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CREATIVE ANNOUNCES Q3 RESULTS - OPERATING INCOME INCREASES 83% AND TOTAL EPS HITS $0.68

Revenues Increase 26% Year-Over-Year to $201.8 Million and Substantial Investment Gains Total $48.3 Million

SINGAPORE - April 29, 2004 - Creative Technology Ltd. (Nasdaq: CREAF), a worldwide leader in digital entertainment products for PC users, today announced financial results for the third quarter of fiscal year 2004, ended March 31, 2004. All financial results are stated in U.S. dollars.

Sales for the third quarter beat guidance, coming in at $201.8 million, up $41.2 million, or 26% from $160.6 million revenue for the same quarter last year.

Creative grew net income 83% to $8.7 million and EPS grew 67% to $0.10, compared to net income of $4.8 million and EPS of $0.06 for the same quarter of last year. The net income of $8.7 million and EPS of $0.10 is before the substantial investment gains of $48.3 million. Including the investment gains, net income was $57.0 million and EPS was $0.68.

Sales for the first nine months of fiscal year 2004 were $613.1 million, up from $552.2 million for the same period last year. Net income for the first nine months of fiscal 2004 was $42.5 million, up from $24.8 million for the same nine-month period last year. EPS for the first nine months of this fiscal year was $0.51, up from EPS of $0.30 for the same period last year. These nine-month comparisons are before investment gains of $72.8 million or $0.87 per share and before a tax write-back of $12.3 million or $0.15 per share in the current fiscal year, and the previous year's investment losses of $6.1 million or $0.07 per share.

Including the investment gain of $72.8 million and the tax write-back of $12.3 million for the first nine months of this fiscal year, Creative posted net income of $127.6 million and an EPS of $1.53. This represents an increase of 580% when compared to the net income of $18.8 million and $0.23 per share for the first nine months of the previous year, including the investment loss of $6.1 million.

"Our sales growth of 26% in the third quarter was driven in part by a sharp increase in demand for our NOMAD family of digital audio players, including both our hard-drive and flash-based players. Revenues for the category increased 151% year-over-year, an even faster rate than we had anticipated," said Craig McHugh, president of Creative Labs, Inc. "Worldwide demand for our NOMAD MuVo2 4GB, which began volume shipments in the quarter, was phenomenal. We quickly sold out all of our MuVo2 units in the U.S., Europe and Japan, as demand for our player far exceeded our drive vendor's capacity to supply us with enough one-inch drives in the quarter. Adding to our success in the quarter were strong revenue contributions from the high end of our audio and speaker businesses, both of which delivered solid growth in the period."

"During the quarter, in addition to our awesome growth in PDE and strong operating profitability, we gained a significant return from our long-term strategy of investing in strategic partners," said Sim Wong Hoo, chairman and CEO of Creative Technology Ltd. "Our investment gains of $48.3 million resulting from the sales of a portion of our ownership positions in SigmaTel and SMIC helped to further strengthen our balance sheet. Even after realizing this sizeable strategic investment gain, we still have $142 million of unrealized gains in our investment portfolio, a dramatic increase from just a year ago, when we had just $5 million of unrealized gains in our investment portfolio."

Outlook
For the fourth quarter of fiscal year 2004, Creative is targeting to increase revenue by 20% to 25% to around $185 million, and to grow EPS by about 20% to $0.07, with gross margins coming in at about 34%.

Share Buyback Program
During the quarter, Creative did not repurchase any shares under its share buyback program.

Recent Announcements

  • Creative introduced the MuVo Slim, incorporating a rich feature set in a fashionably sleek credit card sized digital audio player, plus customization options of color and capacity for an ideal corporate gift;
  • Creative expanded its audio creation arsenal by entering the console game audio development space with GameCODA 2.0, the comprehensive cross-platform audio middleware solution for console and PC game developers;
  • 3Dlabs announced the workstation graphics industry's most powerful visual processing architecture with the introduction of Wildcat Realizm, to deliver advanced shading language functionality from multi-VPU performance;
  • Cambridge SoundWorks introduced the MicroWorks II Personal Entertainment Speaker System, a three-piece amplified speaker system with outstanding audio playback and a great low price.

Awards & Accolades

  • The Creative NOMAD MuVo TX won the "Kick Ass Award" from Maximum PC magazine
  • The Creative NOMAD Jukebox ZEN Xtra was recognized as "Gizmo of the Month" by Glamour magazine
  • The Creative NOMAD Jukebox ZEN NX won:
    • - The "Seal of Excellence" award from Animation Magazine
      - "Best Value" MP3 player recognition from Unlimited magazine

  • The Creative NOMAD MuVo¬≤ X-Trainer was recognized as the "Best Running Buddy" by Stuff magazine
  • The Creative NOMAD MuVo NX was recognized as the "Best Value" MP3 player by Travel+Leisure Golf magazine
  • The Creative GigaWorks S750 speaker system won:
    • - The "Editors' Choice" award from PC Gamer magazine
      - The "Editor's Choice" award from Official Xbox magazine
      - The "Essential Selection" award from GMR magazine
      - The "Drool Award" from gamersdepot.com
      - The "Editors' Choice" award from Computer Gaming World magazine
      - The "Editors' Choice" award from PC Magazine

  • The Creative Sound Blaster Wireless Music won:
    • - The "Editors' Choice" award from TechEdge magazine
      - "Best Digital Audio Receiver" recognition from CNET.com
      - The "Editor's Choice" award from LAPTOP magazine

  • The Creative Sound Blaster Audigy 2 ZS sound card won:
    • - The "Drool Award" from gamersdepot.com
      - The "Editor's Choice" award from CNET.com

  • The Creative Sound Blaster Audigy 2 NX won the "Editor's Choice" award from CNET.com

Balance Sheet & Statement of Income

Listen to Creative's Q3 FY04 Analyst Conference Call:

Link to the Q3 earnings conference call live on April 29th at 1:00 PM Singapore time via Creative's Investor Relations Web site: http://us.creative.com/corporate/investor/ or by calling 1-800-374-2493. A replay will be available from shortly after the end of the conference call until May 7th via the same link from the IR web site or by calling 1-800-642-1687 or 1-706-645-9291, reservation #6901360.

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