Defiant Wolfson presses on with flotation

Published on Sunday 12 October 2003 01:00

WOLFSON Microelectronics will tomorrow issue a strongly worded rebuttal to claims made by its litigious US rival Cirrus Logic that it infringed the company’s patents, and will state its determination to float as planned on Friday.

It is understood that Wolfson’s board has discussed the likelihood of retaliating by counter-suing Cirrus if the allegations made by the US firm damage its plans to list on the stock exchange.

A source close to the company said: "It is something that has been looked at."

The board is determined to press ahead with the 213m flotation on Friday, despite the US legal wrangle, although there could be a slight delay.

The source said: "The more Wolfson’s guys look at Cirrus’s case, the happier they get. It looks like the IPO [initial public offering] will go ahead as planned, although a slight delay cannot be ruled out."

David Milne, chief executive of the Edinburgh-based Wolfson, remained in Europe on Friday to continue the company’s book-building exercise despite the furore that had broken in the US.

Jim Reid, Wolfson’s technical director who was accompanying Milne, flew back to Edinburgh on Friday to examine Cirrus’s claims.

One large City broker said last night that institutional backers of the float were nervous, but that Wolfson was in a confident mood.

He said: "Institutions will need reassuring, but there is a groundswell of goodwill in the City for this thing to go through. Investment banks need new fees, and if the Wolfson IPO is a success then lots more tech firms could follow them on to the market."

Cirrus alleges that Wolfson has infringed two of its US patents and wants full compensation for lost business plus "treble damages in view of the reckless, willful and deliberate nature of the defendant’s infringements".

A spokesman for Cirrus said: "We are taking this action to protect our status as market leader."

He declined to comment on the timing of the legal challenge.

In 2002, Wolfson posted a turnover of 20.2m, of which 2.4m came from the Americas. A lawsuit could drag on for more than a year, take up extensive management time and deter investors. One possible settlement would involve Wolfson agreeing a cross-licensing agreement with Cirrus.

Cirrus is an arch-rival of Wolfson for mixed signal chips which convert audio from digital into analogue and back.

Wolfson supplies the chips in Microsoft’s Xbox consoles while Cirrus makes the same type for Sony’s PlayStation 2.

Cirrus has seen its business eroded by hungry rivals and has suffered a lacklustre last six months. A recent note by American Technology Research predicted the company would make a loss in the next quarter.

The grey market in Wolfson shares remained buoyant despite Cirrus’s intervention and well above the company’s price range for flotation of between 150p and 210p per share.

Angus Campbell, a trader at spread-betting firm Financial Spreads, said: "The LSE itself is quite excited, as it is the first technology float for 17 months and we are quite bullish ourselves. We believe that the [Wolfson] stock will close between 285p and 295p next Friday."

Stuart Lunn, an analyst at E-Trade Securities, added: "The global economy finally appears to be picking up and technology spend is rising on the back of the resulting improvement in business confidence.

"The current market sentiment is a better backdrop for a technology IPO than at any time in the last three years."