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Technology Stocks : Creative Labs (CREAF)

CREAF 0.370

-21.3%

Oct 31 1:10 PM EST

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To: Brian Lempel who wrote (13745)	4/27/1999 10:27:00 PM
From: Fred Fahmy	Read Replies (1) of 13925

Brian, I have a few mental notes from the CC. First, it was upbeat and painted a pretty good picture of the future. Unfortunately the numerical guidance provided calculates out to about .18-.21 for Q4. Guidance was 10 to 15 percent revenue growth in Q4 vs last year Q4 (5-15% growth was given for first half of 2000). Q4 gross margin to remain around 25% plus or minus a point. Operating expense to be at about the same rate. Some other highlights: SBLive OEM agreement with Dell. Multi-media kits up from 22% to 33% of revenue. Graphics was 25% of revenue which was better than expected and about the same as last q. Speakers and Other was 14% of revenue. Number one in speakers in both distribution and retail. Sound was down due to price erosion of ISA products. Nomad sounds really cool. In addition to 64meg, it has an FM tuner, and supports voice recording up to 4 hrs. 100's of thousands of Intel motherboards ship with CREAF chips. Speakers grew from 4% to 7%. Will continue to buy shares back at about the same pace. Two new graphics products this quarter...one of which they said would be the fastest card ever and would make 32meg the standard. Lower end card is going to be $129 and higher end card not priced yet. $50 million dollars approved for Internet initiatives which will be driven by Sim himself. The internet opportunity was stressed a lot. Sim conceded that long term goal of maintaining 30% margin has shifted to 25%. New businesses Nomad, graphics, DVD are lower margin but Sim said it was important to get into these markets to get established early (I can't argue with this as long as margins are positive). Not worried about legal issues surrounding Nomad/MP3. Future versions of Nomad will have flash capability to make them adjustable to different standards (e.g. MSFT). ....oh well...too tired to think about more. FF

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