UPDATE 2-Creative Q2 net jumps on Apple payment; cuts jobs

* Q2 net US$92.1 mln (includes $82 mln payment from Apple)

* Q2 revenues US$424.4 mln

* Outlook: more restructuring costs to impact Q3; expects to

be profitable before special charges

* Shares rise as much as 2.8 pct (Recasts with new dateline, call details)

By Jennifer Tan

SINGAPORE, Jan 31 (Reuters) - Creative Technology Ltd. (CREA.SI), which makes Nomad and Zen MP3 players, is to axe 300 jobs, about 6 percent of its 5,000-strong workforce, as it cuts costs to stay profitable.

Creative CREAF.O warned on Wednesday it would be hit by more restructuring charges in its fiscal third quarter as it reduces operating expenses further, but said it expects to break even before special charges.

It also expects to stay profitable for the rest of 2007. "With the strong demand we anticipate for our Zen MP3 players, and with the expectation that flash memory prices will remain at low levels, we are targeting gross margins above 20 percent and to be profitable for each of the following quarters in the 2007 calendar year, before special charges," said Craig McHugh, president of Creative Labs Inc., the firm's U.S. unit, on an analyst conference call.

Creative earned net profit of $92.1 million for the fiscal second quarter ended December, helped by a one-time licence payment from Apple Inc. (AAPL.O) to settle all patent litigation over the iPod music player.

Excluding the $82 million contribution from the settlement, net profit was $9.9 million, versus a year-earlier $8.2 million, which included an investment gain of $6.9 million.

Last August, Apple agreed to pay Creative $100 million to settle a string of lawsuits between the two firms. The settlement gives Apple a licence to use a Creative patent in its music player and other products.

Apple has over 70 percent of the U.S. market for digital music players. Besides Apple, Creative competes with South Korea's Samsung Electronics (005930.KS), which produces the Yepp players, Japan's Sony Corp. (6758.T), and South Korea's Reigncom Ltd. (060570.KQ), whose iRiver players have won good reviews.

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

Creative shares rose as much as 2.8 percent to a morning high of S$11 after its results. By 0320 GMT, the shares were up 0.9 percent at S$10.80.

October-December revenue was $424.4 million, up 8.6 percent from a year ago, boosted by the $100 million Apple payment.