Creative 1999 Annual Report Download - page 4

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Dear Shareholders,
Fiscal 1999 was another challenging year for Creative - and also a year of significant achievements. The Company’s performance was affected
by lasting effects from economic weakness in Asia and Latin America, as well as by consolidation in the graphics market. There were also
a number of significant product and technology transitions during the year.
In the face of these challenges and product transitions, Creative was still able to produce another year of good financial results. Creative
reported net income of US$115 million, while at the same time improving our product offerings and market position in all key market
segments.
Sales for fiscal 1999 were US$1.3 billion, an increase from US$1.2 billion for fiscal 1998. Gross profit as a percentage of sales was 27%
in fiscal 1999 compared to 31% in fiscal 1998. Net income for fiscal 1999 was US$115 million compared to US$135 million in fiscal 1998.
We also ended fiscal 1999 with a strong cash balance of US$319 million. This compares with US$417 million in fiscal 1998. The reduction,
however, reflects the payment during fiscal 1999 of US$139 million for the repurchase of 10 million shares under the share buy-back
program, and the payment during fiscal 1999 of US$45 million for dividends (consisting of an ordinary dividend of US$0.25 per share
and a special dividend of US$0.25 per share).
During fiscal 1999 we continued to launch exciting, industry-leading new products and technologies in all of our major product categories,
including audio, graphics, speakers, modems, PC-DVD, and Personal Digital Entertainment (“PDE”).
In audio we successfully launched the Sound Blaster Live!TM sound card and a new, industry-leading set of application programming
interfaces (“APIs”) called Environmental Audio ExtensionsTM (EAXTM) . Environmental Audio as delivered by the Sound Blaster Live!, has,
during the past fiscal year, become firmly entrenched as the next generation audio platform for PCs. EAX is an audio API that is supported
by virtually all leading PC games developers. EAX is slated to be included in substantial part in Microsoft’s next-generation Direct Sound
APIs, and is currently supported by a growing list of game titles.
Sound Blaster Live!’s debut during fiscal 1999 was greeted with a multitude of industry awards, including Best Sound Card and 1999 World
Class Award by PC World, A-List by PC Computing, and The Family PC 100 Award by Family PC. Sound Blaster Live! and Live! Value
audio cards have had tremendous strength in our retail markets and have received design wins from many of the major PC OEMs, for
example, Dell, Compaq, Gateway and Micron. Creative was honored as the overall Number One winner as the most desired IT brand
in the German marketplace.
During fiscal 1999 Creative also implemented a new business and technological model called Live!Ware. Live!Ware is a series of downloadable
upgrades that take advantage of the re-programmability of Creative’s custom EMU10K1 chip, which is the heart of Sound Blaster Live!.
Live!Ware also leverages the tremendous and growing installed base of Sound Blaster Live! products. More than just simple software patches
or fixes, Live!Ware updates provide genuine improvements in features and hardware performance for the Sound Blaster Live! family of
products. Recent features have included improved 3D audio positioning, increased number of DirectSound3D streams, MP3 encoding,
multi-speaker performance and new advanced effects such as occlusions and obstructions that prolong the life and competitiveness of the
Sound Blaster Live!.
In fiscal 1999, Creative also launched its first PDE product, the Creative NOMAD Digital Audio Player and Voice Recorder. NOMAD is
a portable digital audio player supporting MP3 playback. It has had an overwhelming reception from industry and consumers for its
futuristic, sleek looks and advanced features. Creative has also launched NOMADWorld.com, which is targeted to be a premiere online
destination devoted to Internet music and enhancing the digital audio experience for Creative NOMAD users.
Other major products launched in fiscal 1999 include: for speakers, multi-channel speakers such as the FourPointSurround FPS2000 and
DeskTop Theater 5.1 DTT2500 Digital speakers; for graphics, 3D Blaster TNT2 series of graphics cards; for DVD, PC-DVD Encore 6X
Dxr3; for CD-ROM drives, the Blaster CD-RW 4224; for video conferencing, Video Blaster WebCam 3; and for modems, the V.90 series
of Modem Blasters.
To maintain our competitiveness and strengthen our leadership position in the industry, Creative has also continued to focus and invest
our resources on the development of new products and technologies. Our success in this product and technology development front can
be seen in the latest product range for fiscal 2000:
• Sound Blaster Live! Platinum is the current flagship of the Sound Blaster family of sound cards designed for the best digital audio
solution for music, games and Internet entertainment. Besides having all the powerful features of the high end Sound Blaster Live!,
the Sound Blaster Live! Platinum comes with the Live!Drive front panel that offers a comprehensive array of I/O connections, a feature
only found in high-end professional systems, MP3 playback and encoding software, and a suite of high quality software including LAVA!
(Live Audio Visual Animation) which brings a whole new dimension to Internet music.
Chairman’s Message