The long term future of Singapore sound card maker Creative Technology is the subject of a great deal of debate. Creative is essentially a one-product company with 75% of its turnover coming from sales of personal computer sound boards under the Sound Blaster logo. Shares in the company have been buoyant over the past six months following two consecutive quarters of upbeat results. Third quarter net profits were up to $44.2m against losses this time last year of $33.1m. But revenues remained flat at $282.8m showing that increased profits are from cost reductions not new product sales. Half the analytical community feels the stock is undervalued, but the other half wants to see some new products coming on-line. Credit Suisse First Boston have moved the stock from Buy to Strong Buy status while Deutsche Morgan Grenfell are recommending a 12 month wait and see policy. Part of the confusion may be the long shadow of Intel Corp which has fallen squarely over Creative’s old patch. The new MMX multimedia extensions on Pentium and Pentium Pro chips from Intel will absorb a great deal of the sound board’s functions into the chip and software, Intel’s vice-president Steve Poole said. Creative disagrees, insisting that the quality of sound available from MMX will not match that from its AWE32 and AWE64 sound board based chips. Nevertheless, Creative is branching out into other fast growing areas such as gigital video DVD-ROM drives and video conferencing where MMX does not yet have an advantage. Creative recently agreed a deal with Scottish company Vision Group Plc, which manufactures digital cameras on a single chip, to market desk top cameras. But video conferencing is far from mainstream and DVD sales will not have a significant impact on Creative’s revenues until 1998, the company estimates. In the short term then, opinions on Creative will remain divided.
