You can tell a lot about a company by listening in on its conference calls, especially after a disappointing earnings report. Case in point: Creative Technology
So let's get those numbers out right now. Sales dropped 14% from last year, to $241.5 million, and the year-ago profit of $691,000 turned into $21 million of red ink. Gross margins of 15% are not conducive to any kind of profits -- even Wal-Mart
Creative spokesman Craig McHugh spent much of the call extolling the virtues of the firm's latest and greatest gadgets, but he did mention that Creative is targeting 20% gross margins for the current quarter, thanks to encouraging sales of high-margin flash-based digital audio and video players. Still, this is a very low-margin company that can't afford to take a whole lot of risks. And it's tough to be a market leader if you never take any chances.
McHugh delved into great detail on the settlement with Apple Computer
Those new revenue streams could -- should, really -- add up to significant improvements, and Creative hopes to become profitable as early as this quarter, even without the Apple payment. There's a lot riding on that one user interface patent now, and the company would be quite lost without it. The stock isn't what I'd call a screaming bargain or a golden goose, but it does look a lot more appetizing today than at the end of the last quarter. Maybe next time, management might want to talk about the numbers a bit.
- Foolish Forecast: Creative Getting Cramped
- A Creative Horror Story: Fool by Numbers
- Apple Gets Creative
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