Beleaguered electronics maker Creative
has decided to cease production of its CD-ROM drives after facing significant losses because of falling prices and a glut of inventory.
The company will instead contract with Samsung for production of
12x CD-ROM drives that it will then resell. Creative will close its own Singapore-based CD-ROM drive manufacturing plant and take a one-time charge of $30 million, according to The Wall Street Journal.
Creative is smarting from an erosion of profit margins on its
industry-standard SoundBlaster sound card line. The company had jumped into new production areas, such as CD-ROM drives and graphics card production, to stem the thinning of profit margins. But the fast pace of evolution in the CD-ROM business caught Creative off guard, leaving the company earlier this year with an excess of outdated 4x and 6x CD-ROM drives.
Prices for its new 8x models, introduced just months
ago, have already slumped from $130 to $70. Partly for this reason, the company is expected to post a significant loss in the quarter ending June 30.