Creative has been making MP3 players since 2000

Reporting its results for the three months to the end of September, it made a net profit of $691,000 (�389,000) as profit margins were squeezed.

The figure was down from $4.8m for the same period a year ago.

Singapore-based Creative would have made a net loss of $9.3m were it not for a one-off $10m investment gain.

Price pressure

Revenues for the quarter rose 33% year-on-year to $280.2m, as sales of its digital music player doubled.

We are not going to go aggressively on market share - we need to hold back our appetite and sell at a higher price Creative boss Sim Wong Hoo

However, profits remained low in the face of fierce price competition in a crowded marketplace which is dominated by Apple's iPod.

Yet Creative's results were an improvement on the net loss of $31.9m in the fourth quarter to the end of June.

The company said it had trimmed the losses due to resisting market pressure to further cut prices, and therefore its profit margins improved.

'No discounts'

Creative's chairman and chief executive Sim Wong Hoo said this non-discount policy would continue into 2006, even if it meant losing market share.

"We are focusing on profitability," he said.

"We are not going to go aggressively on market share - we need to hold back our appetite and sell at a higher price."

Mr Sim said Creative still had the opportunity to grow because a number of Chinese firms had left the digital music player market.