Creative’s Zen Falls To The iPod/Zune
08.08.07 - 02:32pm
The Zune may not have met most blogging standards as the hippest most up to date utterly cool device on the MP3 market, yet it has taken the market share it had hoped for and with the release of new reformatted Zunes coming out this Christmas season it is liable to take more of that market share.
This means that someone is losing market share and while the iPod and the iPhone are still in complete control it is Creative, maker of Zen players, that is suffering the biggest loss since the onslaught of the Zune.
Creative’s stock fell to it’s lowest point in the last 11 years after Creative announced its fifth loss in the last six quarters. Over the last year the stock has lost 35 percent and is the worst performer on Singapore’s benchmark Straits Times Index landing today at $6.60. Sales have fallen 28 percent to $162.2 million in fourth quarter earnings.
“The sector has always been marked by intense competition and Microsoft is not even the biggest or fiercest competitor,” said Patrick Yau, a Singapore-based analyst at Macquarie Securities. “What Creative needs to do is to bring down expenses.” Yau rates creative stock as an “under perform”.
Chief Executive Officer Sim Wong Hoo has shutdown unprofitable units and is farming out production to try to bolster earnings. Creative also spent $2.4 million in restructuring expenses in the fourth quarter and dropped operating expenses $3.1 million.
Creative blamed part of their loss in Zen sales on the price cuts that Microsoft made to bolster Zune sales. Creative sales dropped in America 46 percent for the quarter from a year earlier.
Creative did see a rise in profits from their sound cards up 15 percent from 13 percent a year earlier. Speaker were also up to 18 percent from 13 percent.
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