Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Creative Labs (CREAF) -- Ignore unavailable to you. Want to Upgrade?

To: SASQUATCH who wrote (4755)	10/23/1997 5:55:00 AM
From: See Lo	Read Replies (1) \| Respond to of 13925

Creative beats forecasts as Q1 profit triples to US$52m Sharp gain fuelled mostly by rise in gross margin to 32.9% from 31.4% By Jennifer Lien [SINGAPORE] Creative Technology yesterday said its net income more than tripled to US$51.6 million (S$81.3 million), or 55 US cents a share, for the first quarter ended Sept 30. This was significantly above analysts' consensus forecast of 47 US cents. Including a gain on sale of its investment in chipmaker 3D Labs, attributable net profit was US$70.1 million, or 74 US cents. Sales were up 1.3 per cent year-on-year to US$287.8 million. The sharp profit gain was fuelled mostly by a gross margin improvement to 32.9 from 31.4 per cent. Net profit was flat compared with the 1997 fourth quarter, on a 2.7 per cent rise in sales. The company also continued to grow its cash hoard, from US$418 million at end-June to a record US$463 million, or over US$5 per share. A clearly upbeat chairman Sim Wong Hoo yesterday told analysts in a conference call: "You ain't seen nothing yet." "These results don't come by magic," Mr Sim later told BT in a telephone interview from the US. "Underlying these results is the ongoing strength of our product offering, distribution channels and brand name." Margins continued to be boosted by strong sales of its AWE64 sound card, which accounted for over 50 per cent of all audio sales. "A lot" of AWE64 cards have also been sold to corporations, which traditionally have not been a market for audio cards. Creative expects a strong Christmas quarter, targeting 10 to 15 per cent revenue growth and margins in the low-30s. Its forecast for the full year is the same. South-east Asia's currency crisis hit sales in the region as some distributors in Thailand and Malaysia suffered a cash crunch, said Mr Sim. This caused Asian sales to fall from 29.3 per cent last year to 23.7 per cent this year. But this was offset by lower production costs in Singapore and Malaysia, and more than offset by a later-than-expected growth spurt late in the quarter from the US and Europe, Mr Sim said. Audio revenue rose 51 per cent to about US$158.3 million, multimedia upgrade kits fell 20 per cent to US$100.7 million, and other products dropped 48 per cent to US$28.8 million. Mr Sim said he intended to boost this segment in future by selling more "multimedia components", including new 2D-3D graphics cards, PC-DVD drives and speakers. The company is also launching a new audio product at the Comdex Fall trade show in the US in November. The market responded favourably to Creative's results yesterday afternoon, pushing its share price up $3.60 to $39.00. Analysts contacted yesterday said the stock could trade up to between $44 and $55 in the foreseeable future. For the Christmas quarter, analysts are predicting earnings per share of about 72 US cents, and for the full year, US$2.52, a 37 per cent improvement from last year. Analysts say the future sustainability of Creative's business could depend heavily on the success of its DVD drives, currently touted as providing the best value for money at US$379. Mr Sim himself admitted that DVD was a high-stakes game: "We have to win in this category. If it doesn't move, we'll keep pushing." Beyond 1998, Creative's long-term margin projection remains about 30 per cent, Mr Sim told BT. Revenue growth further down the road would likely be in the region of a "matured company", perhaps 5 to 10 per cent a year. But results would depend on the company's product mix and the sustainability of good margins on its audio products, he said.