Aug. 8 (Bloomberg) -- Creative Technology Ltd., which entered the digital music player market in 1999, posted a wider fourth-quarter loss because of competition from Apple Inc.'s iPod and Microsoft Corp.'s Zune. The shares fell to an 11-year low.

The net loss in the three months ended June 30 swelled to $19.3 million, or 23 cents a share, from $12.7 million, or 15 cents, a year earlier, the Singapore-based company said in a statement today. Sales fell 28 percent to $165.2 million.

The loss is Creative's fifth in six quarters as Chief Executive Officer Sim Wong Hoo shut unprofitable units and farmed out production to bolster earnings. Creative, the maker of Zen players and X-Fi sound cards, reiterated today it will return to profit by year-end with new products to offset the iPod, which has sold 110 million units since being introduced in 2001.

``The sector has always been marked by intense competition and Microsoft is not even the biggest or fiercest competitor,'' said Patrick Yau, a Singapore-based analyst at Macquarie Securities, who rates Creative ``underperform.'' ``What Creative needs to do is to bring down expenses.''

Shares of Creative fell 2.2 percent to S$6.60 at the 5:05 p.m. close in Singapore, the lowest since September 1996. The stock has lost 35 percent this year, the worst performer on Singapore's benchmark Straits Times Index, which gained 14 percent in the same period.

The fourth-quarter loss included $2.4 million in restructuring expenses, the company said, without giving details. Operating expenses fell to $51.3 million in the quarter from $58.4 million a year earlier.

`Biting the Bullet'

``They're biting the bullet and taking the pain,'' said Carey Wong, an analyst at OCBC Investment Research. Wong, who spoke before the earnings release, and had a ``buy'' rating on Creative. The brokerage today suspended its coverage on Creative, citing declining interest.

Microsoft, the world's largest software maker, used price cuts to bolster sales of the Zune to challenge the iPod, Creative said. Sales in the Americas accounted for 30 percent of Creative's total revenue in the quarter ending June 30, down from 46 percent a year earlier.

Microsoft has ``dropped prices to try and clear their stocks,'' Craig McHugh, president of Creative's U.S. unit, said on a conference call today. Some U.S. retailers offered rebates of as much as 20 percent for some Creative music players to boost sales, he said.

The iPod had 68.9 percent of the U.S. market for digital music players in March, according to researcher NPD Group Inc. Sandisk Corp. held 11.2 percent, while Creative's share was 3.6 percent, followed by Microsoft with 2.5 percent.

Apple Licensing Fee

Creative posted a fiscal full-year net income of $28.2 million, compared with a net loss of $118.2 million a year earlier. The profit included a $100 million license fee from Apple to settle a patent dispute over technology used in iPods. As part of the settlement, Creative has become a supplier of accessories for the iPod.

Sales from personal digital entertainment products, including music players, accounted for 57 percent of sales in the fiscal fourth quarter, compared with 65 percent a year earlier, according to today's statement.

Sound cards made up 15 percent of revenue, compared with 13 percent a year earlier. Sales from speakers generated 18 percent of sales, from 13 percent a year earlier.

To contact the reporter on this story: Andrea Tan in Singapore at atan17@bloomberg.net

Last Updated: August 8, 2007 05:50 EDT