Wolfson bullish as sales rise 15% in Q1

Published on Thursday 24 April 2008 21:39

WOLFSON Microelectronics set about restoring its credibility yesterday, insisting it was still on track to grow this year despite losing key business from Apple.

Shares in the Edinburgh-based group, which designs and manufactures audio chips for devices such as MP3 players, fell close to an all-time low last month after the firm admitted to the loss of a major contract from a "tier-one customer", understood to be Apple, which has designed the company out of its next generation of iPod products. The company is also understood to provide audio chips for Microsoft's XBox.

Yesterday, Wolfson reported sales of $46.4 million (23.5m) in the first quarter of 2008. Overall this was 15 per cent above the start of 2007, with sales outside portable media products, its largest sector, up 30 per cent. Chief executive Dave Shrigley said the company was less reliant on a single customer than in the past.

"We had a broad base of growth outside the portable media player segment, which is pretty validating of our strategy," he said.

Wolfson said it is on track to report sales of $51m-$56m in Q2, at least 3 per cent higher than last year, and would grow revenue over the whole of 2008. This was despite a slowdown in demand for portable navigation devices and the drop in revenue from Apple, expected to hit in the second half of 2008.

Shrigley said it was unclear why the group lost the business from its largest customer – Wolfson is unable officially to name the company as Apple – other than the likelihood that the client had elected to source parts from more than one company.

"The truth is that the decisions happen behind their closed doors and we really don't have the details," added Shrigley. "We're clear that we had a very competitive solution, both in terms of our ultra-low-power codec (chip] and pricing."

He was confident the company would still be a customer in 12 months, and it continues to collaborate on other projects, but there was no guarantee.

Finance director Mark Cubitt said the company expected that sales, excluding portable media devices, would show "pretty impressive" growth in the second quarter – proving the "actuals" of the company were strong.

"It was disappointing what we announced on 27 March," Cubitt said, alluding to the Apple announcement. "But people should get a fair bit of comfort from the actuals and say that 'outside of that particular application, they're pretty strong'."

Analysts at Dresdner Kleinwort said that, while Wolfson had performed "reasonably well" in the first quarter, claims that it could still grow sales despite the loss of Apple revenue "look optimistic".

Wolfson's shares rose on Wednesday as it was cited as a potential target of Dallas-based Texas Instruments. Landsbanki analyst Dan Ridsdale said he did not believe the rumours have strong foundation, but "corporate activity could still drive significant upside".

Last night, shares dipped 1.5p to 132.5p.