The struggling Creative Technology group is back in decline after Microsoft denied that it was buying into the company. Facing a share decline this year of 50% and a massive downturn in profits the company is evaluating its future.

Microsoft will not buy into the struggling Creative Technology group according to a Microsoft spokesperson. Microsoft claims that will continue to work with Creative in developing new products as ‘we are the platform provider and Creative provides music devices,’ said Charlene Chian, the company’s public relations manager for Asia Pacific.

In early July, Microsoft Chairman Bill Gates said at an industry briefing that the US software giant would work with vendors like Creative to produce better-designed MP3 players to help gain market share on leader Apple Computer.

That fuelled speculation that Microsoft would invest in Creative. And within days, Creative shares jumped by more than 20%. Some market watchers even predicted that the stock had ended its six-month slide.
Creative shares have fallen by about 49% since the start of the year and are trading at about 25 times their estimated 2005 earnings.

Many people say that Creative are not in a position to compete in the MP3 market and that all they are doing is dressing up old MP3 technology in an effort to take on the success of the iPod. Now with companies like Samsung and Toshiba tipping millions into MP3 marketing Creative are set to come under further pressure.

A Citgroup spokesperson said “Creative Technology is struggling and resellers are starting to turn to a new generation of MP3 players from a variety of other vendors. All that Creative has done this year is back peddling in an effort to compete on price. They don’t have deep pockets and investors are recognising this. The issue for them going forward is that the MP3 and Video Player battle is set to suck cash and this could impact on other parts of their business”.

NIck Angelluci Marketing Manager for Creative in Australia said “We are defiantly under pressure on margins. Everyone is coming after us from Olympus to Samsung to Toshiba. The future for us in the video player market as in the MP3 market  everyone is screaming for margin which is not there”.