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Creative Announces Sales Of Over Two Million MP3 Players In Q2 FY2005

Raises Quarterly Revenue Growth Guidance to 45% Year-Over-Year

SINGAPORE - January 11, 2005 - Creative Technology Ltd. (NASDAQ: CREAF), a worldwide leader in digital entertainment products, today announced that strong sales of its MuVo family of MP3/WMA players and phenomenal demand for its ZEN Micro resulted in sales of more than two million of its MP3/WMA players in Q2 FY2005, which ended December 31, 2004.

Based on the strong sales of its MP3 players, Creative today raised its guidance for revenue growth in the quarter to a 45 percent increase on a year-over-year basis. Creative is now expecting to achieve sales of over $360 million, a sharp increase over sales of $250 million for the same fiscal period last year. Creative had already expected strong growth in the period to $325 million. With the sharp increase in revenue coming from the dramatic increase in sales of its MP3 players, Creative has adjusted its gross margin guidance to about 27 to 28 percent for the period.

"Today's announcement of our two million MP3 players sold in the quarter will come as a surprise to many who underestimated our marketing capability and didn't believe that we could be such a strong contender to the Apple iPod," said Sim Wong Hoo, chairman and CEO of Creative. "We just began shipping the ZEN Micro in late November and it is taking the market by storm. We just won the 'Best of CES' for our ZEN Micro Photo, which we just previewed at the Consumer Electronics Show in Las Vegas."

"The great reviews and broad consumer adoption that Creative is receiving for their ZEN Micro underscore the importance of their focus on rapid innovation and design," said Amir Majidimehr, vice president of Microsoft's Windows Digital Media Division. "We are very excited with Creative's strong support for the PlaysForSure™ logo program and their upcoming release of full subscription support of Windows Media DRM 10 to support all major music subscription services across their line of ZEN players."

Creative Also Announced Today Substantial Investment Gains in the Quarter
During its second fiscal quarter Creative sold 2 million shares of its SigmaTel holdings, generating cash proceeds of about $61 million dollars, with net investment gains in the period of approximately $51 million. After this sale, Creative still holds 3.7 million shares of SigmaTel stock.

About Creative
Creative (NASDAQ: CREAF) is a worldwide leader in digital entertainment products for PC users. Famous for its Sound Blaster® sound cards and for launching the multimedia revolution, Creative is now driving digital entertainment on the PC platform with products like its highly acclaimed MuVo® and ZEN portable audio players. Creative's innovative hardware, proprietary technology, applications and services leverage the Internet, enabling consumers to experience high-quality digital entertainment -- anytime, anywhere.


This announcement relates to products launched in the Asia Pacific. The product names, prices and availability are subject to change without notice and may differ elsewhere in the world according to local factors and requirements. MuVo and Sound Blaster are registered trademarks of Creative Technology Ltd. in the United States and other countries. All other brand names are trademarks of their respective owners.

Safe Harbor for Forward-Looking Statements:
This press release contains forward-looking statements. These forward-looking statements represent Creative's expectations or beliefs concerning future events and including those related to Creative's estimated revenue and gross margin for the quarter ended December 31, 2004. These forward-looking statements involve risks and uncertainties that could cause Creative's actual results to differ materially. Such risks and uncertainties include: Creative's ability to timely develop new products that gain market acceptance and to manage frequent product transitions; competitive pressures in the marketplace; Creative's ability to successfully integrate acquisitions; potential fluctuations in quarterly results due to the seasonality of Creative's business and the difficulty of projecting such fluctuations; possible disruption in commercial activities caused by factors outside of Creative's control, such as terrorism, armed conflict and labor disputes; a reduction in demand for computer systems, peripherals and related consumer products as a result of poor economic conditions, social and political turmoil; major health concerns; the proliferation of sound functionality in new products from competitors at the application software, chip and operating system levels; the deterioration of global equity markets; exposure to excess and obsolete inventory; 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; a reduction or cancellation of sales orders for Creative products; accelerated declines in the average selling prices of Creative's products; Creative's ability to successfully manage its expanding operations; the vulnerability of certain markets to current and future currency fluctuations; the effects of restricted fuel availability and rising costs of fuel; fluctuations in the value and liquidity of Creative's investee companies; and the potential decrease in trading volume and value of Creative's Ordinary Shares as a result of Creative's previous plan and any future plans to delist from NASDAQ and to eliminate its U.S. reporting obligations. For further information regarding the risks and uncertainties associated with Creative's business, please refer to its filings with the SEC, including its Form 20-F for fiscal 2004 filed with the SEC. Creative undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in Creative's expectations. 

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