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

To: Vanni Resta who wrote (9358)	2/4/1998 9:21:00 PM
From: Savoirman	Read Replies (1) \| Respond to of 13925

We all know Creaf's price movements are difficult to predict. One reason is the dual listing in two different currencies in markets halfway around the world from each other. This permits arbitraging between markets, which could reduce the volatility but for the fact that the two markets have no overlap in trading hours. Also, Creaf's cutting-edge business and roller-coaster earnings history have most investors quite jumpy, even though the last 5 quarters were records. All these will change in time. Apart from its strong earnings, Creaf is now a very savvy organization after its problems in the past. For example, instead of playing catch up like in its CD-ROM drive business, Creaf is now making the market in PC DVD-ROM drives by pricing it one-year ahead. At retail, the Encore has practically cornered the market. And Creaf has indicated it can drop the price quite dramatically should any competition crop up. What has allowed this is its huge cash hoarde and strong supplier and channel network. Already the company has a DVD-RAM solution that will roll out this year. We can expect the ramp-up to be even faster, riding on the goodwill generated by the Encore. If you examine how much Creaf's R&D has expanded over the last 5 years, much of it done by partners, and the number of alliances it has with software and hardware suppliers nowadays, it is clear this company is more than the sum of its parts. Creaf is now circling the consumer electronics market like a hawk, slowly but surely closing in. From a mere soundcard company, it now has branched into graphics, DVD, speakers, modems, internet services, headsets, gamepads, translation software, CD-ROM drives & videoconferencing equipment. Not to mention having the most advanced audio solution on the planet. In fact, if you put all these technologies together (with high-bandwidth connection) there will be no need to leave the house for anything. The next step for Creaf will be integrate all its silicon solutions into one, drop the price further and sell it like an appliance. This will be aided by the mad rush to buy cheap PCs. This is big game country. In fact, consumer electronics companies should get pretty worried. Oh yeah, I know Creaf is more volatile than the Nasdaq composite index. You don't have to "know" the beta to realize that. But I was talking about times when the Nasdaq does a broad-based rally, when volumes are high. During these times, very little of Creaf gets traded. So if you weight price movements and then do a beta calculation, you'll find a lower reading. For those interested, for 12 mnths to 30 January, against the Nasdaq composite, the raw beta for Creaf is 1.83 and the adjusted beta is 1.55. Against the S&P 500 the raw beta is 0.79 and the adjusted beta is 0.86 (which means Creaf is less volatile compared to the broader market). But these numbers don't mean much as the coefficient of determination is 0.12 (Nasdaq) and 0.02 (S&P 500), quite close to no correlation. So the markets hardly explain Creaf's price movement. Which brings us back to the first point I mentioned.