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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Sunrise089 - Tuesday, October 2, 2007 - link
I'm no expert, but it seems like there are three things they could do to turn thing around:1) Market their MP3 players better. I know several people who aren't in the "anything but apple" crowd, but who insist everything other than styling and interface is better in the Creative MP3 players. I'm sure more than 4% of the market would choose better audio quality if they could get it, so that's what Creative needs to be advertising.
2) Make the X-fi's cheaper, and market them to gamers. The serious music crowd already has an X-fi if they want one. Gamers however like extra FPS, and I've seen plenty of benches showing decent gains for add-on audio. At the very least gamers should buy an X-fi before a RAID0 setup.
3) Move into the on-board market. Creative still has a better association with quality than Realtec. So I'd have to think there would be some potential for moing the low-end of their soundcard market from discreet to integrated options.
heated snail - Tuesday, October 2, 2007 - link
Back in 1999-2000, two Soundblaster Live audio boards completely failed to work with my via-based AMD platform running first Windows 98, then ME, then 2000. Sound was present but there were regular blue-screens caused by the audio driver. Creative first denied any problem, then blamed VIA's PCI latency issues. Those issues were true, but the daily crash was still in Creative's drivers. Further customer service (or even official response to the issue on their joke of a support website) was nonexistent.Since that time I have eagerly hoped for other consumers to see through Creative's blend of extremely heavy advertising budget and extremely lightweight customer service and support. Their formula worked for years, and now maybe it's almost finished. Creative, rest in pieces.
DigitalFreak - Tuesday, October 2, 2007 - link
Good riddance to bad rubbish. If it wasn't for almost exclusive support of EAX in games, their soundcard division would have died a long time ago. Now all we need is a positional sound open standard (OpenAL is still a Creative controlled standard).As much as I dislike Vista, I have to give props to Microsoft for single handedly killing EAX. :0)
cambit69 - Tuesday, October 2, 2007 - link
in some ways, Creative Labs reminds us of Eastman Kodak company. They missed the boat on digital cameras because they refused to acknowledge that digital would replace film (film was what the company was knwon to have pioneered). THe same way how Creative Labs just sat on their tried and true Sound Blaster brand and refused to put R&D into newer technologies and branch out.creative put 7% of their total revenue into R&D, that doesnt sound a lot to me for a business that relies on technology and it makes me wonder where the other 93% of their revenue is going.
The Boston Dangler - Wednesday, October 3, 2007 - link
your analogy would better fit Polaroid. Eastman Kodak is alive and very well, Polaroid would be dead if it weren't for a couple industrial things going on.strikeback03 - Wednesday, October 3, 2007 - link
Kodak is alive, very well is a different story. Almost all of their products compete at the low end of the point&shoot market, where the competition is fierce and margins small. It is analogous to the segment of the MP3 player market Creative competes in. Kodak's last adventure with a dSLR did not go well, and if they were to re-enter that market it would likely need to be as a partner to someone, as they don't have their own line of lenses and other accessories, which are where the real money is in the dSLR world.Duwelon - Tuesday, October 2, 2007 - link
I haven't read much on UAA, why does the article say the sound card is going away and won't be coming back?What is UAA that it makes hardware based positional audio obsolete?
saratoga - Tuesday, October 2, 2007 - link
I'm no expert on it (never did any Windows driver development), but its basically a standard for audio cards that moves most of the processing into standard Windows components that run in user mode.The upside of this is that sound cards will be able to work correctly and provide a high degree of functionality (5.1, etc) with no extra drivers at all (think how USB flash drives work without a driver disk). Additionally, since they run in user mode, bad drivers will no longer be able to BSOD Windows, at worst the app would crash to the desktop. Presumably, the ultimate goal is for MS to move audio processing over to more standard multicore and onboard accelerators (built in GPUs/PPUs/etc) rather then expensive and less functional proprietary PCI devices.
This really screws over Creative of course, since effectively MS is putting their sound card business out to pasture. I can't say I blame them though. After all the stuff Creative's pulled, MS clearly wants to get them as far from their OS as possible.
leexgx - Wednesday, October 3, 2007 - link
it can still be done in hardware but its more standardised
there drivers still suck and thay Refuse to support OEM sound cards that CAN ONLY be made by creative (it be like nvidia saying we not going to support an BFG NVida video card coes it has an badge on it that says BFG)
EarthsDM - Tuesday, October 2, 2007 - link
...fast enough. The soon they are gone, the better. They started a real revolution, and then drove their popularity into the ground.