Creative expects operating loss this quarter

Digital music player Creative warned it expects an operating loss of up to US$65 million for last quarter due to a sharp drop in prices of flash memory chips.

Digital music player, Creative Technology, expects to post an operating loss of up to $US65 million during the three months ending March 31.

The company blamed a sharp drop in prices of flash memory chips for the loss.

Prices of flash memory chips plunged in March as consumers bought fewer digital music players, yet chipmakers increased production of the chips.

The good news for users has been falling flash memory prices on global chip markets, which should lead to bargains for flash memory cards used in digital cameras or other devices, and digital music players in late April or May. Companies normally respond to falling flash memory prices by either increasing the amount of storage capacity in devices, or slashing prices -- especially on older models.

Creative, in Singapore, expects its revenue to be between $US220 million and $US230 million during the third quarter of its financial year.

The price of the most widely used NAND flash memory chip, 2Gbit chips, had dropped 34 per cent to $US5.67 on Tuesday from $US8.55 at the beginning of March, according to industry researcher DRAMeXchange Technology. Since the beginning of this year, the price of 2Gbit chips has fallen 63 per cent to Tuesday's close, from $US15.13 on December 30.

Other companies have been feeling the bite of plunging NAND flash memory prices.

Lexar Media, a developer of NAND devices, updated its earnings forecast last week for the quarter ending March 31 to a level far below estimates. The company expects revenue for the period of up to $US130 million, with a $US30 million loss, compared to analysts' estimates of $US200 million in revenue and a $US16 million loss.

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Dan Nystedt

IDG News Service
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