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Creative Technology More Than Triples Third Quarter Earnings Year-Over-Year

Exceeds Expectations by Achieving Q3 EPS of 20 Cents

SINGAPORE - April 23, 2002 - Creative Technology Ltd. (NASDAQ: CREAF), the worldwide leader in digital entertainment products for users of the personal computer and the Internet, today announced financial results for the third quarter of fiscal year 2002, ended March 31, 2002. All financial results are stated in U.S. dollars.

Creative reported third quarter sales of $193.4 million, at the top end of the company's expectations for the period. Sales for the third quarter of the previous year were $262.0 million.

Third quarter net income of $15.1 million or $0.20 per share was more than triple the previous year's Q3 operating results which were net income of $4.6 million or 6 cents per share. The previous year's operating results for the same quarter exclude one-time charges of $31.0 million and write-down of investments of $75.4 million in that quarter.

Sales for the first nine months of fiscal year 2002 were $623.3 million, compared to $992.8 million for the same period last year. Net income excluding charges and write-downs for the first nine months of fiscal 2002 was $44.2 million or $0.59 per share, compared to net income before charges and write-downs of $46.6 million or $0.57 per share for the same period last year. Including charges and write-downs, net income for the first nine months of fiscal 2002 was $28.6 million or $0.38 per share, compared to a net loss of $56.9 million or $0.72 per share for the first nine months of the previous fiscal year.

"This was another solid quarter for Creative, as we came in at the high end of our revenue guidance, again achieved gross margins above 33%, and significantly reduced operating expenses. Such strong performance in each of these operational areas resulted in earnings of 20 cents per share, over 40% above our expectations," said Craig McHugh, president of Creative Labs, Inc. "We also strengthened our balance sheet, growing cash to $196 million, which is an increase of 10% over the previous quarter, and of 36% over the same quarter last year. We reached a key milestone in the quarter with the adoption of the Creative's Sound Blaster® Audigy? by Gateway, Inc. as a standard feature on its 700 Series PCs and as an upgrade option on its 500 Series PCs. We also had our first full quarter of volume shipments of our broadband digital modems to America Online. Another key accomplishment in the quarter was the announcement in March of our definitive agreement to acquire 3Dlabs, Inc., which we anticipate closing in this current fourth quarter."

Hock Leow, Chief Technology Officer of Creative Technology noted, "Based upon what we have now seen from the fully functioning prototype of 3Dlabs' highly anticipated programmable TeraOps visual processor, I believe that we will be able to rededicate our efforts to the consumer graphics market with an awesome product line under a business model that more closely resembles our very successful core audio businesses."

"During the quarter, we shipped our first external Sound Blaster, the Sound Blaster Extigy? and received exceptional reviews, including four out of four stars from USA Today, a five out of five from PC Magazine and "Editor's Choice" awards from CNET and ZDNET." said Sim Wong Hoo, chairman and CEO of Creative Technology Ltd. "We also announced the new NOMAD® Jukebox 3 last week, and have already been awarded an 'Editor's Choice' award from CNET. As we look forward to the next quarter and beyond, we will reinforce our leadership in digital audio with a new and exciting family of NOMAD hard-disk and flash-based digital audio players with unique form factors to address different lifestyle segments of the market. We will also be announcing, later this week, an exciting and revolutionary new product that will bring a new dimension to music entertainment, which I call interactive music entertainment. This product will also complement the superior audio quality of the Sound Blaster Audigy and Extigy."

During the quarter, Creative did not repurchase any shares under its share buy-back program, primarily due to securities law restrictions relating to its pending acquisition of 3Dlabs.

. Recent Announcements

  • Creative announced its first external Sound Blaster, the Sound Blaster Extigy, bringing high-definition multi-channel audio to notebook and desktop PC users.
  • Creative announced the NOMAD Jukebox 3 - the first digital audio player to feature high-speed SB1394 transfer to the PC.
  • Creative announced that the Sound Blaster Audigy, Creative Inspire? speakers and Cambridge SoundWorks? speakers are now available with Hewlett-Packard Company's HP Pavilion® PCs.
  • Creative announced its intent to acquire 3Dlabs, Inc. - the worldwide leader in ultra high-end professional graphics.

Awards & Accolades

  • The Sound Blaster Extigy won:
  • 4 out of 4 stars in USA Today, where the editor noted that he, "heard guitar strums and different instruments I had never noticed before."
  • 5 out of 5 in the print and online versions of PC Magazine
  • The "Editor's Choice" award, including a 9 out of 10 score and was listed in the "Top 10 Gear of Spring" products on CNET
  • The "Editor's Choice" award and 8.3 out of 10 on ZDNet
  • A 9.1 out of 10 on IGN
  • The Creative NOMAD Jukebox 3 won:
  • The "Editor's Choice" Award and a 9 out of 10 score on CNET
  • A 4.5 out of 5 on globetechnology.com, Canada
  • The Cambridge SoundWorks MegaWorks? 510D won:
  • The Ziff-Davis ExtremeTech? "ExtremeTech Approved" award and 9 out of 10 rating
  • The 3D SoundSurge "Gold Surge of Approval" award
  • The Cambridge SoundWorks MegaWorks 210D won the "Editor's Choice" award from Computer Gaming World
  • The NOMAD IIc 64MB received the highest overall "CR Best Buy" rating of portable MP3 players in Consumer Reports, July 2002.

