Singapore Creative Technology Ltd. is looking to build on its success as a supplier of computer sound cards to become a worldwide supplier of digital entertainment products, and its latest financial results show progress on that front. The company last week reported net profit of $29.1 million for the September-ended first quarter of fiscal 2004, reversing a $5 million loss in the year-ago quarter.
Sales exceeded the top end of the company's guidance, coming in at $160.8 million. Creative also made an investment gain of $23.6 million, out of which $23.1 million was attributable to a "deemed disposal" of SigmaTel Inc., which had an initial public offering in September.
"Creative, minus this investment gain, beat its own estimations of net profit by booking $5.5 million, and revised earnings from 5 U.S. cents per share to 7 cents per share," said regional analyst Andrew Tay at Axiom Consulting (Hong Kong). "This shows promise for the rest of the year, when Creative is expected to offer more consumer electronics products for digital entertainment." The company, Tay said, "has long passed its stereotype of just being a sound card and SoundBlaster company.
Sim Wong Hoo, chairman and CEO of Creative Technology, called the successful listing of SigmaTel an indication of Creative's long-term strategy of investing in key partners. "The 7.6 million SigmaTel shares we own, with a current market value of approximately $170 million, are a clear validation of this strategy," he said. "We are in a position to invest aggressively in partner companies, R&D or strategic marketing."
Creative became a household name on the strength of its SoundBlaster cards and has surmounted the warnings of industry analysts who predicted a short life span for Creative as a PC-audio supportive company with little room for product diversification. Creative plans to introduce 90 new products during the next two fiscal quarters. For this quarter it intends to release the Nomad Jukebox Zen NX and the Nomad MuVo, equipped with SoundBlaster Wireless Music technology.
Craig McHugh, president of subsidiary Creative Labs Inc., said the company has been so successful in shifting its products outside the PC box that almost 50 percent of its revenue for the quarter came from sales of external products. Creative has revised its outlook for the current quarter, he said, targeting 15 percent year-over-year revenue growth, up from 10 percent forecast earlier.