Digital music player strikes sour note

SINGAPORE - Shares of Creative Technology, the world's second-biggest seller of digital music players after Apple Computer, fell after the company said it had a fiscal third-quarter operating loss, the largest in at least five years.

Creative's stock dropped 7.4 per cent to S$11.20 ($11.36) in Singapore. The shares have fallen 18 per cent this year, making them the worst performer on the Straits Times Index.

The company, which makes Zen and MuVo music players, has seen earnings slump as it battles industry leader Apple. Creative, headed by chief executive Sim Wong Hoo and based in Singapore, said the price drop for flash memory was most severe at the end of the quarter, hurting sales and forcing inventory writedowns.

"Creative has to find a way out," said Patrick Yau, an analyst at Macquarie Research. "It's a victim of the volatility in flash memory prices."

Creative had an operating loss between US$55 million ($89.5 million) and US$65 million in the three months ended March 31 because of a "drastic drop" in flash memory prices, the company said.

Creative expects sales of US$220 million to US$230 million. It posted profit of US$15.9 million on sales of US$334 million a year earlier.

Eight out of 12 analysts who cover the company suggest investors sell the stock, two say they should buy, and two recommend holding the shares.

- BLOOMBERG