Listen to Creative's Q3 FY02 Analyst Conference Call:
Link to Q3 earnings conference call live on April 22nd at 7:00 p.m. EDT via Creative's Investor Relations Web site: https://www.creative.com/corporate/investor/

A replay will be available from shortly after the end of the conference call until April 29th via the same link from the IR web site or by calling 1-800-633-8284, reservation # 20519600.

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About Creative

Creative (Nasdaq: CREAF) is the worldwide leader in digital entertainment products for users of the personal computer and the Internet. Famous for its Sound Blaster® and for launching the multimedia revolution, Creative is now driving digital entertainment on the PC platform with products like its highly acclaimed NOMAD® Jukebox. Creative's innovative hardware, proprietary technology, applications and services leverage the Internet, enabling consumers to experience high-quality digital entertainment -- anytime, anywhere.

This announcement refers to products and pricing sold in the United States of America. Pricing and product availability is subject to change.

Sound Blaster and the Creative logo are registered trademarks and Live! is a trademark of Creative Technology Ltd. in the United States and other countries. Cambridge SoundWorks is a registered trademark of Cambridge SoundWorks, Inc. in the United States and/or other countries. NOMAD is a registered trademark of Aonix and is used by Creative Technology Ltd. and/or its affiliates under license. All other brand and product names are either trademarks or registered trademarks of their respective holder and are hereby recognized as such.

Safe Harbor for Forward-Looking Statements Under The Private Securities Litigation Reform Act of 1995:

Except for the historical information contained herein and in the corresponding conference call, the matters set forth herein and in the call (including all references to future financial performance, products and marketing efforts) are forward-looking statements within the meaning of the "safe harbor" provisions of The Private Securities Litigation Reform Act of 1995. Readers of this press release and listeners to the corresponding conference call are cautioned not to place undue emphasis or reliance on these forward-looking statements which reflect management's analysis, judgement, belief or expectation only as of the date of this press release and corresponding conference call. These forward-looking statements are subject to certain assumptions, risks and uncertainties that could cause actual results to differ materially from those set forth or implied in the forward looking statements. Such assumptions, risks and uncertainties include, among others: possible disruption in commercial activities, occasioned by terrorist activity and armed conflict which may, among other things, result in delays in, or damage to, the manufacture, shipment, or storage of Creative's products, or customers delaying or canceling purchasing decisions as a result of increased broad economic and safety concerns; the timely development, ramp, shipment, delivery, and market acceptance of new products, including Creative's next generation of audio and personal digital entertainment appliances; the increasing proliferation of sound functionality in new products from new and existing competitors and at the application software, chip and operating system levels; further deterioration of the System Integrator markets and failure of the System Integrators or OEMs to adopt Creative's products; the cost-cutting measures Creative has taken and plans to take may be insufficient or may fail to achieve the anticipated cost reduction benefits; deterioration of the global stock market and overall reduction in demand for computer systems, peripherals and related products in general, and Creative's products specifically; increased exposure to excess and obsolete inventory; higher overhead costs as a percentage of revenue; reduction or cancellation of sales orders for Creative products or other unexpected or unplanned events that could cause Creative to miss its revenue guidance, operating expense projections or negatively impact its margins; reductions in the market value of products sold by Creative, including increases in inventory or declines in demand or prices for storage devices, digital entertainment appliances, board and chip-level products, software, speakers, and other products; reductions in revenues and gross margins due to numerous factors, including declines in average selling prices of Creative's products, failure to reduce costs and increased inventories and pricing pressure from competitors; potential fluctuations in quarterly results due to the seasonality of Creative's business and the difficulty of projecting such fluctuations; the vulnerability of certain markets to current and future currency fluctuations, including the exchange rate of the Euro; labor shortages or work stoppages; credit shortages; effects of restricted fuel availability and rising costs of fuel; Creative's reliance on sole sources for many of its chips and other key components; component shortages which may impact Creative's ability to meet customer demand; Creative's ability to protect its proprietary rights; the volatility of share prices for companies in Creative's industry and the effect of those prices or other events beyond Creative's control, including acts of war, terrorist attacks, or adverse changes in general economic conditions; further fluctuations in the value and liquidity of Creative's investee companies, including any losses that may result from the increased volatility for technology stocks and potential price reductions of carrying values of our investee companies; and other risk factors described herein, in Creative's press release announcing the signing of the definitive agreement to acquire 3Dlabs dated March 11, 2002, and in Creative's filings with the Securities and Exchange Commission over the past twelve months, including without limitation, Creative's Form 20-F dated October 10, 2001. Creative urges you to consider all such factors. Creative undertakes no obligation to publicly release the results of any revisions to such forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

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