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Strong Operating Income Contributes 21 Cents per Share Resulting From Higher Than Expected Revenues and Strong Margins, With 80 Cents per Share From Investments

Sales for the third quarter were higher than expected at $330.0 million, driven by strong demand for audio systems, including speakers. This compares to $313.7 million for the same quarter last year. Net income was $88.3 million dollars and earnings per share were $1.01 including investment gains of $0.80 per share. This compares to net income of $18.3 million and earnings per share of $0.20 for the same quarter last year.

Sales for the first nine months of fiscal 2000 were $1.036 billion, compared to $1.021 billion for the same period last year. Net income for the first nine months of fiscal 2000, including investment gains of $84.2 million, was $143.6 million or $1.66 per share. This compares to net income, including investment gains of $2.5 million, of $100.3 million or $1.07 per share for the same period last year.

``Our revenues, which were a record for fiscal Q3, reflect that Creative is performing strongly in all areas -- products, regions, and business units,'' said Craig McHugh, president of Creative Labs, Inc. ``Audio systems, including speakers, accounted for half of our total revenues, posting fifty percent year-over-year gains for the category in the quarter, which helped drive our gross margin to its highest level in eight quarters. Comparative operating results were particularly strong considering that this quarter's operating expenses included $11 million for our Internet initiatives.''

``Creative's vision of building a vibrant, multi-faceted, clicks-and-mortar company around a solid and profitable core is now yielding tangible results,'' said Sim Wong Hoo, Chairman and CEO of Creative Technology Ltd. ``And being able to fully execute on our Internet initiatives and venture strategies, while achieving record revenues from our traditional businesses, including PDE Internet appliances, validates this vision.

``Since our last call, our board of directors approved doubling our value-added venture fund to a total of $200 million and, during this quarter, we invested an additional $86 million, bringing the total investment by the fund to over $150 million with holdings in over 30 public and private investee companies. Our strategy of investing in broadband and communications, PDE, contract manufacturing, and Internet companies has provided a diverse portfolio which has weathered the recent turbulence in the financial markets fairly well.''

Investee Companies

Investee companies in which Creative has a position of over 5% include: Adroit Innovations, Behavioral Technology Computer, Catcha.com, Chaincast, Embedded Solutions, Eureka Technologies, GigaPixel (which has entered into a merger agreement with 3DFX), Innomedia, Lafe Technology, MediaRing.com, Mindmaker, Pixaround.com, Planetweb, Silicon Illusions, and 3D Labs.

Investee companies in which Creative has a position of under 5% include: Bex.com, Centillium Technology, EMusic.com, GRIC Communications, HearMe (through its acquisition of AudioTalk), MyTeam.com, Coresma (formerly NetGame), NVIDIA, Sina.com, and TeraLogic.

In addition to the companies listed above, there are other companies in which Creative has invested that are not disclosed at this time due to competitive, strategic, or other reasons.

During the quarter, Creative continued its stock buy-back program, purchasing 379,000 shares at a cost of $6.6 million. Subject to market price and conditions and securities law restrictions, the company plans to continue its buyback program during the fiscal fourth quarter.

Creative continues to pursue private and public financing options for certain of the company's subsidiaries in both U.S. and foreign markets, including a current plan to file for an IPO for one of the subsidiary companies. However, in light of the uncertain market for Internet-related IPO's, another subsidiary, Hifi.com, decided to temporarily hold off on plans for a public offering, although the company currently intends to reinstate the process pending more favorable market conditions. The decision to pursue any particular offering will depend upon a variety of factors, including, among other things, market conditions. For filings in the United States, non-U.S. companies are permitted, at their option, to file on a confidential basis with the Securities and Exchange Commission.

Recent Highlights

• Creative's NOMAD II portable digital audio player began shipping to selected retail and e-tail outlets in the United States and has been described by the Chicago Tribune as ``the Ferrari of MP3 players.''
• Creative launched LAVA! Producer, the first authoring tool from LAVA.com, which enables artists to construct infinitely unique and stunning 3D Music Videos to accompany their songs without the need for software programming skills.
• Creative unveiled the Creative Blasterkey(TM) MP3, an exciting, low-cost MP3 keyboard with seamless interface to the Internet.
• Hifi.com, one of the Internet's leading consumer electronics shopping resources, was named one of PC Magazine's Top 100 Web sites, and also launched HerHifi.com, the first site to merge women's lifestyle and entertainment needs, generating broad press coverage.
• Creative announced that Hewlett-Packard Company selected the Creative Sound Blaster® Live!(TM) and the 3D Blaster® Annihilator Pro with DDR memory for the HP Pavilion 1G PC.

For more information on these and other announcements please visit the Creative press room at: www.creative.com/pressroom/ .

Awards and Recommendations

Creative's products continued to receive top ratings and recommendations from both traditional and on-line media:

• Sound Blaster Live! Platinum garnered ``Best of Show'' at MacWorld Expo 2000 and ``Best Buy'' from Computer Shopper. Sound Blaster Live! MP3+ and X-Gamer received an ``Editor's Choice'' from PC Gamer and the Sound Blaster Live! MP3+ received a ``9 out of 10'' from Maximum PC.
• 3D Blaster Annihilator Pro received an ``Editor's Choice'' award from PC Gamer and a ``5 out of 5'' from Incite PC Gaming.
• Video Blaster WebCam Go received ``4 out of 5 stars'' from PC Magazine.
• NOMAD II was honored with ``5 out of 5 Stars'' from MP3.com and garnered an ``Editor's Choice'' award from c/net. NOMAD II was also awarded ``4 out of 5'' from PC Magazine and was placed on the ``A-list'' by PC Computing.

