Creative 1999 Annual Report Download - page 6

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The Creative.com Strategy
For the year ahead in fiscal 2000, business conditions remain challenging. The industry remains highly competitive with continuing rapid
changes in markets, products and technology. We face these challenges with several major advantages, including our continuing and
improving strength in the key areas of technology leadership, channel position, brand name recognition and product line-up. These
strengths, as well as our strong financial position, will, we believe, position us well in fiscal 2000 to take advantage of the opportunities
unfolding in a rapidly evolving, Internet-driven marketplace.
To reflect these rapid transformations and seize the opportunities of an Internet-transformed world, we have embarked on our “Creative.com”
strategy. Our goal is to transform key portions of the Company to e-commerce, broadband and Internet models.
Successful Internet companies have the following three core strengths:
• Strong brand name
• Outstanding user experience
• Huge installed base
Many Internet companies work very hard and invest millions to build these core strengths. We believe that Creative already has these and
other critical advantages in the Internet world: strong brand name recognition, highly desirable products, the ability to provide an
outstanding user experience, an extremely popular web site, and a large and rapidly growing installed user base of more than 80 million
Sound Blasters. Each year, we sell about 40 million units of our products to a customer base we estimate to total 25 million per year.
We believe we can leverage on these strengths in the coming fiscal year, both in our Internet plans and in our traditional businesses.
For the Internet, our plans include several key elements: the first is the development of Internet e-commerce channels, both business-
to-consumer and business-to-business, leveraging on our brand name and installed base of users to bring them to our e-commerce
properties. An example is our plan to launch hifi.com in October 1999. Leveraging the strengths of our existing Cambridge SoundWorks
business and products, we intend to make hifi.com the authority and number one Internet site for home entertainment and all kinds of
hifi products on-line. We are also planning to launch an SI-direct.com Internet site to be our low cost high volume business-to-business
e-commerce channel. We plan to use it for system integrator (“SI”) customers to sell lower margin products such as CD-ROM drives and
low end graphics cards - as well as for third party commodity products. We think this low-cost, low-risk channel has great promise for
both Creative and for our customers.
A second key element of our Internet plans is the development of a group of Internet applications and sites that will leverage on our huge
user base to offer new kinds of Internet services. An example is our LAVAmusic.com site, which is aimed at creating an active online
community for experiencing LAVA! music videos for MP3 music.
A third element is our value-added Internet venture capital fund for investments in Internet companies that Creative identifies as strategic
partners in our Internet initiatives. These are early stage companies where Creative can add value by leveraging on our brand name, our
technologies, our access to global channels and our huge user base. We have, over the past six months, made more than ten such investments
at a total cost of over US$30 million.
Finally, the fourth element of our Internet Plan is to focus on broadband. We believe the next wave of the Internet will be driven by
broadband products and broadband Internet applications. We will be introducing ADSL G.LITE modems and other broadband
communication devices during fiscal 2000. In addition, broadband will bring about a whole new generation of highly compelling
Internet applications, products and services, many of which play directly to our strengths. Many such broadband applications will be
entertainment oriented and will drive demand for complementary hardware such as PDE devices, high end audio cards, multi-channel
speakers and 3D graphics cards. We believe that we are well positioned to take advantage of this opportunity.
In closing, I would like to thank our shareholders for their continued support during the past year. I would also like to extend my thanks
to the management and staff of Creative, whose hard work and dedication have been fundamental to the Company’s progress and to our
great hopes for the future.
Sim Wong Hoo
Chairman & Chief Executive Officer
Creative Technology Ltd
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