CONTACT INFORMATION: USA: Phil OShaughnessy (408) 546-6773 poshaughnessy@creative.com
Asia: Wynne Leong (65) 6895-4120 wynne.leong@ctl.creative.com
Creative Announces Q2 FY08 Financial Results
SINGAPORE Jan. 28, 2008 Creative Technology Ltd, a worldwide leader in digital entertainment products, today announced financial results for the second quarter of its 2008 fiscal year, ended December 31, 2007. All financial results are stated in U.S. dollars.
Revenues for the second quarter were $262.5 million, compared to revenues of $324.4 million for the same quarter last year. Net income for the second quarter was $7.6 million, with earnings per share of $0.09. This compares to net income of $92.1 million with EPS of $1.10 for the same period last year, which includes $82.0 million in net income with EPS of $0.98 for the paid-up license from Apple for its use of the ZEN Patent in its products. Excluding the paid-up license from Apple, net income was $10.1 million with EPS of $0.12 for the same period last year.
We continue to improve our operating results, achieving operating income of $7 million compared to $3.3 million last year and increasing gross margins to 23 percent, said Craig McHugh, president and COO of Creative Labs, Inc. During the quarter we also strengthened our balance sheet, increasing our cash position to $291 million and reducing our net inventory to $93 million. We were able to improve our operating results even though we had a reduction in our year-over-year revenues.
Were very excited about delivering on our strategy of introducing key new products, which we did this month at the Consumer Electronics Show in Las Vegas, continued McHugh.
At CES we unveiled a breakthrough with our inPerson multi-party, multi-platform inPerson conferencing system, said Sim Wong Hoo, chairman and CEO of Creative. With our portable, wireless inPerson system, you can have a high resolution video and audio multi-party call with multiple offices participating around the world. Each party can
Creative Technology Q2 FY08 Results
join an inPerson Conference from an inPerson system, through a PC with our inPerson inVite, and even from a cell phone for voice. With inPerson Conferencing, you can experience high resolution video on the systems seven-inch display with high quality audio on the built-in speaker or output to a large screen LCD or plasma display. With inPerson we are creating an entirely new category, inPerson Conferencing, taking video conferencing outside the board room. With its breakthrough price and ease of use, all of the employees in a company can communicate inPerson, dramatically reducing the need for travel, saving cost and reducing their carbon footprint. In referring to the excitement that inPerson generated at the Consumer Electronics Show, U.S.-based BetaNews.com wrote, the inPerson demo drew a crowd that rivaled Panasonic's 150-inch HDTV display.
Craig McHugh continued, We announced new MP3 players with our ZEN Stone and ZEN Stone Plus with Built-in Speaker in cool new colors. We also announced our Xdock HD iPod dock, which upconverts iPod video to HD-quality and plays back music wirelessly in Xtreme Fidelity. The Xdock HD drew huge crowds at CES and Macworld this month, and it was selected by judges as a finalist for the Best of CES award and iLounges Macworld Best in Show award. We came out with another great accessory for the iPod with our TravelSound i80 travel speaker system for the iPod Nano. We generated further excitement for our headphone and headset category with the introduction of the HS-1200 Digital Wireless Headset.
As we look into our current third fiscal quarter we are targeting to further improve our gross margins and achieve overall profitability, added McHugh.
Share Buyback Program During the second quarter, Creative purchased 1,500,000 shares under its share buyback program at an average price of $4.35. ### About Creative Creative is a worldwide leader in digital entertainment products. Famous for its Sound Blaster audio cards and for launching the multimedia revolution, Creative is now driving digital entertainment on the PC platform with products like its highly acclaimed ZEN portable audio and media players. Creative's innovative hardware, proprietary technology, applications and services leverage the Internet, enabling consumers to experience highquality digital entertainment -- anytime, anywhere.

