Creative profits plummet 60 per cent

The Great Satan of Sound Cards, Creative Technology, yesterday reported its profits slumped by a massive 60 per cent during its third quarter while revenue rose by just over five per cent. For the three months to 31 March, Creative notched up sales of $313.7 million, up from the $298.4 million it recorded in the same period last year. Profits, however, fell from $45.2 million in Q3 1998 to $18.3 million this time around. Last quarter they fell too. Creative has essentially been hit by the same intense competition, leading to lower prices and, more importantly, lower margins in the PC add-on market that has hurt rival companies like Diamond Multimedia. Diamond's response was to begin to reduce its dependence on that arena -- a difficult task, given it's responsible for 60 per cent of Diamond's business -- and focus on more lucrative products like its Rio PMP300 digital music player. And Creative is doing pretty much the same thing. It recently launched its own MP3 player, Nomad, and a Web site to back it up. Creative CEO Sim Wong Hoo announced the company is spending $15 million on building up its Internet audio business. ®