Why did you guys choose NVIDIA over 3D Labs and what will happen with your relationship with 3D Labs in the near future ?

Over the past year we have built a good working relationship with NVIDIA and have a very successful retail business (we have 57% retail market share in the UK for example). During this period NVIDIA has gained a better understanding of how the retail channel in Europe works and as a result are a good partnership for Creative. NVIDIA's product line-up is extremely compelling for the foreseeable future and continuing to work with them allows us to offer our retail partners a complete product line-up and our end-users a great gaming experience.

At the same time 3D Labs will focus on the workstation market where we see great growth potential for them as they move from the ultra high-end ($2,000+) into the mainstream with the Wildcat VP range. 3D Labs dominance at the highest end of the market is unquestionable and their newly expanded product line-up will guarantee their future success across the workstation market.

I have to ask this as it has been asked to me many times. Why is Creative Labs separated into so many divisions and thus has different product lines ? Creative Asia for example right now is selling ATi Radeon 9700 Pro while European costumers simply can not understand why they can't buy it while Asia can.

I think that the answer to this is a combination of many factors both commercial and cultural and is in no way restricted to either Creative or the PC industry for that matter. Specifically in the graphics market there are barriers to doing business here in Europe that most smaller companies find difficult to overcome. Firstly you have the decentralised nature of the market. In the US you have buyers for the huge retail chains like CompUSA, Best Buy etc. so one successful meeting can get you a retail presence across the USA. Contrast that to Europe where each country has its own retailers (and in some countries there are no big chains buts lots of smaller dealers) and you quickly see that you need a big sales force to cover all of these markets.

Next up is the localisation, translation and localised testing. At Creative we test all cards on all OS plus all languages so each card is tested on 98, 2000, ME, XP & NT for each of 13 languages … that’s 65 platforms per card that need functionality testing & compatibility testing for every new driver release!

Now the big advantage with Creative is that we already have a huge infrastructure in place in Europe … we have 9 sales offices spread throughout Europe and are about to open our 10^th in Moscow. We have several hundred people here at the HQ in Ireland providing all essential services to our customers: tech support, RMA, operations, credit control, product development, testing, quality control etc. For my graphics business I get this structure for free as our audio, speakers, web-cams, DAP, modem and other business all play their part in paying for this set-up.

As I believe I mentioned before the graphics market is really cut-throat and margins are really, really thin. It is simply not possible to make enough money from a graphics business alone to fund a European business. I believe the recent experience of Visiontek highlights the problem ... another good example is 3Dfx who despite having 70% market share still lost money.

So Europe is a difficult market for companies to break into. Asia and the US have different dynamics. In the US the biggest problem we faced were with product returns which were incredibly high and this combined with a competitive market meant that breaking even was a struggle .. again Visiontek illustrate the problem well they had huge market share in the US but simply couldn't turn a profit. Finally there is the Asian market which is the most fiercely price competitive of all.  Creative Asia have struggled to be profitable with NVIDIA based graphics cards due to a lack of support from NVIDIA. I must confess that I have never understood the reason behind this but the fact remains that ATI simply offer them a better deal.