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The one-off gains will boost its book value to US$5.90 ($9.30). Apple will certainly not agree to recurring revenue from its iPod sales.
For once, a S'pore stock snatches the Headline in Nasdaq!
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Creative Technology leads tech-sector gains
By Rex Crum
Last Update: 9:45 AM ET Aug 24, 2006
Creative up 30% in Nasdaq now ... check out below page to see the HUGE volume now.
http://www.marketwatch.com/tools/quotes/quotes.asp?symb=CREAF
Just a temporary reprieve for Creative?
They need to reinvent themselves very badly!
They need to reinvent themselves very badly!
| Thursday August 24, 6:44 PM | |
Investors cheer iPod decision but Creative's woes far from over | |
Investors have cheered Creative Technology's 100 million US dollar settlement from rival Apple Computer but analysts warned the Singapore company's troubles are from over.
The companies earlier settled a dispute over patented technology used by the US company in its best selling iconic iPod music players resulting in Creative's share price enjoying a bumper ride on the stock market.
Creative's shares surged to as high as 13.20 Singapore dollars (8.40 US), or 37.5 percent, in morning trade Thursday. The shares soon came off their highs and closed at 11.40 dollars, still up 1.8 dollars, or 18.8 percent from the previous day.
However, analysts said the loss-making Singapore company faces an uphill battle to get its business back on track after investing heavily in the last two years to challenge Apple's dominance in the MP3 music player market.
"Their cost structure is still too high, they are still losing money," said Claudio Checchia, a regional research manager with International Data Corp.
"They still have to go a long way to improving their own cost structure and trying to get sales high," he told AFP.
Jonathan Ng, a technology analyst with CIMB brokerage, said the settlement has cleared the uncertainty of a possible long legal battle.
"However, the settlement does not change our negative view on its core businesses. Demand for its audio products have been waning, and competition for the MP3 player market has intensified.
"We still cannot find any new 'killer' products from Creative that could help revive strong earnings recovery in the near term."
Ng however raised his fair value for Creative by 1.85 dollars to 10.50 dollars per share and upgraded the brokerage's rating on the stock to a "trading buy" due to the windfall from the settlement.
He also increased his year-to-June 2007 net profit estimate for Creative to 99.40 million US dollars from a previous forecast for loss of 600,000 US dollars.
Under the deal Apple will pay Creative 100 million dollars for a license to use the technology and would be able to recover some of the money if Creative licensed the patent to others, according to the companies.
Creative would also begin marketing its own line of iPod accessories as part of Apple's "Made for iPod" program.
Creative chairman and chief executive Sim Wong Hoo said in a statement the settlement with Apple "opened up significant new opportunities" for his company.
The firm's participation in the "made for iPod" program should provide market opportunities for Creative's speaker systems, headphones and the future family of X-Fi audio enhancement products, Sim said.
"It is definitely going to bolster the fact that Creative does have superior technology... It shows that it is a technology company, just that Apple has more superior marketing," said DBS Vickers analyst Don See said, noting that the Singapore firm was strong in headphones and speaker systems design.
The deal ended a legal battle that began earlier this month after Creative was awarded what it referred to as a "Zen patent" on technology used to select and sort songs in its Zen MP3 player.
In May, Creative filed a lawsuit and a patent complaint in the United States against Apple aimed at halting the import and sale of the allegedly infringing Apple iPod and iPod Nano products in the giant US market.
Creative has paid dearly in its unsuccessful bid to challenge Apple in the MP3 player market as the Singapore outfit slipped into the red for the year to June with a loss of 118.2 million US dollars.
The company gained global fame for its SoundBlaster card that allowed personal computers to be used as home entertainment units but its follow-up products have struggled to match the success of the sound cards.
How does the settlement affect Creative in the long term? Any FA gurus got comments on this one?
oops...my apology...regardless of the typo...
so it is an one-off settlement??
why dont Creative opt for a re-occurring revenue generation instead? hmm....
so it is an one-off settlement??
why dont Creative opt for a re-occurring revenue generation instead? hmm....
How did US$100m become US$1m? You're missing 2 zeroes. That's a lot of difference, you know?
qn:
does the US$1m settlement a one-off compensation ??
seems silly to allow a one-off compensation right?
it should be tagged to the annual IPOD sales unit vol...hee then the revenue will be re-occurring correct?
comments ???
does the US$1m settlement a one-off compensation ??
seems silly to allow a one-off compensation right?
it should be tagged to the annual IPOD sales unit vol...hee then the revenue will be re-occurring correct?
comments ???
Creative price looking up in US after hours trading .... a whopping 37%!
http://www.marketwatch.com/tools/quotes/quotes.asp?symb=CREAF
Apple to pay $100 million in Creative settlement
By Rex Crum, MarketWatch
Last Update: 5:29 PM ET Aug 23, 2006
Apple to pay $100 mln to Creative in settlement. looks like creative is in for for a good run today.
According to industry news, Microsoft's new MP3 player will be called the Zune. Slated for Nov release, it will sport a larger screen than iPod Video, and will have a built-in WiFi for direct download. The Zune looks similar to Creative's new ZenV. It would not be surprising if Creative were to manufacture the ODM.
There's talk that Zune will form a larger line-up of xBox-branded products, which together, will form a connected entertainment network. MS is expected to enable easy portability of games to multiple platforms, thus making Zune a potential gaming extension of xBox.
Zune may cannibalise Creative's own players but rather than let another party make it for MS, Creative might as well make it as it will gain economies of scale. Creative can also leverage MS's site for its content download, and latch on to its WiFi platform.
Creative lost out to Apple's iPod mainly due to marketing. Having learnt from this, Creative would benefit from a tie-up with MS who can market the Zune as well as Apple's iPod.
We are approaching Creative's busiest season of the year, and with flash prices down 50%, and MP3 prices holding steady, some margins recovery can be expected. Creative may be a good buy near its trough of $7.40.
About a year ago, when Bill Gates visited Spore, he affirmed his support for Creative. Do you think they may be jointly developing the wifi player?
By now Sim WH should have learnt his lesson....that Creative's strength lies in its technology and that marketing is not one of its strong points. Because of his arrogance, he missed a great opportunity to team up with Apple for the MP3. A cooperation with Microsoft will be a good fit cos the MS is strong in marketing and software technology but not that great in hardware development (which is Creative's strength).
Any reason for the drop today ? it is already below 9. going to 8.6 soon.
Another drop today for creative! below $9 soon?
wah .... big crash today! below $10 again.
creative going up and up!
wah! Wireless!
Wi-Fi is it? I heard that Singapore going totally Wi-Fi in a couple of years time! I think by that time, SMS will be obsolete already since you can communicate in "real-time" using Wi-Fi handphones!
Wi-Fi is it? I heard that Singapore going totally Wi-Fi in a couple of years time! I think by that time, SMS will be obsolete already since you can communicate in "real-time" using Wi-Fi handphones!
Sources said that Microsoft will start selling a wireless digital music and video player to compete with Apple's iPod by Christmas. It will let users download music and videos over the air, a feature which would give it an edge over the iPod.
Microsoft's push will also pose a threat to Creative, which has a <10% share of the US market.