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Technology Stocks : Creative Labs (CREAF)
CREAF 0.4700.0%Nov 21 9:30 AM EST
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To: Doug Fowler who wrote (9743)2/14/1998 8:12:00 AM
From: Fred Fahmy  Read Replies (3) of 13925
 
Hi Doug,

<The real key to make this stock take off will be top-line growth, which the company is indeed struggling with.>

I agree 100%. Despite Vanni's earlier assertions to the contrary, revenue growth (not margin concerns) is what is holding back this stock. It is the key ingredient that the analysts and investors are looking for. The company is well aware of this and is taking steps to address it. The three key actions that I see are

1) Diversification beyond just the franchise Soundblaster products (i.e. DVD, graphics).

2) Strategic acquisitions (Cambridge, Ensoniq).

3) Working on expanding from primarily the retail channel into the huge OEM opportunity.

All of these are interrelated and all are aimed at growing the top line.

BTW, I don't expect an acquisition either but I think your Sony idea makes more sense than anything I have heard. Seems like a great fit.

<it is weathering the Asia crisis well (at least so far)>

Indeed, much of CREAF's great margins can be attributed to the cost advantages they have experienced as a result of the currency debacle.
CREAF can't count on favorable currency to expand margins forever and that's why they know they must grow the top line. SIM seems keenly aware of our revenue concerns and seems on track to remedy the situation. A key OEM win would go a long way towards removing investor doubts/concerns as would a sharp ramp in DVD and other new product sales.

Good luck,

FF
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