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Creative fails to live up to MP3 hype |
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Monday, 25 April 2005 |
Creative fails to
live up to MP3 hype
IT AsiaOne -
Singapore,Singapore
There was much fanfare last November when Creative Technology chief Sim
Wong Hoo declared war in the MP3 market and zeroed his sights on US giant Apple
Computer. Creative, said Mr Sim, wanted to seize 40 per cent of the global MP3
player market by this year - estimated at about 60 million units - by selling
some 24 million digital music players.
It was an ambitious target, and while there were sceptics right from the start,
it captured the headlines. For a while, Creative basked in the limelight,
reporting strong sales and good reviews of its Zen Micro MP3 players. Mr Sim
even took swipes at Apple: when Apple launched its iPod Shuffle in January this
year, he laughed it off as a 'huge disappointment'.
Today, however, Creative's boast of challenging Apple and its iconic iPod and
iPod Mini for leadership of the MP3 market is wearing increasingly thin. And it
has to be asked if Mr Sim has badly mis-calculated.
In its latest financial results, Creative suffered a 72 per cent plunge in
quarterly earnings as the fight for a share of the digital music player market
exacted a huge toll on its profitability. While sales for the third quarter
ended March 31, 2005 rose 65 per cent to a record US$333.8 million, Creative
earned just US$1.1 million for the quarter, excluding investment gains, down
from US$8.7 million in the previous year.
Sharp price cuts of Apple's iPod mini and the introduction of the iPod Shuffle -
which Mr Sim had written off just a few months ago - pushed Creative's gross
margins to 23 per cent, below its forecast of 27 per cent. Worse still, analysts
pointed out, net margins were terribly thin at just above zero.
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