the first time since FY1993 that revenue in a quarter has dipped under US$100 million.

The third quarter also saw a marked drop in contribution to overall sales from personal digital entertainment products. Creative's flagship product category of recent years contributed just 27 per cent to Q3 sales, compared with 47 per cent for the year-ago period and 54 per cent for the preceding quarter. In Q3, speakers and headphones were Creative's biggest revenue contributors at 30 per cent of overall sales.

Craig McHugh, president and COO of Creative, reiterated the two key reasons for the decline in gross margins and revenue. The first was falling demand for Creative's products due to the global downturn. The second was its decision to close or consolidate certain businesses to focus on specific markets.

The 28-year-old local tech icon is facing its toughest times in recent years. It posted losses of US$32.4 million and US$32.2 million for Q2 and Q1 respectively.

In March, it announced it was slashing about 300 jobs worldwide, primarily in Europe and the US, which would result in restructuring charges of about US$10 million for Q3.

On the current quarter, Mr McHugh said: 'We expect the difficult market conditions to remain this quarter. We will continue our efforts to restructure our company as we work to further reduce operating expenses and our operating loss.'

Creative shares rose two cents yesterday to S$3.54. It announced the Q3 results after trading closed.