Creative Revenues Down; Company Shifts Focus To High-End Products

For the quarter, the company posted a net loss of $12.8 million ($0.17 per share). In Q1 last year Creative posted net income of $17.6 million ($0.21 per share). The biggest impact on the company's results came from losses associated with its venture capital investment portfolio. Excluding the effect of these investment write-offs, the company would have seen a net profit of $3.6 million ($.05 per share). Going forward, the company said it plans to concentrate on high-end products and low manage operating costs closely. "As we announced in last quarter's earnings release, we have taken major steps to refocus Creative on our core audio and personal digital entertainment products, and to de-emphasize lower margin products," said Craig McHugh, president of Creative Labs, Inc. "Executing upon this strategic shift was...to reduce operating expenses a further 11% to $55 million; to reduce inventory levels to $131 million; and to improve operating profit sequentially from the previous quarter."