Creative, the leading challenger to the iPod in digital music players, reported its second consecutive quarterly loss as it battles strong competition from rivals and mobile phones with built-in music players.

The Singaporean company said it lost $12.7 million during the three months ended June 30, its fiscal fourth quarter, as its sales plunged to $230.9 million from $305.4 million in the same quarter a year ago.

The results brought its full year loss to $118.2 million, while its sales fell to $1.13 billion. In fiscal 2005, Creative reported a net profit of $588,000 on sales of $1.23 billion.

Still, Creative vowed to return to profitability by the end of 2006, and promised continued profitability thereafter.

Some analysts, however, were skeptical of its vow. Digital music players and accessories accounted for 65 percent of Creative's revenue in the quarter, and that's where competition is toughest.

And it's not just Apple Computer Inc. the company has to worry about. Major handset makers, including Nokia, Motorola, and Sony Ericsson have all launched popular mobile phones that offer music and even video player functions.

Now that mobile phone companies have the digital music player market in their sights and on their handsets, users may opt for the convenience of listening to music on their mobile phones instead of carrying around multiple devices, analysts say.