Shares in Creative Technologies plummeted today after the company said lower flash memory prices will likely push it to an operating loss in its fiscal third quarter. The news sent the company's stock into a tailspin, dropping nearly 12 percent to $6.70 in midday trading on the Nasdaq exchange.

For the quarter that ended March 31, Creative, whose Nomad and Zen MP3 players compete with Apple's iPod line, said it is projecting an operating loss of $55 million to $65 million on revenue ranging from $220 million to $230 million.

The estimated results include a $25 million impairment charge and restructuring costs of $9 million.

Those numbers represented sharp drops from Creative's second quarter, in which it tallied a profit of $8.2 million, or 10 cents per share, on sales of $390.8 million.

"The operating loss is primarily attributable to a drop in flash memory prices in the quarter," the company said in a statement. "The sharp drop had a significant negative impact on sales in March and resulted in lower revenues and gross margins and inventory write-downs in the period."

The news comes amid heightened competition for market share among the companies hoping to put a dent in iPod's huge lead in the portable music space.

Creative's Zen Vision:M has been critically praised since its release late last year, and Creative boss Sim Wong Hoo seemed ready for a showdown with Apple last December, telling BBC News that his firm planned to "pursue aggressively" a US patent the company garnered last August on a system used to navigate music on digital players.

"We are focused on the technology. This is the key difference between a technology company and a branding company," Sim said at the time.

He also took a shot at Apple's use of its proprietary Fair Play digital rights management (DRM) technology, which restricts transfers of song files to non-Apple devices.

"We offer people the freedom to choose their video in a variety of different formats, and to get subscription music or download tracks from a number of different sites to their player," Sim said.