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Shares in CSR plunged in early trade on Monday after the maker of Bluetooth wireless chips cut its revenue forecasts after weaker-than-expected second-half demand.

The Cambridge-based company blamed the revised forecast on changing purchasing patterns at one if its headset customers and a change in production plans at two other customers.

In early trade CSR shares tumbled almost 27 per cent and by afternoon were down 25 per cent at 859p, valuing the company at about £1.1bn.

CSR said it now expects third-quarter revenues for 2006 to be between $210m and $215m. Fourth-quarter revenues are now expected to be about 5 per cent below the lower end of the revised third-quarter 2006 revenue range, the company said.

The company had previously forecast third-quarter revenue to be in the range of $225m to $240m.

In a research note, Panmure Gordon described the update as a profit warning, and cut its recommendation from buy to hold and downgraded its price target to £10 from £12.80.

“Speculatively, we believe that, if this is not a competitive issue, handset OEMs are taking a greater share of the headset market, which is having an adverse impact on the business of the headset OEMs,” it said in the note.

“CSR continues to view all the market segments in which it operates as very attractive and sees growth in 2007 and beyond. CSR is well positioned to benefit from this market trend and is confident in its own prospects for growth,” CSR said in its trading update.

CSR will report its third-quarter results on 8 November.

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