Investors Pile Into Stock Promising the `Holy Grail of Audio'

(Bloomberg) -- It was once the world's second-largest maker of digital music players. Now, Creative Technology Ltd. thinks its audio technology will transform the “human listening experience” -- and investors are buying into it.

The Singapore-listed company's Super X-Fi technology won the “Best of CES 2018 Award” at the electronics show in Las Vegas in January for its latest innovation. The product is used in headphones and dongles for smartphones and uses photos of people's ear canals and acoustics assessments of the space they're in to personalize their sound experience.

It's been in the works for over 20 years and the company's Chief Executive Officer Sim Wong Hoo has been touting the technology as “life-changing” and that it was the “holy grail” of headphone audio.

Investors seem to agree. Creative's share price rallied more than 290 percent to a level not seen in about six years after winning the trophy. At S$4.35 ($3.29), that's still far from its record high of S$64 attained in 2000, when it had a market cap of S$5.2 billion.

But it hasn't yet flowed through to the company's bottom line. Forced to cut 2,700 jobs in 2009 after demand for its music players tumbled, Creative has seen its revenue decline for 12 consecutive years amid the transformation of the music industry. In its heyday, Creative was a supplier of accessories for Apple Inc.'s iPod product.

That's why it's staking a lot on the Super X-Fi technology, which Creative says can make listening to music on your headphone or phone like being in a theater.

If the product gains just 0.5 percent share of the global headset market in 2020, Creative would gain revenues of $232 million, Sachin Mittal, an analyst at DBS Group Holdings Ltd. wrote in a note. The Super X-Fi dongle is expected to be released in mid-2018 at a retail price of $150, he said.

To contact the reporter on this story: Livia Yap in Singapore at lyap14@bloomberg.net.

To contact the editors responsible for this story: Divya Balji at dbalji1@bloomberg.net, Emma O'Brien

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