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"We're pleased that the court has entered the order approving the sale to Creative," said Craig McHugh, president of Creative Labs, Inc. "Since Creative would not be able to recover significant damages given Aureal's bankruptcy, there was no upside in continuing this protracted litigation. As a result, we believe that this outcome is the best we could have expected. Without further distraction by the litigation, Creative's management will be able to focus on delivering the digital entertainment experience consumers are demanding."
As a result of the settlement of outstanding litigation with Aureal, Creative expects that a significant portion of the value of the cash and shares, as well as the associated costs, will be recorded as a pre-tax charge against previously announced fiscal 2000 earnings. Since the litigation was ongoing at June 30, 2000 and the settlement was reached after release of Creative's fiscal 2000 earnings, but before distribution of Creative's financial statements, generally accepted accounting principles in the United States require that this charge be reflected in Creative's fiscal 2000 financial statements. Creative is currently evaluating the assets to be acquired, and does not believe that the value of such assets to Creative will be significant. The value of such assets, if any, will be recorded by Creative in the period that the purchase is completed.
None of the directors or substantial shareholders of Creative has any interest, direct or indirect, in the acquisition.
Safe Harbor for Forward Looking Statements:
Except for the historical information contained herein, the matters set forth herein (including information on future products, future marketing efforts, and future revenues, margins, expenses and earnings) are forward looking statements subject to certain risks and uncertainties that could cause actual results to differ materially from those set forth in those forward looking statements. With respect to information related to the purchase of the Aureal assets, such risks and uncertainties include, among others: the need to record the transaction as other than a pre-tax charge against fiscal 2000 earnings or occurrence of any event that might result in a failure of the customary conditions to each party's obligation to close the sale. With respect to information set forth as to Creative's business in general, such risks and uncertainties include, among others: potential fluctuations in quarterly results due to the seasonality of Creative's business and the difficulty of projecting such fluctuations; reductions in the market value of products sold by Creative, including increases in supply or declines in demand or prices for CD-ROM or DVD drives, board and chip-level products and software products; the short product cycles that characterize most of Creative's products; the increasing proliferation of sound functionality in new products from new competitors and at the application software, chip and operating system levels; Creative's reliance on sole sources for many of its chips and other key components; the timely development, ramp, delivery and market acceptance of new products, including Creative's next generation sound chips, and its graphics accelerator, video conferencing, CD-ROM and DVD drives, DVD encoder cards, PDE solutions, communications and Internet-related products; the availability of operating capital on acceptable terms; the volatility of share prices for companies in Creative's industry and the effect of those prices or other events beyond Creative's control; and other risk factors described in Creative's filings with the Securities and Exchange Commission over the past twelve months.