Creative Technology Q2 FY08 Results This announcement refers to products and pricing sold in the United States of America. Pricing and product availability are subject to change without notice. Sound Blaster and ZEN are trademarks or registered trademarks of Creative Technology Ltd. in the United States and/or other countries. All other brand and product names are trademarks of their respective holder and are hereby recognized as such.
Safe Harbor for Forward-Looking Statements:
This press release contains forward-looking statements, including statements relating to Creatives gross margins, operating expenses, and profitability. These forward-looking statements involve risks and uncertainties that could cause Creative's actual results to differ materially. Such risks and uncertainties include: Creative's ability to timely develop new products that gain market acceptance and to manage frequent product transitions; competitive pressures in the marketplace; a reduction or cancellation of sales orders for Creative products; accelerated declines in the average selling prices of Creative's products or any prices of components; Creative's ability to successfully integrate acquisitions; potential fluctuations in quarterly results due to the seasonality of Creative's business and the difficulty of projecting such fluctuations; possible disruption in commercial activities caused by factors outside of Creative's control, such as terrorism, armed conflict and labor disputes; a reduction in demand for computer systems, peripherals and related consumer products as a result of poor economic conditions, social and political turmoil; major health concerns; the proliferation of sound functionality in new products from competitors at the application software, chip and operating system levels; the deterioration of global equity markets; exposure to excess and obsolete inventory; Creative's reliance on sole sources for many of its chips and other key components; component shortages which may impact Creative's ability to meet customer demand; Creative's ability to protect its proprietary rights; the vulnerability of certain markets to current and future currency fluctuations; the effects of restricted fuel availability and rising costs of fuel; fluctuations in the value and liquidity of Creative's investee companies. For further information regarding the risks and uncertainties associated with Creative's business, please refer to its filings with the SEC, including its Form 20-F for fiscal 2007 filed with the SEC. Creative undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in Creative's expectations.
CREATIVE TECHNOLOGY LTD. CONSOLIDATED BALANCE SHEETS

( In US$' 000)

(Unaudited)
December 31, 2007 ASSETS Current Assets: Cash and cash equivalents Accounts receivable, net Inventory Other assets and prepaids Total current assets Property and equipment, net Investments Other non-current assets Total Assets $

June 30, 2007

290,563 124,050 93,363 47,959 555,935 67,729 64,145 3,763 691,572
250,480 110,520 134,911 40,308 536,219 97,696 80,121 8,997

723,033

LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable Accrued liabilities Income taxes payable Current portion of long term obligations and others Total current liabilities Long term obligations Minority interest in subsidiaries Shareholders' equity Total Liabilities and Shareholders' Equity $
55,588 98,194 21,241 4,365 179,388 126,385,634 691,572
66,778 92,898 21,349 3,934 184,959 129,408,570
CREATIVE TECHNOLOGY LTD. CONSOLIDATED STATEMENTS OF OPERATIONS
( In US$' 000, except per share data) (Unaudited)
Three months ended December 31, Sales, net Cost of goods sold $ 262,536 201,883 $ 324,356 $ 253,706
Six months ended December 31, 447,093 $ 346,646 565,868 459,318
Gross profit Operating expenses: Selling, general and administrative Research and development

60,653

70,650

100,447

106,550

36,947 16,671

52,366 14,958

71,401 31,654

94,193 30,821
Total operating expenses Operating income (loss) (Loss) gain from investments, net Interest income Interest expense Others
53,618 7,035 (2,121) 2,869 (1,620) 1,633
67,324 3,2,270 (2,885) 106,994
103,055 (2,608) 2,281 5,768 (3,305) 7,451
125,014 (18,464) (492) 4,179 (5,749) 108,827
Income before income taxes and minority interest Income tax expense Minority interest in loss

