| BUSINESSWEEK ONLINE : DECEMBER 13, 1999 ISSUE | ||||||||
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| INTERNATIONAL -- ASIAN BUSINESS
Splendor on the Web for Creative Technology? (int'l edition) The Singapore sound-card maker is snapping up e-upstarts Nov. 19 was a big day for Sim Wong Hoo. That's when Mediaring.com, a Singapore software startup in which Sim's Creative Technology had invested $6 million, began trading on the Singapore Stock Exchange under new rules that allow companies to go public without first demonstrating a record of profitability. The stock soon tripled in value, making Sim's original 15% stake worth $164 million. If all goes according to plan, it may be the beginning of a successful transformation for Singapore-based Creative Technology, the world's leading maker of computer sound cards. After years of trying to diversify away from its core business, which is vulnerable to drastic shifts in demand, Creative may have hit on a solution. Sim has so far invested half of a $100 million fund for Internet start-ups spanning Singapore, China, and the U.S. and embarked on a path similar to the one blazed by Japanese entrepreneur Masayoshi Son. Son's Softbank Corp. purchased stakes in then fledgling Yahoo!, E*Trade, and GeoCities, creating a network of Net companies that has turned his business into one of the most powerful forces in the New Economy. Sim hopes to do the same. DISGUISING VOICES. His strategy is to use Creative's edge in audio and graphics cards to help nurture the companies he targets. Creative's digital audio technology allows computers to play stereo sound and is used in more than 70% of PC audio systems. By hooking up with startups that focus on audio applications, Sim can transfer Creative know-how. For example, Creative has technology that allows users to alter their voices in real time. A company that wants to offer audio chat rooms could use that technology to help people preserve their anonymity. ''We can not only pick winners, we can make winners,'' says Sim. Startups also get access to Creative's customer base. For example, Sim is incorporating Mediaring's free software that enables users to place phone calls through the Net into Creative's soundcards, giving the startup an edge in winning new customers. ''Having them as a partner is the best way to get into the PC,'' says Chua Kee Lock, Mediaring's president. Investors also seem sold. Largely because of its Mediaring stake, Creative's stock has soared 36% since late October. ''Creative has metamorphosed into a pretty nice creature,'' says Theodore Teo, an analyst with Prudential-Bache Securities Inc. in Singapore. Based on Creative's previous attempts to diversify, however, there's reason for skepticism. Founded in 1981, the company's first success was the Sound Blaster card, which became the industry standard. In the 1990s, Creative went into CD-ROM drives, a costly and unsuccessful move into what turned out to be a low-margin business. But even though demand for Creative's traditional products is expected to remain strong, Salomon Smith Barney estimates that 2000 earnings will fall 20%, to $91 million, because of Sim's buying spree. That puts pressure on Sim to make his Internet strategy work. Plus, Sim isn't the only Asian businessman aiming to build a regionwide Web network. Besides Softbank, Hong Kong's Pacific Century Cyberworks is making aggressive moves. It has invested in some of the same companies as Creative, including Mediaring. But unlike Softbank and Pacific Century, Sim is making his investments strategic by picking companies that use audio and graphics, hoping that sales of Creative's products will get a boost. Two years ago, he acquired Cambridge SoundWorks Inc., a Boston-based manufacturer and retailer of stereo speakers. The company's Web site has a Net name to die for: Hifi.com. To capitalize on it, Creative launched a $10 million campaign that includes ads during U.S. football games. Investors expect a Nasdaq listing next year. And, after years of negotiations, Sim finally acquired the Creative.com domain in hopes of more sales to consumers. Sim is also betting on the Internet at home. He took a 24% stake in a new Internet service provider run by Britain's Cable & Wireless PLC, which is entering Singapore following recent liberalization. For now, the government still controls what the company can offer: Broadband service is off limits, for example. Meantime, Sim is charging ahead--and talking a good game. By Bruce Einhorn in Singapore _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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