Creative Technology May Post Highest Profit in Five Years
Jan. 19 (Bloomberg) -- Creative Technology Ltd., whose MuVo and Zen music players compete with Apple Computer Inc.'s iPod, may report its highest quarterly profit in almost five years on investment gains and surging sales of its entertainment gadgets.
Net income for the three months ended Dec. 31 likely rose 81 percent to $75.2 million from $41.5 million a year earlier, according to the median estimate from a Bloomberg poll of four analysts. Creative, based in Singapore, earlier said sales were more than $360 million, up from $250 million a year ago. It is to report earnings after 12:30 p.m. in Singapore Jan. 20.
Chief Executive Sim Wong Hoo reaped a gain of $51 million selling shares of chipmaker Sigmatel Inc. during the quarter and also shipped more than two million music players as holiday shoppers snapped up gadgets capable of playing so-called MP3 songs, which can be downloaded off the Internet.
``It was a fantastic year for MP3s,'' said Jonathan Koh, an analyst with UOB-Kay Hian in Singapore, who has rated the shares ``sell'' since 2003. ``Consumers are learning more about how to download songs and it's this lifestyle thing that you want to carry with you.''
The profit would be the highest since the company recorded earnings of $88.3 million in the third quarter of fiscal 2000.
Production Increase
The company said on Jan. 7 it is increasing its production capacity ``significantly,'' without providing details, and is introducing three new versions of its Zen Micro player.
Creative shares rose 6.3 percent to S$26.90 as of 12:28 a.m. in Singapore. The shares rose 36 percent last year, their third- best annual performance since 1995. They have gained 48 percent since Nov. 22.
Some analysts say gains in the share price may slow down because of concerns that music players are less profitable than Creative's Sound Blaster sound cards and increasing competition will force the company to lower prices. Three analysts have downgraded the shares since the start of the year, according to information compiled by Bloomberg.
Creative said Jan. 11 that its gross margin for the quarter fell to about 28 percent because it sold more music players. Gross margin, a measure of profitability, was 36 percent a year earlier.
CIAO
