MP3 player sales drive Creative to record Q3

Strong sales of MP3 players helped Creative Technology achieve record sales during the first three months of this year but increasing competition drove down profits, the Singapore-based company said Friday.

Net sales for the January to March quarter were US$333.8 million, up from US$201.8 million a year earlier, which was a company record for any quarter other than the holiday season. Net income was US$15.9 million for the quarter, down from US$57 million in the same period a year ago. Both periods included extraordinary gains on investments. Excluding those gains, net income for the quarter was US$1.1 million versus US$8.7 million a year ago.

"Strong sales of the Zen Micro 5G-bytes [player] and MuVo Micro flash player helped us to achieve sales of 2 million MP3 players in the period," said Craig McHugh, president of Creative Labs., the company's U.S. unit, in a conference call with analysts. Creative saw strong demand in all regions for its MP3 players and achieved sales of 2 million MP3 players for the second quarter in a row, he said.

McHugh credited the higher sales to the general expansion of the MP3 player market in addition to regional consumer advertising campaigns in Asia, Northern Europe and the U.S. West Coast; a channel marketing campaign; lower prices; and the addition of new retail outlets. These new retailers included Best Buy and Circuit City in the U.S.

The quarter saw increased competition in the market especially from Apple Computer Inc., which in January reduced the price of its popular iPod Mini player and introduced the low-cost iPod Shuffle flash player. This pushed Creative to reduce prices and led to a reduction in the profit margin on each player it sold.

"During the quarter we reduced the selling price following sharp price drops by Apple on the Mini and the introduction of flash players as lower than expected prices," he said. "These were the major factors in the decrease of gross margins."

Gross margin during the quarter averaged 23 percent, which is substantially lower than the 34 percent that Creative reported a year ago. In the near future the company expects to see gross margins fall towards 20 percent, said McHugh.

For the current quarter, the period from April to June, Creative is expecting revenue of between US$330 million to US$360 million, which would represent a 65 percent to 80 percent increase over the same quarter in 2004.

Join the newsletter!


Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.
Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Martyn Williams

PC World
Show Comments

Brand Post

Most Popular Reviews

Latest Articles


PCW Evaluation Team

Maryellen Rose George

Brother PT-P750W

It’s useful for office tasks as well as pragmatic labelling of equipment and storage – just don’t get too excited and label everything in sight!

Cathy Giles

Brother MFC-L8900CDW

The Brother MFC-L8900CDW is an absolute stand out. I struggle to fault it.

Luke Hill


I need power and lots of it. As a Front End Web developer anything less just won’t cut it which is why the MSI GT75 is an outstanding laptop for me. It’s a sleek and futuristic looking, high quality, beast that has a touch of sci-fi flare about it.

Emily Tyson

MSI GE63 Raider

If you’re looking to invest in your next work horse laptop for work or home use, you can’t go wrong with the MSI GE63.

Laura Johnston

MSI GS65 Stealth Thin

If you can afford the price tag, it is well worth the money. It out performs any other laptop I have tried for gaming, and the transportable design and incredible display also make it ideal for work.

Andrew Teoh

Brother MFC-L9570CDW Multifunction Printer

Touch screen visibility and operation was great and easy to navigate. Each menu and sub-menu was in an understandable order and category

Featured Content

Product Launch Showcase

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?