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A $6.6mn profit a year ago became a $31.9mn loss during the last quarter as Creative cut prices; analysts expected losses closer to $9.6mn.

Creative is the number two in the portable player market behind Apple, but one of its key strengths was the flash sector until Apple decided it wanted a slice of that pie and unveiled the iPod shuffle at the start of this year. Apple has also twice reduced iPod and iPod mini prices this year, first in February and then in June.

Chief executive Sim Wong Hoo said that some of the losses were down to mistakes the company had made as it graduated from SoundBlaster PC sound cards and audio equipment to MP3 players.

'It's more complex than our Sound Blaster days,' he said. 'We're learning all these things, we've paid the price.'

Music players now account for just over two-thirds of the company's revenue but it is recently returned to its roots with the release of two new sound cards.