7,796 (168) --

109,930 (18,118) 310

9,587 (650) 1

88,301 (18,500) 1,313
Net income Basic earnings per share: Weighted average ordinary shares outstanding ('000) Diluted earnings per share: Weighted average ordinary shares And equivalents outstanding ('000)
92,122 $ 1.10 $ 83,394 1.10 $ 83,992
8,938 $ 0.11 $ 83,253 0.11 $ 83,303
71,114 0.85 83,358 0.85 83,889

0.09 $ 82,902

0.09 $ 82,953
CREATIVE TECHNOLOGY LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS Increase (decrease) in cash and cash equivalents (in US$'000) ( Unaudited) Six Months Ended December 31, 2007 Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of fixed assets Amortisation of intangible assets Deferred share compensation amortization Minority interest in loss Equity share in loss of unconsolidated investments (Gain) loss on disposal of fixed assets Write downs of investments and other non-current assets Gain from investments, net Gains on disposal of subsidiary Deferred income taxes, net Foreign currency exchange gain Dividend income Changes in assets and liabilities, net: Accounts receivable Inventory Other assets and prepaids Accounts payable Accrued and other liabilities Income taxes Net cash provided by operating activities Cash flows from investing activities: Capital expenditures, net Proceeds from sale of fixed assets Proceeds from investments Proceeds from sale of subsidiary Purchase of investments Increase in other non current assets, net Dividend income received Net cash provided by (used in) investing activities Cash flows from financing activities: Proceeds from exercise of ordinary share options Repurchase of ordinary shares Repayments of debt obligations Repayments of capital leases Dividends paid Net cash used in financing activities Net increase in cash and cash equivalents Effects of exchange rate changes on cash and cash equivalent Cash and cash equivalents at beginning of year Cash and cash equivalents at end of the period $ 14 (8,527) (2,074) (8) (11,528) (22,123) 35,157 4,926 250,480 290,563 $ 751 -(1,957) (882) (20,855) (22,943) 16,137 4,274 213,995 234,406 (7,846) 75 4,427 5,830 (1,135) -422 1,773 (2,820) -(735) (873) 419 (3,851) $ 8,938 $ 71,114 2006

5,586 (1) 1,6,854 (2,186) (6,948) (17) (3,882) (422)
7,1,004 (1,313) 438 (1) 493 (1) -(72) (3,528) (419)
33,416 9,932 (8,352) 3,663 6,55,507
(57,925) 33,708 11,618 (41,632) 21,673 (1,071) 42,931
CREATIVE TECHNOLOGY LTD. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Unrealised Holding Gains (Losses) on Investments $'000 24,240 (12,419) 11,821
Ordinary Shares '000 Q208 Balance at July 1, 2007 Shares issued under employee options and share purchase plans Purchase of treasury shares Dividends paid Amortization of deferred share compensation Comprehensive loss Balance at December 31, 2007 Q207 Balance at July 1, 2006 Shares issued under employee options and share purchase plans Purchase of treasury shares Dividends paid Amortization of deferred share compensation Comprehensive loss Balance at December 31, 2006 83,83,626
Treasury Shares '000 (2,000) (2,000)
Ordinary Shares $'000 300,300,100
Treasury Shares $'000 (8,527) (8,527)
Other Reserves $'000 53,54,535
Retained Earnings $'000 30,295 (11,528) 8,938 27,705
Total $'000 408,(8,527) (11,528) 586 (3,481) 385,634

83,83,432

298,299,225

52,265 1,004 53,269

19,453 (5,238) 14,215
22,961 (20,855) 71,114 73,220
393,(20,855) 1,004 65,876 439,929
CREATIVE TECHNOLOGY LTD. SUPPLEMENTAL FINANCIAL INFORMATION
Dec 31, 2007 Revenue by geographical region : Americas Europe Asia and rest of the world Revenue by product category : Personal Digital Entertainment Audio Speakers and Headphones Others
Three months ended Sept 30, Dec 31, 2007 2006

27% 53% 20%

20% 57% 23%

34% 51% 15%

56% 12% 25% 7%

53% 14% 25% 8%

68% 10% 16% 6%