Creative Technology Ltd. is a provider of products for personal computers (PC) and lifestyle digital entertainment products. Its products are used in an array of solutions for PC entertainment, education, music, Internet applications and services and productivity tools markets. Creative’s product line includes an array of PC upgrades, such as Sound Blaster audio cards, multi-channel speakers, lifestyle digital entertainment products (such as the NOMAD line of portable digital audio players and PC-CAM/DC-CAM and WebCam digital cameras) and a mix of other products, including three-dimensional (3-D) graphics cards, modems, software, musical instruments, computer mice and keyboards. The company markets its products to consumers and system integrators, with worldwide distribution through traditional marketing channels, original equipment manufacturers (OEMs) and the Internet under a variety of trademarks, including the Blaster and MuVo family names.
Sound Blaster Strategic alliances Strengthening distribution network Strong balance sheet as well as proven R&D skills
Audio product sales 3Dlabs Problems in transition to digital lifestyle products
New product launches Personal digital entertainment market Broadband CAD and DCC growth opportunities
Exchange rate fluctuations Economic conditions Competition
Sound Blaster The company’s most successful and well known product, Sound Blaster audio cards, have an installed base of over 120 million customers whose PCs are equipped with the card. The card is the industry standard and with more than 70% of PC audio
Creative Technology Ltd. © Datamonitor Page 5
CREATIVE TECHNOLOGY LTD.
systems worldwide built on Creative’s Sound Blaster technology, Sound Blaster compatibility is mandatory for most PC-enhanced software sound systems. The success of Sound Blaster has helped Creative become a very strong brand name widely recognized and trusted in the PC and multimedia world. This helps to strengthen the company and help secure future sales of its products. Strategic alliances Creative has forged numerous synergistic alliances and licensing and OEM (original equipment manufacturer) partnerships with companies such as Acer America Corporation, Dell Computer, Digital Equipment Corporation, Gateway 2000, Microsoft, Intel, Micron, NEC - among others - to further advance the power of multimedia on the PC. Working closely with leading company’s helps reduce the risk to the company putting them in a stronger position. Strategically, Creative’s partnership with Microsoft for the operating system of its selfdesigned, highly-acclaimed Zen portable media center product also suggests potential upside (although there is unlikely to be any meaningful impact on earnings until FY06 at the earliest). Strengthening distribution network Creative has expanded its operations that include wholly owned subsidiaries and joint ventures in Japan, China, Hong Kong, Taiwan, Malaysia, Australia, South Korea and South Africa. These centers and sales offices enable Creative Technology to provide effective global support to its broad-based multi-tiered channel distribution network of 230 key distributors in more than 80 countries. Strong balance sheet as well as proven R&D skills A few years ago, when Creative first decided to make its foray into the PDE segment with products such as MP3 players and webcams - many were skeptical about the potential for success given the significant investments required in R&D, marketing, inventory and manufacturing processes. While the PDE segment still remains highly competitive with much bigger players in the industry, the significant gains from its investments in Sigmatel and SMIC have further strengthened Creative’s balance sheet (net cash of US$230 million with long-term investments worth another US$200 million) and should enable it to...