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StrategyAfter the Extigy demonstration, Sim Wong Hoo took the stage and talked about the company's current situation and strategy for audio and the Extigy. He lamented that many skeptics still think Creative would go bankrupt someday because it has hit a plateau in audio when the Sound Blaster 16 provided CD quality audio. Many were not convinced of the Audigy's potential, and some are still not convinced about the Extigy as well. He talked about the stunning audio quality of the Audigy, and the numerous awards it has garnered since its release, which also contributed to better-than-expected sales, leading to recent surges in share price when the company beat market expectations for the 2nd quarter of 2001. The Extigy marks a milestone for Creative, as this is the first time the company is moving out of the box and into the consumer electronics space. He admits that the market comprising of the female population was largely untapped, and many people do not want to open their PCs to install a sound card, so the Extigy has a strong selling point.
Now that Creative is at the top of the sound card market, he wants Creative to be the "best in digital audio" as well, and believes that there is always room for innovation because music "touches your soul". The Extigy was originally marked for a US$199 retail price, but various managers in Creative offices throughout the world wanted a more aggressive price point, and he decided to sacrifice a little profit margin and retail the Extigy at US$149. The Extigy is more costly to manufacture compared to sound cards, therefore margins are slightly lower initially. This will better when volume increases and production moves to countries like Malaysia where costs are lower. (The Extigy is currently manufactured in Singapore.) Creative expects that there will be no immediate challenger to the Extigy and there is enough time to "let the market play out." When asked about sales expectations, he said the company was being cautious and did not want to be overly optimistic, especially in the current economic climate. Creative did not want a repeat of the Nomad Jukebox situation, where hype and expectations were extremely high but the company failed to meet the targets it set. Of course, many of us wanted to ask him "what's next?" He was adamant about revealing future plans, but hints that there will be more external "boxes" coming, and the Nomad portable MP3 product line will be refreshed this year.
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"Convergence" used to be a bad word because many devices that tried to bridge the PC and consumer electronic worlds have failed, but he believes that the Extigy is something that will sell, especially after the product was named one of the top 10 in CES 2001.
