Creative warns of weaker demand for MP3 players

MP3-player maker Creative Technology Monday warned that demand for its MP3 players was weaker than expected.

Creative Technology, a Singapore-based maker of MP3 players, Monday lowered its guidance for its fiscal fourth quarter, citing "softer-than-expected" demand for MP3 players and lower selling prices.

In April, Creative said it expected to earn fourth-quarter 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. The company has now lowered its revenue forecast to US$300 million, which represents a 50 percent increase over the same period last year.

Creative did not offer a reason why it was seeing weaker demand for its MP3 players or why it had been forced to cut prices on its MP3 players, but the company warned the revised guidance will likely push it into the red on an operating basis.

"Based upon its revised guidance, Creative expects to report an operating loss for the period," it said in a statement.

Creative has been feeling pressure from the competition for some time. During the company's third fiscal quarter, price cuts for Apple Computer's iPod mini and the introduction of Apple's cheaper iShuffle flash memory-based player forced Creative to cut prices on its own products, reducing its profit margin, said Craig McHugh, president of Creative Labs, the company's US unit, in an April conference call with analysts.

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Sumner Lemon

IDG News Service
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