The Business of Technology: Creative Labs
by Ryan Smith on October 2, 2007 5:00 PM EST- Posted in
- Bulldozer
Closing Thoughts
So between their business and technology, where does all of this leave Creative? Simply put, it would be difficult to argue they're not in a very bad situation.
On the technology side, almost all of their markets are either commodities or dying, and they're not the market leader in anything any more. Some businesses exist and thrive solely as a supplier of commodity components, but Creative isn't that kind of company. They need to be able to take a major part in a new high-profit industry to replace what they've lost from the sound card market, and they've yet to find something that can sustain them for long. Or to put things in another perspective: we don't see them as having the technology needed to carry the company.
On the business side, they're already in trouble from their technology issues. Their stock price is near record lows and they haven't been able to generate enough revenue to cover costs in a couple of years. Their saving grace at the moment is their Apple settlement, which has helped them turn a profit for this year at least. In the next year or so they may be able to take a piece of flesh from all the other major portable media player competitors, but there's a finite number of targets and as one-time payments the money won't last forever. For the time being Creative's business side can hold up the company, but it can't do this for very long, they need improvements on the technology side to bring the company back in to balance.
Looking at their research & development expenditures however, it paints a conflicting picture. A company in need of technological rejuvenation generally needs to be spending a lot on R&D, and this isn't the immediate case. FY2007 R&D spending was $64mil, compared to $77mil the year before and $82mil the year prior to that. We would have to go back to FY2003 to find a time they spent less on R&D, and that was one of their boom years. $64mil is not a small chunk of change to be spending on R&D (it's some 7% of all revenue) but it still leaves us wondering if they're going to be able to develop something to get the company out of its current rut. R&D spending only gets harder as revenue continues to drop.
In closing, it's too early to even be hinting at doom & gloom for Creative yet, but by now the first warning light has lit up. Things are not good for Creative right now, but there's a lot of time left. But can the company survive the dramatic shift required to make it? Only time will tell.
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Christobevii3 - Wednesday, October 3, 2007 - link
Sensaura was always plauged by being lower end. The companies that supported them would throw out trash $20 cards so that basically was their problem.Zak - Wednesday, October 3, 2007 - link
Corporate bullying, bloated software and crappy drivers, overpriced hardware, destroying superior Aureal3D technology, they got themselves into bad position. I've been using on-board sound for years via SPDIF fed to a AV receiver and I haven't touched a CL card in all this time, don't miss them.Z.
chizow - Wednesday, October 3, 2007 - link
I've always had a soft spot for Creative throughout the years. I'll never forget loading up Wing Commander for the first time after plunking down $100 for my first Sound Blaster and just oogling over actual MIDI sound (and later, voice with the voice pack) rather than beeps and buzzes from an internal speaker.Throughout the years I've continued buying Creative products with the latest being the X-Fi. After countless hours trying to troubleshoot it with Vista and my 650i mobo, I finally called it quits and came to the same realization the article predicts: add-in sound cards are dead.
Sure Creative products have had their share of problems here and there, but I'll certainly miss the superior positional sound of EAX in games. As much as people want to bash Creative, their drivers and their products, they sure as hell knew what they were doing when it came to audible differences in games. So long Creative, here's one person who will miss having a company who actually cared about PC sound.
leexgx - Wednesday, October 3, 2007 - link
new vista drivers are out for X-FI now ? not tryed them yet as i am running on me XP drive now (some games little BSOD unstable still heh)KillerCroc - Wednesday, October 3, 2007 - link
Creative were really responsible for putting sound cards and PC audio on the map - but they lost their dominance to advances in on-MB audio (despite Realtek's gaffes)and better chips from the competition. And as I'm writing this and listening to MediaMonkey/Shoutcast, I'm hearing a perfect example of "Years later, I come across many SB cards with horrible crackling noises," from my Audigy 2ZS card. maybe I'll do better with an M-Audio card....psychotix11 - Wednesday, October 3, 2007 - link
Other companies are releasing better sound cards. Creatives' junk really only has a point if you are a gamer and only a gamer. Their professional branded cards are a joke so let's not even delve into that. However unless all you do is play games that can use EAX5 auzentech, htomega, hell even asus now, make a far better product in both build quality, feature set, sound quality, and driver quality.Happy with my sound cards with full dolby DTS! Screw creative!
IKeelU - Wednesday, October 3, 2007 - link
I really hope it isn't the end of add-in sound boards. I don't care who makes the hardware, but I like having noise-free output w/ positional sound. The so-called "HD Audio" on my motherboard is utter crap. Even with a mediocre pair of headphones I can hear the noise. I just don't get how people can get by with that junk.Demon-Xanth - Wednesday, October 3, 2007 - link
When I had an AWE64 soundcard, I thought Creative was awesome, I had one of their Permidia2 cards and I was happy with it. I even had their DVD kit (with decoder card!). I was practically a poster Creative Labs fan. But then I got a Live card, and was less than impressed. It often flat out didn't work in my system, I ended up getting another as a gift and THAT one worked right. The first card worked in other systems, but not mine. So I stuck with the AWE64. It handled the inputs well and the sound was good. And best of all, the drivers didn't install extra crap that cluttered Windows.Then I got their Digital VCR card. My PC wasn't able to capture and convert full TV res to a compressed format at the time, and here was a card that captured to MPEG2. Well, this card turned out to be a steaming pile of crap. In two days I found a rather obvious and major bug in their software. It took them 11 months to fix it. And I couldn't find a single program that could handle the MPEG2 files that it exported to that could do more than just play them. (many failed to do even that)
But the key tipping point was when onboard audio stopped sucking. Is it as good as a dedicated sound card? Probably not. But it's not the CPU robbing POS that it used to be. And with most boards having it, the soundcard requirement went from nearly 100% to just a tiny little percent of users.
...and there was that time they wanted to charge for driver DLs.
Dfere - Wednesday, October 3, 2007 - link
Not being a techead... two thumbs up on the subject matter. Aslo good job for picking a company near (if not dear) to most of us.On the article you end with "only time will tell". IMHO do not equivocate. For a true business article, stick with facts and then possibly a projection -"The stock price is low... here is why", then "forecasts for home theater buys indicate...", or "if peripheral component sales become its focus, the company can still capitalize on its name and branding, it needs to find other companies it can acquire and slap a label on...." or something like "Seems like Creative needs to do something.... but what....?"
Did Creative release any comments about future direction.. etc etc...?
Ryan Smith - Wednesday, October 3, 2007 - link
Creative has not released its FY2007 shareholder report, nor have they filed their SEC form 20F yet, so no, there's not really much out of them on future direction. Since they are no longer traded on American exchanges, they're not required to publish these documents either.What I can tell you from their FY2007 conference call, they're aware their not doing well and they have some vague plans. For MP3 players, they're going to focus on flash players, and look to exploit the few markets Microsoft isn't competing in yet (which will be trouble with the Zune2). Their other big area is X-Fi licensing, including the actual DSP (Auzentech may not be the only one to license it) and the X-Fi crystalizer for other devices. Frankly none of this is very inspiring.