Hi Fred, I think Sim has been reported to say that the currency effect on margins was positive but small (this was in reference to 2Q98 earnings).
On another note: The "margins" problem has been widely misinterpreted, from the reports I have seen from a few brokers.
Some brokers were actually worried margins would come down as Creaf sold more DVD, graphics (non-audio). Strange to say the least, as the non-audio business does not cannibalize on the existing business, so every margin-dollar earned is more money to the bottom line, on top of whatever audio brings in.
Sure PC-DVD may have lower margins, as all new products do if they're targeted at a broad market, but like audio the margins will broaden once volume goes up and component prices come down and manufacturing becomes better "oiled". In fact, all Creaf should care about now (since it's got tons of US$ in the kitty) is to FLOOD the market with quality products. Margins come second. If they do it right, Creaf can have another "Soundblaster"-type success where they become the de facto standard. This could lead to YEARS of milking this baby.
Graphics may not be Creaf's core business yet, but they've been sure good at it of late (those who have not checked out the Voodoo2 raves/purchase intentions/Diamond-deriding on the Creaf site, should). In fact, this really is the amazing thing about Creaf of late - the ability to branch out and make the major players cringe. I bet Altec Lansing's pretty worried about its speaker sales as well. |
