updated 09:15 am EST, Wed January 31, 2007
Creative gets Apple boost
Creative Technology on Wednesday reported a large boost in its operating profit for its second fiscal quarter due to receipt of a one-time licensing fee from Apple. The company reported a net income of $92.2 million or $1.10 per share, up significantly from the same period a year ago, during which it reported net income of $8.2 million. Last August, the companies announced a broad settlement ending all legal disputes between the rival media player manufacturers in which Apple agreed to pay $100 million to use Creative's patent for a hierarchical user interface in all Apple products: the Zen Patent covers the user interface that enables users of portable media players to "efficiently and intuitively navigate among and select tracks on the players." Although the settlement was expected to close during the company's September 2006 quarter, Creative today announced that the fee was received during its December quarter.
According to the terms of the settlement, Apple is entitled to recoup a portion of its payment if Creative is successful in licensing this patent to others. In addition, Creative joined Apple's "Made for iPod" program and announced its own iPod accessory products, including the Xdock Wireless, a device that docks an iPod and plays music at beyond CD quality via X-Fi Wireless Receivers.
"Creative is very fortunate to have been granted this early patent," said Steve Jobs, Apple's CEO. "This settlement resolves all of our differences with Creative, including the five lawsuits currently pending between the companies, and removes the uncertainty and distraction of prolonged litigation."
Creative posted December quarter revenues of $425 million, up nine percent from the same quarter last year, when the company generated sales of $391 million. Apple's "paid up" licensing fee payment contributed $82 million in net income, for the quarter: excluding the Apple payment and investment gains, Creative's net income for the second quarter was $9.9 million, compared to net income of $1.3 million, excluding the investment gains for the same period last year.
The company, however, only sold a total of 2.5 million MP3 players in the quarter, a small of fraction of Apple's record sales of 21 million iPods during the same quarter.