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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KingofL337 - Wednesday, October 3, 2007 - link
How do you spend 60+ million in R&D a year and release almost nothing except a few iffy mp3 players. Creative hasn't released a new sound card product in years. They just keep re-releasing the Audugy brand and thats about it. How long has it been since Nvidia released the soundstorm chipsets? Everyone you talk to about sound cards wants real time DD / DTS / AC3 encoding and creative still hasn't released a product with that feature.I for one won't miss Creative's overpriced crappy sound cards once they are gone.
Scorpion - Wednesday, October 3, 2007 - link
I've been saying this since '99:Creative doesn't innovate, they regurgitate.
Pyramix - Wednesday, October 3, 2007 - link
It was an informative article and I am glad to see this new direction on this website.Spoelie - Wednesday, October 3, 2007 - link
But there are three 'but(t)s' in the last paragraph, but it's not really that annoying, but also a little annoyingsmn198 - Wednesday, October 3, 2007 - link
Ditto.mindless1 - Wednesday, October 3, 2007 - link
I beg to differ with the article on the point of onboard sound being a joke 10 years ago. 10 years ago onboard sound was superior for it's primary (most common) purpose, 2 channel analog output.Take for example Intel P2 boards with Ensoniq (later bought by creative) 1370 chip on them. They had a very full sound, better bass, and it was more immune to system noise than today's integrated audio. People I built systems for back then often remarked about how unusually good they sounded compared to what they had been used to with some sound cards. Creative later rebadged the Ensoniq 1370 and made some sound cards, but things when downhill when the industry went to 48KHz rate and resampled everything.
The same goes for many solutions back then, they typically used discrete sound chips and did fairly well at 2 channel analog output. While there weren't a lot of bells and whistles, and the paper specs didn't look as good, I think we all know paper specs mean little when it comes to sound quality, at least when talking about low level signals opposed to circuits with high gain like power amps.
The terrible truth is, most people have two analog amplified speakers and nothing matters to them except whether that config sounds good. With onboard sound today there is usually a lot of undesirable noise from the onboard audio, and as such it is almost the worst onboard audio has ever been. I partly blame the higher currents in today's systems, but nevertheless it effects the result. Some systems are bad enough you have to disable ACPI/Halt just to get rid of a lot of the noise, if you care much at all about audio quality.
LoneWolf15 - Wednesday, October 3, 2007 - link
Of all the driver problems I had with sound cards, the Ensoniq 1370-based ones were the biggest pains. The entire AudioPCI family was just plain and simple, miserable; I've had numerous occasions where I ripped one from a machine because of cards working, not working next reboot, driver installs sometimes fixing it, sometimes not, etc. Sad, knowing that the original ISA Ensoniq Soundscape cards really rocked.Onboard sound was bad years ago. IMHO, it still isn't great, although the ADI/Soundmax and Sigmatel codecs used on Intel boards put most of Realtek's stuff to shame. Creative had a golden opportunity at some point to do this with their own chips, but I think a combination of elitism, and likely demanding higher prices probably doomed this. The only one that has taken them up on this is MSI, and the sound chip used has been the rather lame one used in the Audigy SE and SBLive! 24-bit, with no true hardware DSP. I think the sound card market death is only partially due to Creative; some of it is due to the new way Vista DirectX works, sacrificing possible innovation in audio for relative driver stability, and some of it is due to no other vendors stepping up to the plate to provide true competition, especially in the mainstream and gaming markets.
mindless1 - Thursday, October 4, 2007 - link
I think you just had bad drivers or buggy motherboard bios, I ran 1370 boards without any problem. If you are only referring to early win95 era drivers, ok, but most drivers for win95 were junk, that's how it went with driver development at the time and unfortunately too many people were quick to fault the OS. NOt that Win95 was flawless but there's definitely some variable besides the card when I didn't have the same problems.Cincybeck - Tuesday, October 2, 2007 - link
Looking back, I think Aureal probably suffered more from bad legal council and childish antics. Yes Creative issued the first lawsuit but, Aureal fired back with its own counter-suit. Aureal ended up winning that first lawsuit, but the two companies bitterly went back and forth like two siblings. Aureal even went as far as publicly announcing Creative's first PCI card on their website. A low blow if you ask me on Creative's late entry to the PCI market. I don't see how any one can entirely blame Aureal's demise on Creative.As for Creative's products I've never had any bad luck with them. They've all worked as they should and I can not remember a single time where I’ve had a BSOD as a result of the Audio drivers. Maybe I've just have been lucky.
As for Vista support I believe the gun should be pointed at Microsoft on that one. Because not only is Creative having issues but Turtle Beach is as well. Even going as far as stating that any one using their computer to accomplish a task should stick with WinXP "http://support.turtlebeach.com/site/kb_ftp/5882198...">http://support.turtlebeach.com/site/kb_ftp/5882198.... Its obvious Microsoft cut the floor out from under their feet with not supporting DirectSound/3D in UAA, maybe a legacy mode? I don't know.
Personally I enjoy the quality clear sound provided by my Audigy and still plan on buying an X-fi, if that means sticking with XP for a year or two more I have no problem with that. Granted I haven't heard a new on-board as of late, but the quality still echoes in my mind and just Blah. Anyway XP does everything I need it to and it would appear in most cases it does it better than Vista.
PandaBear - Tuesday, October 2, 2007 - link
With everything getting integrated, you either have to move up and be a chipset (at least south bridge) company or consumer product company. They have the Cambridge soundwork name, why not build good home theater system with it? Just relying on Nomad for MP3 is not enough, esp others are doing it for other reasons (sandisk do it to sell more flash, MS do it to get more monopoly, etc). You have to wonder what is the advantage Creative have over the others.In the end, I think they should either go into a chipset company for mp3 players like sigmatel or get into home theater business like pioneer. They are just another logitech but with much higher overhead.