Creative Technology lands a mention in Singapore budget 2019

Singapore two-dollar bills

Creative Technology landed a mention in Singapore’s budget speech on Monday, as Finance Minister Heng Swee Keat sought to highlight the importance of the entrepreneurial spirit in the city-state.

“Sim Wong Hoo, CEO of Creative Technology, brought us the popular Sound Blaster cards in the 1990s. Creative Technology went through a difficult patch after its initial success,” Heng said on Monday.

At the time of its launch, the Sound Blaster was a technological breakthrough, making sounds and music widely available through consumer computers. The once ubiquitous product, however, became the victim of competition and obsolesce, particularly after Microsoft effectively stopped supporting sound-card hardware with Windows Vista.

“But Mr. Sim and his team pressed on. After 20 years of R&D, costing US$100 million, the company recently launched the Super X-Fi, a technology that recreates the holographic sound experience, or 3D sound with headphones,” Heng said, noting the technology won 14 awards at the 2019 Consumer Electronics show in the U.S. recently.

“Having tried it myself and having heard the endorsement of audiophiles, including some in these [parliamentary] chambers, I’m happy that Mr. Sim and his team are at the cusp of a major breakthrough and I wish them every success,” Heng said.

It’s not clear whether the Super X-Fi technology, however exciting it may be to audiophiles, will drive earnings, however.

In its earnings outlook last week, Creative said, “revenue contribution from Super X-Fi products for the quarter is not expected to be significant to the overall revenue for the group.”

That was after the company reported its fiscal second quarter net loss widened to US$4.92 million, from a US$4.23 million loss in the year-ago quarter, as sales dropped.

Back in October, KGI had forecast that Creative could sell around 40,000 Super X-Fi headphones or dongles in the first year, translating into revenue of around US$6 million. Assuming a 20 percent net margin for Super Xi-Fi products, that suggests the segment would contribute an additional US$1.2 million to Creative’s bottom line, KGI had estimated.

KGI called that “inadequate” as Creative’s net losses have averaged US$27 million over the past five years, excluding one-off earnings from lawsuits. It also pointed to looming competition, with the chances of any player gaining a first mover advantage rather dim.

Get the Shenton Wire morning briefing in your inbox