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Creative to axe 500 staff, shut US plant

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Sound card supremo Creative Technology is to cut ten per cent of its worldwide workforce and shut US manufacturing plant in a desperate bid to cut costs.

Blame the economic downturn, the company said, as it announced the closure of its factory in Malvern, Pennsylvania, which it acquired in 1997 when it purchased Ensoniq. Production will be transferred to Creative's Singapore facility.

Creative also announced it will be making "sharp cutbacks" in "non-revenue generating" Internet operations, which suggests that non-core businesses like online music provider Oozic.com and audio e-tailer hifi.com - Creative's only Net subsidiaries - may be contributing to the job cuts too.

All of which will cost the company between $15 million and $20 million, to be taken on the nose in a single quarter as a one-off charge. The company's third quarter is due to end on 31 March. Creative still believes its quarterly revenue will come in at $260-270 million, down from $330 million this time last year and well down on last quarter's $427 million. Q2 yielded earnings of $26.5 million, which, once you've taken into account the quarter's drop in sales, won't leave much from which to subtract $15-20 million in redundancy payments.

Creative said it also plans to "take a write-down during the current quarter of approximately $65 million against its investment portfolio", thanks to the recent collapse in hi-tech stocks. ®

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