Wolfson losses larger than expected but chip firm bullish on new deals

Published on Wednesday 28 October 2009 20:28

CONTRACT wins with the likes of Microsoft and Samsung led the directors of microchip maker Wolfson Microelectronics to give an upbeat assessment of its fortunes yesterday despite posting a fourth consecutive quarter of losses.

The Edinburgh-based firm reported a pre-tax loss of $1.5 million (920,000) in the three months to 4 October, compared with a profit of $8.3m in the third quarter of 2008. The loss exceeded analysts' expectations for a $1.1m deficit.

Revenue fell from $60.5m a year ago to $35.4m after Wolfson's chips were not selected for use in Apple's new 3Gs iPhone, having been used in the previous 3G model.

The company said there was no change to the "poor visibility" over demand for chips, leading to volatile ordering patterns and short lead times.

But chief executive Mike Hickley, who was appointed in January, said that Wolfson was refreshing its product range in an attempt to recover revenues and that the current line-up was the company's "strongest ever".

Also yesterday, Wolfson unveiled new contracts with Microsoft and Samsung to supply power management components for their portable media players, devices that can play both sound and video files.

The deals follow a previously-announced contract win with a "tier one mobile phone company" – believed to be Nokia – and further contracts with digital camera makers and headphone manufacturers.

Wolfson also announced a deal with Irex Technologies to supply power management chips for its eReader, which allows users to download books and newspapers to a portable device.

Hickley said Wolfson would also benefit as features in high-end smartphones – which use its chips – filter down into the bulk mobile market.

He said everyone in the sector was waiting to see which smartphone would emerge as the most popular with consumers in the run-up to Christmas, but added that Wolfson had enough chips in a range of models to help cushion itself if one phone became a "runaway success".

Mark Cubitt, Wolfson's finance director, said the firm had taken its headcount back up to 388, which he said was around the same level as before job cuts last summer during a "belt-tightening" programme.

He said the firm had hired about ten staff in its Japanese design office and about 25 graduates for its headquarters.

Cubitt said the company had hired more graduates than it had originally intended due to the high-quality of the applicants. Hickley added: "There were very high-calibre graduates available this year because fewer people were recruiting … The biggest users of consumer electronics are young people; bringing in these graduates was an investment we chose to make and I think it will pay off big time."

Shares in Wolfson fell 2p to end the day at 118p.