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Creative earnings seen hit by competition
SINGAPORE, July 28 (Reuters) - Singapore's multimedia company Creative Technology Ltd (Nasdaq:CREAF - news) is expected to announce weaker full year earnings next week, reflecting increased competition in some of its previous strongholds, analysts said on Wednesday.
A survey of five analysts based in Singapore produced a median estimate of around US$117 million for full year net profit in 1999, own from $152.8 million in 1998.
Creative announced a net profit of $100 million for the first nine months of fiscal 1999 at the end of March, and fourth quarter earnings were expected at around $17 million.
The company is scheduled to announce its results on August 6.
''A lot depends on the management strategy of the company to steer it forward, (given) mergers and acquisitions of its competitors in graphics and audio segments,'' said Theodore Teo, analyst at Prudential Securities in Singapore.
Teo forecast net profit of $117.4 million, and earnings of $1.25 per share for the full year.
Creative, a multimedia product manufacturer best known for its sound cards, has recently diversified its range of products from graphic and audio instruments to Internet access solutions.
But mergers and acquisitions among competitors and former suppliers have clouded the company's long term prospects, market analysts said.
Diamond Multimedia Systems (Nasdaq:DIMD - news), who competes directly with Creative in graphic and sound cards, has been trying to spin off its Internet music subsidiary RioPort as a separate company.
The purchase of Diamond by S3Inc (Nasdaq:SIII - news) in June was expected to help the RioPort investment, as were recent tie-ups with several other software and hardware companies.
Creative's shares have fallen 24 percent since the beginning of the month to a new year low of S$17.30 on July 27.
It was down 10 cents at S$17.90 at the midday break on Wednesday.
Analysts said negative expectations for fourth quarter results, in addition to recent downgrades by several analysts, had weighed
on Creative's shares.
''You could say it's permanently underalued. Its competitors have been gaining position through mergers and acquisitions, and its graphics segment is weak in particular.. and there are very few interesting ventures left,'' another Singapore-based technology analyst said.
But Choo Tse Wei, analyst at a local securities firm, said prices would be supported at Tuesday's lows, and the company's outlook was basically ''more or less stable.''
He predicted full year net profit at around US$154 million
''The company itself has very strong cash flow, and their cash returns are very high,'' he said.
The company's assets in cash and cash equivalents totalled $349 million as of end March 31, 1999.
''While there is some pressure on the graphics side...a lot depends on how sound cards do in terms of market share expansion,'' he said. ''It will also be interesting to see how well they do with their new NOMAD (line of portable digital audio players).'' |
