Investors yesterday wiped almost £20m off the market worth of Wolfson Microelectronics after the Scottish maker of iPod chips revealed a drop in fourth-quarter sales because of a lack of must-have gadgets on the market over the Christmas period.
Investors yesterday wiped almost £20m off the market worth of Wolfson Microelectronics after the Scottish maker of iPod chips revealed a drop in fourth-quarter sales because of a lack of must-have gadgets on the market over the Christmas period.
The Edinburgh-based company, which also makes chips for Sony PlayStations, Microsoft's XBox and a raft of other electronics goods, further warned seasonality would hit its first quarter figures.
Wolfson shares yesterday plunged to their lowest point in more than a year, although they climbed back over the course of the day to close down 5.8%, or 17.25p, at 280p, valuing the company at £328.1m.
Shares in Wolfson have halved in the last eight months as demand for mobile phones, digital cameras and MP3 players has waned.
Wolfson's fourth quarter sales fell to $52m, compared with $61.3m a year ago.
With electronics retailers bemoaning the lack of exciting new gadgets over Christmas, chip firms have seen demand fall off as retailers try and shift the mountain of older portable music players, flat-screen TVs and mobile devices from their stockrooms.
Nonetheless, David Milne, the group's departing chief executive and founder, said the stock glut, which has been dragging on sales, was now showing signs of clearing and chip sales would pick up again as new products begin to capture the imagination of tech- savvy shoppers again.
"Throughout the chain, there is inventory that has to be burnt off and all the evidence shows it will happen in Q1," said Milne, who is scheduled to step down on March 1.
"We are flagging that it will continue into Q2 before we get a strong ramp up."
Wolfson's chips are primarily used for tasks such as converting digital data into analogue signals for speakers.
They are key components of the fast-growing number of portable listening and communications devices, such as iPod music players and multimedia mobile phones.
Milne also said he expects the company to clinch a new design win with a top-tier handset maker this year.
"We continue to work to get design wins with other tier one manufacturers we are not supplying at present," Milne said.
"We would have disappointed if we had not made significant progress over 2007."
Wolfson is also widely expected to supply its audio and video chips for Apple's much-hyped iPhone, putting the Scottish technology star in line for a roughly £5m-plus boost over the next two years.
The iPhone, a touch-screen-controlled mobile phone device that plays music, surfs the internet, delivers voicemail and e-mail, stores photographs and is expected to be regarded as "wicked cool", was unveiled last month after more than two years and millions of dollars of top-secret development.
Meanwhile, Wolfson saw its pre-tax profits rise to $44.6m in 2006 calendar year, compared with $38.7m last time.
Annual revenues climbed by 26% to £204.1m compared with £166.6m in 2005 Milne added: "In spite of challenging market conditions in Q4, we are pleased to report strong growth in 2006 as the company's high-performance products gain share in new and existing markets.
"For the year as a whole, we are well positioned to benefit from our expanding product portfolio and a strong design win position, particularly in portable devices.
"As a result, the company looks forward to delivering further growth in 2007."
