Wed May 17, 2006 12:54am ET

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Kim Eng Securities analyst Gregory Yap said Apple was unlikely to give up its lucrative iPod business without a long, expensive fight -- time and money that loss-making Creative cannot afford to waste.

``Creative`s suit against Apple may bring relief to the share price in the short term, but in the long term, it will distract and divert management attention and company resources when both are needed to turn around the ailing business,`` he said.

Earlier this month, Creative swung to a larger-than-expected quarterly net loss of $114.3 million in its fiscal third quarter ended March, compared with a $15.9 million profit a year ago, after a plunge in music player prices squeezed margins and forced it to write down its inventory.

But Creative said it aimed to return to profit in the second half of 2006 by focusing on high-margin products and cost cuts.

While Creative struggles, market leader Apple last month posted a forecast-beating 41 percent jump in quarterly profit and said iPod sales topped 8.5 million.

According to research firm International Data Corp., Creative was ranked second after Apple in the global flash memory-based MP3 player market in 2005, with a 4.7 percent share against Apple`s 16.9 percent, and number two in the hard-drive music player market with a 15.8 percent share against Apple`s 72.2 percent.

Creative also competes with South Korea`s Samsung Electronics (005930.KS: Quote, Profile, Research), which produces the Yepp players, Japan`s Sony Corp. (6758.T: Quote, Profile, Research), and South Korea`s Reigncom Ltd. (060570.KQ: Quote, Profile, Research), whose iRiver players have won good reviews.

Mobile handset makers Nokia (NOK1V.HE: Quote, Profile, Research) and Motorola (MOT.N: Quote, Profile, Research) are also adding MP3 functions to high-end music phones.

Creative is expected to post a net loss of $116.6 million for the full year ending June 30, according to the average forecast from 10 analysts polled by Reuters Estimates.