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Press Releases

Creative Technology Announces First Quarter Fiscal 2002 Revenue And Operating Profit In-Line With Expectations

Achieves Highest Gross Margin Percentage in 14 Quarters

SINGAPORE - October 24, 2001 - Creative Technology Ltd. (Nasdaq: CREAF), the worldwide leader in digital entertainment products for users of personal computers and the Internet, today announced financial results for the first quarter of fiscal year 2002, ended September 30, 2001. All financial results are stated in U.S. dollars.

Sales for the first quarter were within the Company's initial guidance at $182.3 million. This compares to sales of $304.4 million for the same quarter of last year. The Company achieved net income for the first quarter of $3.6 million or $0.05 per share before write-downs on listed investments of $16.4 million or $0.22 per share. Including the write-downs, the Company reported a net loss for the quarter of $12.8 million or $0.17 per share. Comparative results for the first quarter of last year were net income of $17.6 million and earnings per share of $0.21, including net investment gains of $2.4 million.

"As we announced in last quarter's earnings release, we have taken major steps to refocus Creative on our core audio and personal digital entertainment (PDE) products, and to de-emphasize lower margin products," said Craig McHugh, president of Creative Labs, Inc. "Executing upon this strategic shift was key to our ability to increase quarterly gross margins to 31.7%, the highest percentage in the past 14 quarters; to reduce operating expenses a further 11% to $55 million; to reduce inventory levels to $131 million; and to improve operating profit sequentially from the previous quarter."

"The most significant accomplishment this quarter was the launch of Sound Blaster Audigy," said Sim Wong Hoo, chairman and CEO of Creative Technology. "This major audio platform is of unprecedented significance in the history of Creative, and I believe its significance will surpass that of the original Sound Blaster in 1989, the AWE64 platform in 1996, and the Sound Blaster Live! platform in 1998. We believe the Audigy platform will establish an entirely new standard for audio entertainment, and it sets the stage for a whole new family of our future audio products. The Audigy's 24 bit, 96 kHz, 100 db EAX ADVANCED HD technology far surpasses all PC audio and most home stereo equipment. Hearing the Audigy convinced even very skeptical reviewers that there are clear and compelling reasons to upgrade from even the highest-end soundcards of the current generation. Both PC Gamer and PC World Magazine called the Audigy technology 'stunning,' and in the words of Maximum PC magazine, it is a 'significant advancement' and 'a perfect 10 if there ever was one.'"

During the quarter, Creative continued its share buy-back program, repurchasing approximately 1.5 million shares at a cost of $9.8 million. Subject to market price and conditions and securities law restrictions, Creative plans to continue its buyback program, and is seeking shareholder approval at the Company's Annual General Meeting on October 31st to extend the buyback program for another year.

Recent Highlights

  • Creative launched the highly anticipated Sound Blaster® Audigy? line of sound cards.
  • The new family of Creative Inspire? PC speakers were announced.
  • The Creative PC-CAM 300 began shipping.
  • Creative's NOMAD® Jukebox 20GB began shipping.
  • Cambridge SoundWorks® introduced the MegaWorks? 210D, an audiophile-quality, 270-watt amplified speaker system.
Recent Awards & Accolades
  • The reception for the Sound Blaster Audigy family has been outstanding, with numerous awards in recent weeks. Sound Blaster Audigy Platinum eX has won:
    • the "Editor's Choice Award" from PC Magazine;
    • the "Best Buy Award" from ZD Net;
    • a 5 out of 5 rating from PC Magazine online;
    • a 9 out of 10 "Superb" Rating from Ziff-Davis Gamespot;
    • a 9 out of 10 rating from ExtremeTech; and
    • a 4 ½ out of 5 star score in PC World Magazine.

  • The Sound Blaster Audigy Platinum won:
    • the "Product of the Year Award" from PC World Latin America; and
    • the "Kick Ass Award" from Maximum PC Magazine.

  • The D.A.P. Jukebox (also known as the NOMAD Jukebox) won the European Imaging and Sound Association (EISA) Award for European Personal Audio of the Year.

Balance Sheets & Statements of Income

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Creative (Nasdaq: CREAF) is the worldwide leader in digital entertainment products for users of personal computers and the Internet. 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 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, EAX, Cambridge Soundworks and the Creative logo are registered trademarks and Live!, Audigy, Creative Inspire, and Megaworks are trademarks of Creative Technology Ltd. in the United States and other countries. NOMAD is a registered trademark of Aonix and is used by Creative Technology Ltd. and/or its affiliates under license in the United States and/or other countries. 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 cost-cutting measures Creative has taken and plans to take may be insufficient or may fail to achieve the anticipated cost reduction benefits; further 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; 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; 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, divestments of low margin product lines or businesses, and increased inventories and pricing pressure from competitors; the short product cycles that characterize most of Creative's products; 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; 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; and other risk factors described herein and in Creative's other 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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