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Increased Gross Margin Percentage and Year-Over-Year EPS Growth

Creative exceeded revenue expectations for the second quarter, reporting sales of $250.9 million for the period. The Company had forecasted a lower revenue base of $225 to $240 million for the quarter -- a reduction from the previous year's Q2 revenues of $427 million -- as a result of Creative's planned de-emphasis of certain product categories and the difficult economic climate.

Earnings per share were well ahead of expectations at $0.36. This was an increase from the previous year's Q2 earnings per share of $0.33.

Net income for the second quarter was $26.3 million compared to $26.5 million for the same quarter last year. Second quarter fiscal 2002 net income includes investment gains of $0.7 million, compared to gains of $0.5 million for the same quarter of the previous year.

Sales for the first six months of fiscal year 2002 were $433.2 million, compared to $731.4 million for the same period last year. Net income for the first six months of fiscal 2002 was $13.5 million or $0.18 per share, compared to net income of $44.1 million or $0.53 per share for the same period last year. Net income for the first six months of fiscal 2002 includes investment losses of $15.7 million or $0.21 per share. Net income for the first six months of the previous year includes investment gains of $2.9 million or $0.03 per share.

``We posted solid results for the holiday quarter,'' said Craig McHugh, president of Creative Labs, Inc. ``Although the quarter started slowly and consumer holiday buying came very late this year, we were able to finish strong, particularly in the European region, and beat our revenue target for the period. The focus on our core audio product areas enabled us to increase our gross margin to 33.3%. This improved gross margin percentage, the higher-than-expected revenue base, and our ongoing efforts to keep operating expenses down were the major factors in surpassing our goal of $0.25 EPS -- growing EPS more than nine percent year-over-year to $0.36.''

``As I stated last quarter, I believe the Sound Blaster® Audigy(TM) platform will establish an entirely new standard for audio entertainment, and it sets the stage for a whole new family of our future audio products,'' said Sim Wong Hoo, Chairman and CEO of Creative. ``We made great progress in establishing this standard, with a rapid adoption of the Sound Blaster Audigy in retail. The Sound Blaster Audigy continued its momentum of positive press from last quarter and received even more outstanding reviews, including prestigious 'Editor's Choice' awards from PC Magazine, Computer Shopper magazine and Computer Games magazine.''

``We now plan to build upon the excitement of the Sound Blaster Audigy with the introduction of the Sound Blaster Extigy(TM), the first external Sound Blaster,'' continued Sim. ``We announced the Sound Blaster Extigy at this year's Consumer Electronics Show in Las Vegas, where CNET and ZDNET named it one of their 'Top Picks of CES.' The Sound Blaster Extigy extends our leadership in PC audio by delivering the stunning digital 24-bit, 96kHZ, 100dbSNR audio clarity of the Sound Blaster Audigy for the first time outside the PC. With the Sound Blaster Extigy's easy-to-use and ubiquitous USB connection, we can now offer super high-quality multi-channel audio to two new markets we've never been able to address before: notebook users and desktop users who don't want to install an add-in card.''

During the quarter, Creative continued its share buy-back program, repurchasing approximately 1.2 million shares at a cost of $8.2 million. Subject to market price and conditions and securities law restrictions, the company plans to continue its buyback program.

    Awards and Recent Highlights
    * The Sound Blaster Extigy was announced, offering notebook PC, desktop PC
      and computer gaming console users the same high fidelity audio available
      with the Sound Blaster Audigy.  The Sound Blaster Extigy was featured in
      the "Top Picks of CES" by CNET and ZDNET.
    * The Sound Blaster Audigy continued to garner top editorial awards,
      including:
      -- The "Editor's Choice" award in PC Magazine, January, 2002;
      -- The "Editor's Choice" award in Computer Games magazine, December,
         2001;
      -- The "Gear of the Year" award in Maximum PC magazine, December, 2001;
      -- The "Editor's Choice" award in globetechnology.com, Canada;
      -- The "Product of the Year" award from Users magazine, Argentina.

    * The Sound Blaster Live! 5.1 won "Info Award 2001" in InfoExame, Brazil.
    * The NOMAD Jukebox 20GB won "Best of 2001" from PC Magazine.
    * The NOMAD Jukebox 6GB won the "Best of 2001" award from E-Gear.
    * The NOMAD II MG won:
      -- The "Gear of the Year" award from Maximum PC magazine, December,
         2001;
      -- The "Product of the Year" award from Users magazine, Argentina.

    * The PC-CAM 600 megapixel camera was announced, offering superior image
      quality and versatile dual-cam functionality to PC users.

            Listen to Creative's Q2 FY02 Analyst Conference Call:

   Creative's Investor Relations Web site: http:/www.creative.com/investor
 Link to Q2 earnings analyst call live at 3:00 p.m. PST January 23, 2002 via
                 Creative's Web site or call 1-800-774-8574.
 Replay available from shortly after end of conference call until 1/30/02 via
          the web site or at 1-800-633-8284, reservation #20230727.

About Creative

Creative is the worldwide leader in digital entertainment products for users of personal computers and the Internet. Famous for its Sound Blaster® sound cards and for launching the multimedia revolution, Creative is now driving digital entertainment on the PC platform with products like its highly acclaimed NOMAD® Jukebox. Creative's innovative hardware, proprietary technology, applications and services leverage the Internet, enabling consumers to experience high-quality digital entertainment -- anytime, anywhere.

