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

To: Marc who wrote (12578)	10/28/1998 12:03:00 PM
From: Marc	Respond to of 13925

Dow Jones Online News, Wednesday, October 28, 1998 at 11:21 SINGAPORE -(Dow Jones)- Shares of Singapore's Creative Technology Ltd. failed to be damped by a plunge in its first-quarter earnings Wednesday, as the multimedia-peripherals maker's new products are expected to spark some cheer this Christmas quarter, analysts said. The company said it expects revenue to grow 10% in the second quarter ending Dec. 31 from US$395 million a year ago. They also expect gross margins to improve to 31% in the second quarter, from 28.6% in the first quarter. In midmorning trading, Creative's (CREAF) American depositary receipts were up 75 cents to $12.875 in heavy trading. Its stock closed 11% higher in Singapore. Creative said net profit for the quarter ended Sept. 30 slid 58% to $21.5 million, or 23 cents a share, from the year-ago quarter. Revenue slipped 3.1% to $279 million. Year-ago results excluded a $18.5 million gain from the sale of quoted investments, Creative said. Based on Creative's revenue forecast, analysts predicted earnings in the current quarter could more than double the first quarter. But they warn that second-quarter net profit will still be below the year-ago level of $75 million, or 79 cents a share, before acquisition-related write-offs. Pranab Kumar Sarmah, an analyst at DIR Singapore Pte. Ltd., the research unit of Daiwa Securities, said he expects Creative's net profit in the second quarter to hover around $55 million to $60 million. Analysts also were encouraged by Creative's forecast that operating expenses in the current quarter will be 17% of total revenue, down from 22.2% in the first quarter. The bulk of the increase in first-quarter operating expenses was in selling, general and administrative areas, thanks to the launch of several new products. Creative is shipping several new competitively priced products in the first half of its current fiscal year - including its new flagship audio SoundBlaster products - that are expected to boost sales during the traditionally strong Christmas quarter, analysts said. "With the launch of several new products for the Christmas quarter, the near-term outlook is relatively more positive and this will be beneficial for the share price," said Low Hung Huat, an analyst at Fraser-AMMB Research. Despite the rosy outlook Creative painted for the current quarter, some analysts are still wary, especially with the brewing financial crisis in Latin America, which accounts for an estimated 7% to 8% of the group's sales. "The 10% growth is a little bit on the optimistic side," Sarmah said. "I'm worried that their sales to Latin America will slow down this quarter." He added that Creative's sales to that region will likely shrink this quarter compared with the same quarter last year. Analysts said jitters over the prospects of Creative's graphic-card business also are looming. Severe price erosion in the market, as a result of intensifying competition, had continued to exert pressure on Creative's margins in the first quarter, they said. Analysts also warned of pressure on Creative's sound-card sales, which is its bread-and-butter business. Recently, Creative acquired new competition in the form of a chip used in high-quality sound cards like SoundBlaster Live! Aureal Semiconductor Inc.'s (AURL) came up with the new competitor, called Vortex 2. And Creative's rival, Diamond Multimedia Systems Inc. (DIMD), is using Aureal's Vortex 2 in its new MX300 sound card. "The threat is still there," said Sarmah. Analysts also said Creative's outlook, although promising for the next three to six months, remains cloudy for the next year or two. Sales of Creative's premium products would feel the greatest pinch if the global economic downturn deteriorates. Copyright (c) 1998 Dow Jones & Company, Inc. All Rights Reserved.