Safe Harbor for Forward-Looking Statements Under The Private Securities Litigation Reform Act of 1995:

Except for the historical information contained herein and in the accompanying conference call, the matters set forth herein and in the call (including any references to future financial performance, products and marketing efforts) are forward-looking statements within the meaning of the ``safe harbor'' provisions of The Private Securities Litigation Reform Act of 1995. Readers of this press release and listeners to the conference call are cautioned not to place undue emphasis or reliance on these forward-looking statements which reflect management's analysis, judgment, belief or expectation only as of the date hereof. These forward-looking statements are subject to certain assumptions, risks and uncertainties that could cause actual results to differ materially from those set forth or implied in the forward looking statements. Such assumptions, risks and uncertainties include, among others: potential fluctuations in the value and liquidity of Creative's investee companies; the timing or completion of a subsidiary IPO and/or the valuation that would apply in the event of a consummation of a subsidiary IPO; potential fluctuations in quarterly results due to the seasonality of Creative's business and the difficulty of projecting such fluctuations; the vulnerability of certain markets to currency fluctuations and credit shortages; reductions in the market value of products sold by Creative, including increases in supply or declines in demand or prices for optical storage devices, board and chip-level products, and software products; the short product cycles that characterize most of Creative's products; the increasing proliferation of sound functionality in new products from new and existing competitors and at the application software, chip and operating system levels; Creative's reliance on sole sources for many of its chips and other key components; the timely development, ramp, delivery and market acceptance of new products, including Creative's next generation audio, graphics accelerator, CD-ROM and DVD drives, communications and personal digital entertainment products; the volatility of share prices for companies in Creative's industry and the effect of those prices or other events beyond Creative's control; and other risk factors described in Creative's filings with the Securities and Exchange Commission over the past twelve months. The company undertakes no obligation to publicly release the results of any revisions to such forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

About Creative

Creative Technology Ltd., a global leader in PC entertainment products, expands the power of the personal computer with Personal Digital Entertainment (PDE) solutions, comprising desktop products, Internet appliances and Internet applications and services. Leveraging in-house technology, partnerships and value-added investments, Creative markets its solutions to consumers and system integrators, with worldwide distribution through traditional marketing channels, OEMs and the Internet. Creative's mission is to expand upon its leadership role in PDE, utilizing innovative technology, broadband and leading-edge designs for technically progressive consumers and entertainment enthusiasts. Explore PDE at www.creative.com.

NOTE: Sound Blaster and Blaster are registered trademarks and Environmental Audio, PC-DVD Encore, DeskTop Theater, 3D Blaster and Graphics Blaster are trademarks of Creative Technology Ltd. Cambridge SoundWorks is a registered trademark of Cambridge SoundWorks, Inc. All other products mentioned herein are trademarks of their respective owners and are hereby recognized as such. Nomad is a registered trademark of Aonix and is used by Creative Technology Ltd. and/or its affiliates under license.

                             CREATIVE TECHNOLOGY LTD.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                       (In US$' 000, except per share data)
                                   (Unaudited)

                              Three months ended        Nine months ended
                                    March 31,               March, 31
                                2000        1999         2000       1999

    Sales, net               $330,022     $313,715  $1,035,889 $1,021,403
    Cost of goods sold        228,444      232,964     734,418    731,428
    Gross profit              101,578       80,751     301,471    289,975
    Operating expenses:
      Selling, general and
       administrative          64,167       51,534     194,009    161,702
      Research and
       development             16,538       11,825      43,968     33,852
    Total operating
     expenses                  80,705       63,359     237,977    195,554
    Operating income           20,873       17,392      63,494     94,421
    Gain from investments,
     net                       70,632          239      84,232      2,486
    Interest income and
     other, net                 (542)        2,669       4,232     12,133
    Income before income
     taxes and minority
     interest                  90,963       20,300     151,958    109,040
    Provision for
     income taxes             (2,327)      (1,624)     (7,468)    (8,617)
    Minority interest
     in income                  (317)        (425)       (881)       (77)
    Net income                $88,319      $18,251    $143,609   $100,346
    Basic earnings
     per share:                 $1.09        $0.21       $1.75      $1.10
    Average ordinary
     shares outstanding
     ('000)                    81,339       88,398      82,249     91,271
    Diluted earnings
     per share:                 $1.01        $0.20       $1.66      $1.07
    Average ordinary
     shares and equivalents
     outstanding ('000)        87,697       90,835      86,281     93,646

                             CREATIVE TECHNOLOGY LTD.
                           CONSOLIDATED BALANCE SHEETS
                       (In US$' 000, except per share data)

                                                  (Unaudited)
                                                    March 31,   June 30,
                                                      2000        1999
    ASSETS
    Current Assets:
      Cash and cash equivalents                     $283,276    $318,990
      Marketable securities                           32,263          --
      Accounts receivable, net                       133,719     130,144
      Inventory                                      179,211     148,028
      Other assets and prepaids                       23,434      12,709
        Total current assets                         651,903     609,871
    Property and equipment, net                       94,359      97,961
    Investments                                      285,590      70,305
    Other non-current assets                          15,063      27,552
                                                  $1,046,915    $805,689

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current Liabilities:
      Accounts payable                              $132,089    $101,666
      Accrued liabilities                             84,261      55,684
      Income taxes payable                            50,835      47,031
      Other current liabilities                        3,678       4,492
        Total current liabilities                    270,863     208,873
      Long term obligations                           25,655      28,642
      Minority interest in subsidiaries                8,718       7,913
      Total shareholders' equity                     741,679     560,261
                                                  $1,046,915    $805,689

SOURCE: Creative Technology Ltd.