Creative Technology



Creative Technology is a Singapore-based company best known for its digital entertainment products. It has set worldwide standards with its digital audio technologies for personal computers.1 Its associated product line includes speakers, soundcards, gaming headphones, MP3 players and web cameras.2

Background
Creative was founded in 1981 by entrepreneur Sim Wong Hoo. He was later joined by Ng Kai Wa and Chay Kwong Soon as co-founders. The company was incorporated as a limited company on 18 July 1983.3 Sim was responsible for developing new ideas and penetrating new markets, Chay undertook administration, marketing and management duties, while Ng focused on research and development.4 The company’s goal was to design, manufacture and distribute products for personal computers (PC), and was initially funded by Sim’s savings.5

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 fallen and become on par with that of Cubic 99.6 To beat the competition, the company came up with the Cubic CT, a computer with multimedia and Mandarin-language capabilities, in 1986. However, the Cubic CT was not a commercial success.7

Sound Blaster
Creative then shifted its focus to sound-card technology, which resulted in the introduction of Sound Blaster, a device that allowed PC to generate quality sound. The product was an immediate success after it was launched in 1989 at the annual computer show, Comdex, in the United States. During the show, Creative was receiving orders for its Sound Blaster cards at a rate of one in three minutes. Six months later, the product was shifting 10,000 units per month.8

To maintain the momentum of the Sound Blaster brand in the US market, Creative established a marketing and distribution network and set up an office in San Francisco.9 It also struck deals with computer makers to include Sound Blaster card in their PCs, as well as developed spin-off products such as Sound Blaster Pro, Video Blaster and the Multimedia Upgrade Kit.10 By the time Sound Blaster was celebrating its 10th anniversary, the product had become the industry standard with a registered user base of 100 million.11

Going public and leadership changes
In 1992, Creative was 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.12 In 1994, the company sought a secondary listing on the Stock Exchange of Singapore, which raised around S$230 million in capital.13

From 1995, however, Creative underwent a series of leadership changes starting with the resignation of its chief technical officer and co-founder, Ng.14 This was followed by co-founder Chay, who resigned as president and chief operating officer the following year.15

Diversification of business
While the leadership changes were taking place, Creative also registered its first ever full-year net loss for the year ending June 1996.16 The difficult period was attributed to a US$20 million inventory writedown of a four-speed CD-ROM that had become obsolete, and an inability to find a product that could match the Sound Blaster’s success.17 To regain traction, Creative announced that it would be investing up to S$186 million over five years in research and development on technologies such as 3D graphics, advanced telephony, optical storage, audio delivery over the Internet, and music synthesis.18

In 1999, the company announced its new direction with a suite of personal digital entertainment products like the Nomad, a personal digital music player. It also introduced new Sound Blaster models and 3D gaming cards.19 However, sales remained sluggish due to numerous factors such as competition from other companies like Apple and the poor economic conditions brought about by the burst of the technology bubble in 2000 as well as the SARS outbreak in 2003.20

Music player wars
In 2004, Creative launched a battle with Apple, the leader in the music player market when it introduced a range of new models including the Zen Touch and Zen Micro, and embarked on an 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 that year.21 Creative was second in line, with 16.5 percent of the market.22


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 50percent in the first half of 2005.23 Despite pricing its Zen players lower than the iPod and claiming more functions and better technology, Creative failed to dent Apple’s dominance.24 Sales of Creative players increased and were strong, but the company was badly affected by the low margins.25 In August 2005, Creative reported a quarterly loss of US$31.9 million – the first in three years – compared with a US$6.6 million profit in the previous quarter. The company also had to write off S$20 million in inventory.26

Subsequently, Creative undertook a series of cost-cutting measures and refocused on high-end products that yielded a better margin.27 In 2006, Creative sued Apple for infringements relating to a patent on a user interface technology in its music player. Apple countersued Creative on the basis of patent infringement, and the litigation was eventually settled out of court with Apple paying a one-time licensing fee of S$158 million to Creative.28

Losses continued to mount, however, and in August 2007, Creative delisted from NASDAQ, citing low trading volume.29 Sales remained low, prompting the company to scale back operations and cut some 2,700 jobs.30 For the fiscal year 2009, revenue fell 37 percent to around US$466 million, with a net loss of around US$138 million. The company, however, remained virtually debt-free and held a cash position of over S$250 million at the time.31

New focus
In 2009, Creative introduced Zii Platform as a new product line. The new offering comprised the energy-efficient and high-performance ZMS processor chip, and either the Android or Creative’s Plaszma operating system could be used by electronic device manufacturers to make more powerful and cheaper products like mobile phones, television set-top boxes, video conferencing systems, digital signs, netbooks, eBooks and other mobile communication devices. The Zii Platform could also be used by Creative for its own Zii-branded products like portable media players, speakers, audio solutions and other personal digital entertainment devices.32

In addition to Zii, Creative has continued to leverage on the Sound Blaster brand. Some of the recent Sound Blaster products include the portable bluetooth wireless Sound Blaster Roar series, the Sound Blaster E-series and the Sound Blaster X7.33



