Creative Technology's war against Apple chopped 10 per cent from its quarterly profits, analysts say.
The company has massively increased its marketing spend to take on Cupertino in its battle to retain its slice of the music player market.
Creative's second quarter sales were up 50 per cent to $375.1 million, from sales of $250.4 million in the same quarter last year. Sales for the first six months of fiscal year 2005 were $585.2 million, compared to $411.2 million for the same period last year.
Sim Wong Hoo, chairman and CEO of Creative said: "I believe we are extremely well positioned against the flash products and pricing that were recently announced by Apple, as we have superior features and broad product lines that span the entire category. I also believe that Apple's entry into the flash market will create more awareness in the flash market segment, and we are well positioned to become a big beneficiary of this expanding market.
"We are going to continue our aggressive marketing and improve our already strong market position, and we are targeting to grow revenue substantially in the third quarter on a year-over-year basis by 50 per cent."
However, describing the increasingly competitive market for such devices, DBS Vickers Securities analyst Don See told Reuters: "We do not believe Creative has the edge or resources to maintain its market share."
"With the two million units sold in the quarter, we now have sold over five million MP3 players," said Craig McHugh, president of Creative Labs
Creative shares fell 3.08 per cent to $16.369.