NOTE: Sound Blaster is a registered trademark and Live!, Audigy and Extigy are trademarks of Creative Technology Ltd. in the United States and other countries. NOMAD is a registered trademark of Aonix and is used by Creative Technology Ltd. and/or its affiliates under license in the United States and/or other countries. All other brand and product names are either trademarks or registered trademarks of their respective holder and are hereby recognized as such.

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 corresponding conference call, the matters set forth herein and in the call (including all 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 corresponding conference call are cautioned not to place undue emphasis or reliance on these forward-looking statements which reflect management's analysis, judgement, belief or expectation only as of the date of this press release and corresponding conference call. 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: possible disruption in commercial activities, occasioned by terrorist activity and armed conflict which may, among other things, result in delays in, or damage to, the manufacture, shipment, or storage of Creative's products, or customers delaying or canceling purchasing decisions as a result of increased broad economic and safety concerns; the cost-cutting measures Creative has taken and plans to take may be insufficient or may fail to achieve the anticipated cost reduction benefits; further deterioration of the global stock market and overall reduction in demand for computer systems, peripherals and related products in general, and Creative's products specifically; increased exposure to excess and obsolete inventory; higher overhead costs as a percentage of revenue; reduction or cancellation of sales orders for Creative products or other unexpected or unplanned events that could cause Creative to miss its revenue guidance, operating expense projections or negatively impact its margins; the timely development, ramp, shipment, delivery, and market acceptance of new products, including Creative's next generation of audio and personal digital entertainment appliances; the increasing proliferation of sound functionality in new products from new and existing competitors and at the application software, chip and operating system levels; reductions in the market value of products sold by Creative, including increases in inventory or declines in demand or prices for storage devices, digital entertainment appliances, board and chip- level products, software, speakers, and other products; reductions in revenues and gross margins due to numerous factors, including declines in average selling prices of Creative's products, failure to reduce costs, divestments of low margin product lines or businesses, and increased inventories and pricing pressure from competitors; the short product cycles that characterize most of Creative's products; further fluctuations in the value and liquidity of Creative's investee companies, including any losses that may result from the increased volatility for technology stocks and potential price reductions of carrying values of our investee companies; 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 current and future currency fluctuations, including the exchange rate of the Euro; labor shortages or work stoppages; credit shortages; effects of restricted fuel availability and rising costs of fuel; Creative's reliance on sole sources for many of its chips and other key components; component shortages which may impact Creative's ability to meet customer demand; Creative's ability to protect its proprietary rights; the volatility of share prices for companies in Creative's industry and the effect of those prices or other events beyond Creative's control, including acts of war, terrorist attacks, or adverse changes in general economic conditions; and other risk factors described herein and in Creative's other filings with the Securities and Exchange Commission over the past twelve months, including without limitation, Creative's Form 20-F dated October 10, 2001. Creative urges you to consider all such factors. Creative 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.

                             CREATIVE TECHNOLOGY LTD.
                           CONSOLIDATED BALANCE SHEETS
                                  ( In US$' 000)

                                                  (Unaudited)
                                                  December 31,      June 30,
                                                      2001            2001
    ASSETS

    Current Assets:
    Cash and cash equivalents                       $178,261       $168,157
    Marketable securities                              2,439          3,581
    Accounts receivable, net                         105,263         94,445
    Inventory                                        121,213        155,550
    Other assets and prepaids                         20,168         19,476

    Total current assets                             427,344        441,209

    Property and equipment, net                      105,187        110,535
    Investments                                       93,856        118,330
    Other non-current assets                           3,638          3,906

    Total Assets                                    $630,025       $673,980

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current Liabilities:
    Accounts payable                                 $88,237        $88,691
    Accrued liabilities                               81,898         98,135
    Income taxes payable                              44,806         47,601
    Other current liabilities                          3,520          3,602

    Total current liabilities                        218,461        238,029

    Long term obligations                             20,602         22,560
    Minority interest in subsidiaries                 32,388         31,505
    Total shareholders' equity                       358,574        381,886

    Total Liabilities and Shareholders' Equity      $630,025       $673,980


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

                              Three months ended          Six months ended
                                  December 31,              December 31,
                              2001          2000         2001          2000

    Sales, net            $250,938      $427,026     $433,192      $731,394

    Cost of goods sold     167,353       313,069      291,882       524,403


    Gross profit            83,585       113,957      141,310       206,991

    Operating expenses:

      Selling, general and
       administrative       46,575        70,064       91,814       128,166

      Research and
       development           9,480        15,115       19,088        30,211


    Total operating
     expenses               56,055        85,179      110,902       158,377

    Operating income        27,530        28,778       30,408        48,614

    Gain (Loss) from
     investments, net          728           507      (15,697)        2,858

    Interest income and
     other, net              1,291         2,055        2,715         1,143


    Income before income
     taxes and minority
     interest               29,549        31,340       17,426        52,615

    Provision for
     income taxes           (2,753)       (4,624)      (2,983)       (8,409)

    Minority interest
     in Income                (489)         (241)        (984)         (109)


    Net income             $26,307       $26,475      $13,459       $44,097

    Basic earnings
     per share:              $0.36         $0.34        $0.18         $0.56

    Weighted average
     ordinary shares
     outstanding ('000)     72,366        78,964       73,110        79,406

    Diluted earnings
     per share:              $0.36         $0.33        $0.18         $0.53

    Weighted average
     ordinary shares        73,664        81,180       73,895        82,666
     and equivalents
     outstanding ('000)

SOURCE: Creative Technology Ltd.