Authors

Alvin Chua & Lim Tin Seng



References
1. Creative. (2016). About Creative. Retrieved 2016, April 14 from Creative website: http://www.creative.com/corporate/about/?_ga=1.50919529.1717337133.1457425056
2. Creative. (2016). Creative online store. Retrieved 2016, April 14 from Creative website: http://sg.creative.com/estore/
3. Creative. (1994, June 12). The Straits Times, p. 6. Retrieved from NewspaperSG.
4. The other two behind the Creative triumvirate prefer a low-key image. (1993, August 30). The Straits Times, p. 39. Retrieved from NewspaperSG.
5. Creative. (1994, June 12). The Straits Times, p. 6. Retrieved from NewspaperSG.
6. The first made-in-Singapore personal computer. (1984, October 31). Singapore Monitor, p. 5; Chan, H. L., & Lim, S. B. (1992, October 11). Singapore’s new business heroes. The Straits Times, p. 1. Retrieved from NewspaperSG.
7. Chan, H. L., & Lim, S. B. (1992, October 11). Singapore’s new business heroes. The Straits Times, p. 1. Retrieved from NewspaperSG.
8. Chan, H. L., & Lim, S. B. (1992, October 11). Singapore’s new business heroes. The Straits Times, p. 1. Retrieved from NewspaperSG.
9. Mulchand, S. (1989, December 1). Creative Tech set to storm US. The Straits Times, p. 2. Retrieved from NewspaperSG.
10. Chan, H. L., & Lim, S. B. (1992, October 11). Singapore’s new business heroes. The Straits Times, p. 1. Retrieved from NewspaperSG.
11. Chng, G. (1999, November 24). Digitally aggressive. The Straits Times, p. 1. Retrieved from NewspaperSG.
12. Lim, K. (1992, August 5). Creative Technology receives good response in Nasdaq debut. The Straits Times, p. 40. Retrieved from NewspaperSG.
13. Lim, K. (1994, June 14). Creative draws $230m applicationsThe Straits Times, p. 40. Retrieved from NewspaperSG.
14. Creative’s co-founder and chief technical officer resigns. (1995, July 21). The Straits Times, p. 48. Retrieved from NewspaperSG.
15. Lor, S. (1996, June 28). Creative president and COO Chay quits both positions. The Straits Times, p. 79. Retrieved from NewspaperSG.
16. Tan, T. (1996, July 11). Creative to make third inventory writedown of $28m. The Straits Times, p. 40. Retrieved from NewspaperSG.
17. Chng, G. (1996, November 20). Surprisingly fast turnaround. The Straits Times, p. 13; Creative’s co-founder and chief technical officer resigns. (1995, July 21). The Straits Times, p. 48. Retrieved from NewspaperSG.
18. Lien, J. (1996, June 13). Creative to pump $186m into R&D over five years. The Straits Times, p. 1. Retrieved from NewspaperSG.
19. Creative Technology Ltd. (1999). Annual report 1999, p. 2. Retrieved 2016, May 23 from Creative Technology Ltd website: http://images.americas.creative.com/docs/fy99.pdf
20. Lee, B. (2003, August 7). 90 new Creative products to hit shelves. The Straits Times, p. 6. Retrieved from NewspaperSG.
21. Teo, B. (2004, October 14). Creative declares war on Apple. The Straits Times, p. 11; Lee, B. (2005, June 11). MP3 war drives Creative shares to two-year low. The Straits Times, p. 30; Ho, K. W. (2004, September 8). Creative to take a bigger bite of Apple. The Straits Times, p. 10. Retrieved from NewspaperSG.
22. Ho, K. W. (2004, September 8). Creative to take a bigger bite of Apple. The Straits Times, p. 10. Retrieved from NewspaperSG.
23. Lee, B. (2005, June 11). MP3 war drives Creative shares to two-year lowThe Straits Times, p. 30. Retrieved from NewspaperSG
24. Tan, A. (2005, August 12). Creative incurs first loss in 3 years. The Straits Times, p. 22; Teo, B. (2004, October 14). Creative declares war on Apple. The Straits Times, p. 11. Retrieved from NewspaperSG.
25. Ng, G. (2005, April 23). MP3 price war erodes Creative earnings. The Straits Times, p. 28. Retrieved from NewspaperSG.
26. Tan, A. (2005, August 12). Creative incurs first loss in 3 years. The Straits Times, p. 22. Retrieved from NewspaperSG.
27. Lee, B. (2006, August 11). Creative banks on cost-cutting effort to return to profitability. The Straits Times, p. 25. Retrieved from NewspaperSG.
28. Lee, B. (2006, August 25). Apple pays Creative $158m to settle lawsuit. The Straits Times, p. 1. Retrieved from NewspaperSG.
29. Ng, G. (2007, June 15). Creative to delist from Nasdaq. The Straits Times, p. 74. Retrieved from NewspaperSG.
30. Chan, R. (2009, January 3). Creative cuts 2,700 jobs. The Straits Times, p. 59. Retrieved from NewspaperSG.
31. Creative Technology Ltd. (2009). Annual report 2009, p. 2. Retrieved 2016, May 23 from Creative Technology Ltd website: http://images.americas.creative.com/docs/fy09.pdf
32. Creative Technology Ltd. (2009). Annual report 2009, p. 2. Retrieved 2016, May 23 from Creative Technology Ltd website: http://images.americas.creative.com/docs/fy09.pdf
33. Creative Technology Ltd. (2014). Annual report 2014, p. 2. Retrieved 2016, May 23 from Creative Technology Ltd website: http://www.creative.com/corporate/investor/files/AR/fy14.pdf; Creative Technology Ltd. (2015). Annual report 2015, p. 2. Retrieved 2016, May 23 from Creative Technology Ltd website: http://www.creative.com/corporate/investor/files/AR/fy15.pdf



The information in this article is valid as at 2016 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.

 

Subject
Organisations>>Companies
Computers and information technology>>Computer hardware>>Storage and peripherals
Commerce and Industry>>Industries
Sound cards (Computers)--Singapore
Computer input-output equipment--Singapore
Trade and industry
Computer industry--Singapore
Business enterprises