Creative Technology is a publicly listed, Singapore-based company best known for its digital entertainment products. It has set worldwide standards with its various digital audio technologies for personal computers. Its associated product line includes personal media players, sound cards, web cameras, speakers, keyboards and headphones.
Background
Creative was founded in 1981 by entrepreneur Sim Wong Hoo, then 26 years old, and co-founders Ng Kai Wa and Chay Kwong Soon. Sim worked on new ideas and new markets, Chay on administration, marketing and management, and Ng on research and development. The company’s initial goal was to build its own personal computers (PCs) for retail, and was funded by Sim’s savings.
In 1984, Creative introduced the Cubic 99, the first PC to be designed and produced in Singapore. The Cubic 99’s functionality and price were its main selling points, but within two years the prices of “clone” computers based on IBM models had dropped to around that of Creative’s product. To beat the competition, in 1986 the company came up with the Cubic CT, a computer with multimedia and Mandarin language capabilities. However, the Cubic CT was not a commercial success.
The Sound Blaster
Creative’s focus shifted to sound card technology and it released the Creative Music System (C/MS) sound board in August 1987. The following year, the C/MS was marketed as the Game Blaster and distributed through retail chains like Radio Shack in the United States.
The first Sound Blaster cards followed in 1989 and were an immediate success. The sound card allowed PC users to play music, input voice and connect to musical instruments. Creative distributed the Sound Blaster through retail channels and also struck deals with computer makers to include the card in their PCs. After numerous product enhancements and Sim’s move to the United States to market his product, the Sound Blaster sold over a million units. The Sound Blaster continued to be popular throughout the following decades – by 1999, its tenth anniversary, it had sold over 100 million units.
Going public and leadership changes
In 1992, Creative listed on the American NASDAQ stock market, offering 4.8 million shares at US$12 per share. The company’s Initial Public Offering was about 5.5 times subscribed in the United States, bringing in US$37.5 million for expansion plans and US$13.5 million for Creative’s founders. In 1994, the company sought a secondary listing on the Stock Exchange of Singapore, which brought in around S$230 million.
In 1995, Creative’s chief technical officer and co-founder Ng Kai Wa resigned from the company but retained his stakeholding. The following year, co-founder Chay Kwong Soon resigned as president and chief operating officer, but remained a director and kept his shareholding.
Diversification of business
With the Sound Blaster coming under intense competition from other card makers and after several failed attempts to find a new hit product, Creative registered its first full-year net loss in June 1996. There was a quick return to profitability, however, as the company posted a S$79.7 million profit for the three months ending December 1996. The difficult period was attributed to a phase of product diversification and an inability to find a product that could match the Sound Blaster’s success. Refocusing on the audio business, the company’s core strength, and low-cost manufacturing helped Creative regain profitability.
In 1999, the company signalled its new focus on personal digital entertainment products and the Internet by introducing the Nomad, a personal digital music player, as well as new Sound Blaster models and 3D gaming cards. However, in 2001 the company suffered losses despite introducing 90 new products. The sound cards on which Creative had built its success also declined to under 20% of the company’s revenue.
Music player wars
A battle with Apple, the leader in the music player market, ensued. Creative introduced a range of new models and embarked on a S$165 million worldwide advertising campaign in a bid to unseat Apple’s iPod, which had a share of more than half of the music player market in 2004. Creative was second in line, with just over 16% of the market.
The competition took its toll on Creative, however, as profits fell after a series of price wars and the company’s share price dropped by more than 50% in the first half of 2005. Despite having introduced a player two years before Apple, pricing its Zen player lower than the iPod and claiming more functions and better technology, Creative failed to dent Apple’s dominance. Sales of Creative players increased and were strong, but the company was badly affected by the low margins. In June 2005, Creative reported its first loss in three years, and full-year profit was just S$990,000. The company also had to write off S$33 million in inventory.
Subsequently, Creative undertook a series of cost-cutting measures and refocused on high-end products that yielded a better margin. In 2006, Creative sued Apple for infringements relating to a patent on navigation and methods of organising music on personal music players. Apple counter-sued Creative on the basis of patent infringement, and the litigation was settled out of court with Apple paying a one-time licensing fee of S$158 million to Creative.
Losses continued to mount, however, and in 2007, Creative delisted from the NASDAQ , citing low trading volume. Sales remained low, and by June 2008, the company cut some 2,700 jobs. For the financial year ended June 2009, revenue fell 37% to around S$652 million, with a net loss of around S$193 million. The company, however, remained virtually debt-free and held a cash position of over S$350 million at the time.
A new focus
In January 2009, Creative introduced the ZMS line, versatile computer chips that can be used in a range of applications from mobile phones to media players and netbooks. It has also released a range of hardware products based on the Zii platform, including video conferencing devices and media players. Other products like e-book readers and smartphone platforms are also planned.
Author
Alvin Chua
References
About Creative. (2010). Retrieved March 18, 2009, from http://www.creative.com/corporate/about
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(Call no.: RSING 959.57003 SIN - [HIS])
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The information in this article is valid as at 2010 and correct as far as we are able to ascertain from our sources. It is not intended to be an exhaustive or complete history of the subject. Please contact the Library for further reading materials on the topic.
