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Creative Technology Announces Fourth Quarter And Fiscal 2001 Results

Achieves Operating Profit for Fourth Quarter and Fiscal Year

SINGAPORE - August 10, 2000 - - Creative Technology Ltd. (NASDAQ: CREAF), the worldwide leader in digital entertainment products for the personal computer and the Internet, today announced financial results for the fourth quarter and fiscal year 2001, ended June 30, 2001. All financial results are stated in U.S. dollars.

Sales for the fourth quarter were $234.2 million. This compares to sales of $307.7 million for the same quarter of last year. Sales for fiscal year 2001 were $1.229 billion, compared to $1.344 billion for fiscal year 2000.

The Company reported a net loss for the quarter of $73.4 million or $0.94 per share. This includes a write-down of investments of $76.0 million or $0.97 per share. Excluding these charges, the Company would have reported net income for the quarter of $2.5 million or $0.03 per share. Comparative results for the fourth quarter last year were net income of $17.4 million and earnings per share of $0.20, including net investment gains of $19.2 million and a charge against operating expenses of $20 million.

Net loss for fiscal year 2001 was $130.4 million or $1.65 per share, including net investment losses and write-downs totaling $148.5 million or $1.88 per share, and restructuring and other charges of $31.0 million or $0.39 for the year. Excluding those charges, net income for fiscal year 2001 would have been $49.1 million or $0.61 per share. Comparative results for fiscal year 2000 were net income of $161.0 million or $1.86 per share, including net investment gains of $103.4 million and a charge against operating expenses of $20 million. Excluding this charge and the investment gains, net income for fiscal year 2000 would have been $77.6 million or $0.90 per share.

"Given the poor equity market sentiment, particularly in the communications sector, we took an additional $76 million write-down in our investment portfolio, leaving a written-down value of only $41 million in private companies," said Creative Chairman and CEO Sim Wong Hoo.

"As we previously announced, we fell short of our original revenue guidance for the quarter, primarily because of an unexpected downturn in sales in our Asian and European regions in the back half of the quarter," said Craig McHugh, president of Creative Labs, Inc. "Notwithstanding, we significantly reduced our inventory levels and operating expenses, and we posted positive operating income."

"We are also announcing today that we have embarked on a plan to focus the Company around our core audio businesses, which provide our highest margins," continued Mr. McHugh. "Looking forward to the holiday season and beyond, we believe there are opportunities to build on our already-strong retail audio businesses, as we add great new products which will broaden our product lines. As part of this plan, we will be foregoing significant revenues from our lower margin product categories. While this will significantly reduce overall revenues, we believe this strategic shift will allow us to improve gross margins and further our efforts to reduce costs and inventory risk. Therefore, we believe we will be able to increase profitability in the first quarter of fiscal year 2002 sequentially from the fourth quarter fiscal year 2001, even though we expect revenues in the first quarter fiscal 2002 to be down substantially from those in the fourth quarter of fiscal year 2001."

"As we embark on our plan to focus on our core product areas, we are very excited about our two new product launches slated for late next month - the new Sound Blaster audio platform, and our new line of speakers," said Creative Chairman and CEO Sim Wong Hoo. "We believe the new Sound Blaster platform will stimulate excitement at retail for all of our audio products, providing compelling reasons for PC owners to want to upgrade, especially in the upcoming holiday season. The new Sound Blaster audio platform represents the fourth major audio platform since the original launch of the Sound Blaster in 1989. Pushing into the realm of professional audio quality, it elevates PC audio quality and performance beyond the level where home stereo equipment is today."

During the quarter, Creative continued its share buy-back program, repurchasing approximately 4.8 million shares at a cost of $39.6 million. Subject to market price and conditions, and securities law restrictions, the Company plans to continue its buyback program.

Recent Awards & Accolades

  • The Sound Blaster® Live!?® Platinum 5.1 and the NOMAD® Jukebox C-Series both won the "World Class Award" from PC World 2001 for their respective categories.
  • The Sound Blaster Live! Platinum and the NOMAD Jukebox both won the "Fast Forward Technical Achievement Award" from the Toronto Star, Canada.
  • The Sound Blaster Live! for Macintosh® won the "Freakin' Awesome" award from MacAddict.
  • The NOMAD II earned the rating of "#1 MP3 Player" from Consumer Reports.

Listen to Creative's Q4 FY01 Analyst Conference Call:
Link to the Q4 earnings conference call live on August 9th
at 4:00 p.m. PDT via Creative's Investor Relations Web site: https://www.creative.com/investor/
Replay available from shortly after the end of the conference call
until 8/16/01 via link from the IR web site or
by calling 1-800-633-8284, reservation # 19434636.

Balance Sheets & Statements of Income

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Creative (Nasdaq: CREAF) is the worldwide leader in digital entertainment products for the personal computer 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.

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. 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, the matters set forth herein (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 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. 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: the cost-cutting measures Creative 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 or 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 or negatively impact its margins; the timely development, ramp, shipment, delivery, and market acceptance of new products, including Creative's next generation audio, personal digital entertainment appliances, including the WebCam line of products and specifically, the NOMAD and NOMAD Jukebox line of products, CD-ROM, CD-RW and DVD drives, and communications products; 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 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 recent trend of 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 timing or completion of a subsidiary IPO and/or the valuation that would apply in the event of a consummation of a subsidiary IPO; 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 adverse changes in general economic conditions; and other risk factors described in Creative's filings with the Securities and Exchange Commission over the past twelve months, including without limitation, Creative's Annual Report on Form 20-F and the Form 6-K dated January 19, 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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