Short circuit for Wolfson shares

Wolfson Microelectronics has warned of cancelled products from a major customer. Picture: Julie Bull
Wolfson Microelectronics has warned of cancelled products from a major customer. Picture: Julie Bull
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SHARES in audio chip maker Wolfson Microelectronics slumped by 15 per cent today after a revenue warning that analysts blamed on the decline of smartphone firm Blackberry.

Edinburgh-based Wolfson didn’t name Canada’s Blackberry, saying only that a “major customer” had cancelled orders following a strategic review of its business.

But Wolfson warned some key programmes with other customers are also being delayed until the first half of next year.

The chip maker said the result will be a shortfall in 2013 revenues. Shares in the FTSE 250 company fell as much as 15 per cent before recovering some lost ground to finish 27.5p lower at 147p, their biggest one-day decline in more than two years.

The announcement marks the second time in little more than two months that Wolfson has warned of slower-than-expected orders for its chips, which are used in smartphones, tablet computers and other consumer electronics. Customers include Samsung, Nokia and satnav maker TomTom.

Earlier this year, industry sources revealed that Wolfson chips were being used in the Z10 that Blackberry released in January to compete with Apple’s iPhone 5 and Samsung’s Galaxy S3. However, sales of it and Blackberry’s other top device, the Q10, have been lacklustre.

More recently, Blackberry revealed losses of $1 billion (£615.5 million) along with plans to shed 4,500 of its global workforce. It has reached a tentative agreement with its largest shareholder to take the firm private, though the future of its handset division remains in doubt.

Wolfson said revenues in the final quarter of this year will be $40m-$50m, compared to the previous average analyst estimate of $58m.

Revenues for the third quarter will be about $44m, the company added. Wolfson had already toned down its forecast for the period to the $40m to $50m range after warning at the end of July of slower-then-expected sales of electronic gadgets by its customers.

Wolfson – which is due to post those third-quarter results on 29 October – is currently in its closed period. A spokesman therefore declined to comment further on today’s statement, which added that “the overall impact of these developments on Wolfson’s revenue will be mitigated in 2014 as other customer projects ramp up”.

Analyst Nick James of Numis agreed with this assessment, and advised investors to use any sell-off in Wolfson as an opportunity to add to their holdings.

Wolfson’s largest customer, Samsung, will account for about 35 per cent of third-quarter revenues, compared to 60 per cent in the first half of the year. Citigroup’s Amit Harchandani said this was “encouraging” news.

“Although we did expect the contribution of the largest customer to decline in the third quarter, the extent of decline suggests accelerating traction for Wolfson’s products outside Samsung,” Harchandani said.