MY dear boy boy ,i nvr said that Mr SIM was making profits in e
MP3 war.DONT make assumptions,i have no recollections of EVER
SAYING DAT. AS A MATTER OF FACT,I SAID DAT HIS SOUND BLASTER ARE
PULLING IN E PROFITS IMPLIES DAT HIS MP3 PLAYERS ARE NT VERI
PROFITABLE 
Creative fails to live up to MP3 hype
CREATIVE Technology has - and not for the first time - failed to
deliver on its own hype.
By Wong Wei Kong , Business Times
25 Apr 2005
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'.
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.
Strategy too hopeful?
Creative's response to the dismal earnings is to do more of the
same: it will sell more and more MP3 players, hoping that the
growth in sales will compensate for the fall in margins and
profitability. There are holes in this strategy, however.
For one, while Creative has produced some of the strongest rivals
to the iPod, Apple still leads the hard disk drive music player
market by a wide margin. Analysts estimate that Apple, which
shipped 5.31 million iPods in the March quarter, has a 60 to 70 per
cent world market share. Apple has also encroached on Creative's
market for MP3 players based on flash memory chips with the launch
of the iPod Shuffle. The iPod Shuffle, now acknowledged by industry
players as a masterly stroke, serves a sharp reminder that Apple
wouldn't just sit pat and watch its market share slip away.
Second, sales growth may not be enough to make up for rapidly
falling prices and profit margins in the MP3 market. To sell more
in a fiercely competitive market, Creative will have to lower its
prices. It would also have to respond to any price cuts by Apple.
And Creative does not compete with Apple alone. Japanese, South
Korean, Taiwanese and even Chinese companies are also gunning for a
slice of the MP3 pie. Creative will have to constantly look over
its shoulders as the likes of Sony Corp and Samsung Electronics
stake their claims in the market.
I WLD LIKE TO UNDERLINE DIS PT (Worse still, analysts pointed out,
net margins were terribly thin at just above zero.)-SHWS DAT HE IS
LOSING $$$ IN E MP3 WAR
