Singapore Straits Times, 8/1/97. Check out what Creative has
to say about DVD-ROM..............
web3.asia1.com.sg
Creative: From loss to record $245m profit
Related
NovaStation a threat? That's a joke, says Creative chief
--------------------------------------------------------------------------------
Reports by Tammy Tan
CREATIVE Technology turned in record full-year earnings of US$167 million (S$245.5 million), but the sterling results failed to spur its local share price further because of profit-taking and its overnight loss on Nasdaq, where the soundcard maker is also listed.
The counter went on a mini-rollercoaster ride on the Stock Exchange of Singapore yesterday after a trading suspension was lifted at 2pm. It fell by as much as $1.90 to $32 in early trade and bounced back to a high of $34.50 before closing a mere 10 cents up at $34.
Creative's share price had been running up ahead of the earnings announcement. The counter is already the top gainer on the Singapore bourse this year with a gain of about 130 per cent.
For the year ended June 30, 1997, Creative reported a profit of US$167 million, compared to a loss of US$37.6 million a year ago.
Creative attributed the turnaround to a refocus on its core soundcard business, resulting in the timely disposal of the group's loss-making CD-Rom drive manufacturing arm.
In a conference call from the United States yesterday, Creative founder and chairman Sim Wong Hoo said on top of strong earnings growth, the group had strengthened its cash position in the last 12 months.
It amassed a cash hoard of US$418 million for the year ended June 30, 1997, up from US$196 million in the previous financial year. The surplus would be used to "strengthen our position in the marketplace".
Asked how this would be done, Mr Sim quipped: "There are many things you can do with cash. You can frighten people with it...tell people you have a lot of cash and they will be frightened. But seriously, we can use it in some strategic investments, take bigger stakes in companies and not just $1-2 million stakes."
He declined to elaborate on the possible investments but noted they would be in fields related to Creative's core sound business.
Analysts contacted yesterday were pleased with Creative's good showing, which exceeded market expectations of a US$164.7 million net profit. They said trading in Creative shares on the local bourse yesterday had been hurt by the stock's overnight fall in the United States. It had closed at US$21.50 on Nasdaq on Monday, which converted roughly into S$31.50.
"This actually means the stock is trading at a premium here. Basically the market is still undecided about where the stock is going," said Jardine Fleming analyst Lim Cher Kwang.
The strong earnings growth, analysts said, came despite a 6 per cent drop in sales to US$1.23 billion.
"Margins were good in 1997. They didn't do as well in terms of sales but still managed to turn the company around. That's certainly good news," said an analyst from a major foreign stockbroking firm.
Mr Lim agreed, saying margins were 31.4 per cent, in keeping with the target of about 30 per cent set by Mr Sim last quarter.
"Actually, the company gave out US$6 million in bonuses to employees last year. If you take that into account, Creative's margins were actually much better at 32.4 per cent."
He said the group was maintaining its target to grow sales by 10 to 15 per cent until the end of next year. This would be buoyed by an "aggressive push" to increase sales of its AWE64 soundcard and the introduction of a new DVD (digital video disk) drive which plays back video and movies.
DVDs are expected to become a major driving force in Creative's sales and profit growth. Yesterday the group launched its next-generation PC-DVD upgrade kit at what it called an "industry stop-press price of US$379.99".
Currently, US company Diamond Multimedia Systems' DVD upgrade kit is the next cheapest at US$599.95.
Mr Sim said Creative's new kit would "break the chicken and egg problem by providing the next-generation DVD solution at an irresistible price, with the intent of creating a huge installed base this year".
"There may still be a shortage of DVD titles out there but I think with this kind of price point, people will go out and get an upgrade kit. People are saying DVD will be a 1998 phenomenon, I think it will be a 1997 phenomenon."
He expects monthly sales of a "six-digit nature" for the product this year. |
