Creative 2000 Annual Report Download - page 4

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CHAIRMAN’S MESSAGE
Value-Added Strategic Investment Fund — Creative’s Value-Added Strategic Investment Fund invests in companies that
Creative identifies as potential strategic partners. These are primarily companies where Creative can add value by leveraging
on our brand name, our technologies, our access to global channels and our huge user base. In return, many of these
companies provide technology, products, or services – and potential investment gains to us. Although the initial focus of
these investments was in the Internet space, we have expanded the focus to include a balance of companies in Broadband
Communications, Contract Manufacturing, and PDE Technologies, with Internet companies comprising only about a quarter
of the portfolio.
The fund has now invested over $200 million in over 40 companies. Creative’s value-added angle is proving sound: we
realized $103 million of net gain from investments in fiscal 2000, plus unrealized gains of $174 million as of June 30, 2000.
I am most proud that we managed to accomplish all of the above while simultaneously achieving record annual revenue,
increased net income, and strong operating results. It is a truly remarkable accomplishment to be able to achieve a transformation
of this magnitude not only without diminution of profits, but while actually building our financial strength – and in a one-
year timeframe!
• Sales for fiscal 2000 were $1.34 billion, an increase from $1.30 billion in fiscal 1999.
• Gross profit as a percentage of sales was 30% in fiscal 2000, up from 27% in fiscal 1999.
• Net income for fiscal 2000 was $161 million, compared to $115 million in fiscal 1999.
• We ended fiscal 2000 with a strong cash balance of $286 million. Although this was down from $319 million in fiscal
1999, the reduction reflects the utilization during fiscal 2000 of $102 million for the repurchase of 5.9 million shares
under the share buy-back program, the payment of $21 million for the $0.25 per share ordinary dividend, and strategic
investments of over $200 million.
• Total shareholders’ equity, including the unrealized gain in investments, increased to $778 million at the end of fiscal
2000 from $560 million at the end of fiscal 1999. Excluding the share repurchase and dividend payment, the increase
in total shareholders’equity would have been $341 million, an increase of 61%. This may be the best measure of what
our transformation has accomplished.
As we look forward into fiscal 2001 and move toward our vision of enabling the computer platform for the best digital
entertainment experience, we see two key trends paving the way.
The first is the phenomenal growth of downloadable digital music. This is drawing huge attention to the personal computer
as the hub of entertainment in the home – something we’ve been predicting for two years. But it is no longer just our vision.
Tens of millions of people are listening to music from their computers, and many people who aren’t yet doing so have at least
learned about it because of all the publicity surrounding MP3, Napster, and others. All this publicity means more sound cards
and better sound cards, more speakers and better speakers will be in demand. And we are right on the spot to reap the
benefits.
A new digital audio revolution has just started, and Creative is right in the middle of it. It covers all ages, both genders,
and it is many times bigger than the multimedia market that the Sound Blaster kick-started ten years ago. People want the
music of their choice to be easily accessible to them – and the PC, the Internet and portable digital audio devices are the
way to go. Creative will deliver the power of convenience and choice to our users.
The NOMAD Jukebox is the first of the products that will exemplify the new economy company Creative has transformed
into. With more and more people moving over to the PC to enjoy the digital music of their choice, many will want their
whole collection of music to be mobile – anywhere, anytime – right in their hand. The NOMAD Jukebox will become the
perfect solution.