The rise of Samsung smartphones helped Wolfson Microelectronics report better than expected first-quarter sales, yet margins at the component maker fell.
Revenues at Edinburgh-based Wolfson, which has not made an annual profit since 2008, rose 59 per cent year-on-year in the first quarter to $48.1m. Pre-tax losses reached $6.3m, down from $8.2m a year earlier.
“We’re roughly where we thought we’d be,” says Mike Hickey, Wolfson’s chief executive. “We’re pretty excited about the acceptance of our audio processors.”
Samsung accounted for 62 per cent of Wolfson’s sales, compared with 36 per cent in the previous three months. Analysts suggested that this helped to explain the fall in Wolfson’s gross margins, which declined nearly 9 percentage points year-on-year to 40.3 per cent.
“Wolfson’s products for Samsung are priced very aggressively,” said Eoin Lambe, an analyst at Liberum, revising down his forecasts for operating profit this year.
Wolfson’s shares, which are trading at about a third below a peak in 2011, fell 2.9 per cent on Tuesday.
However, Mr Hickey said that Samsung, which recently confirmed Wolfson as its primary audio supplier, would account for a lower share of its revenues in the remainder of the year as other smartphone makers introduced new models.
“Samsung had a very good first quarter, while some other clients are in transition,” he said.
Wolfson also forecast a revival in gross margins, based on the rollout of chips with higher software content. “Our traditional model has been to keep margins over 50 per cent . . . That’s still achievable,” said Mark Cubitt, chief financial officer.
Sales of components for gaming consoles, PCs and printers all fell in the first quarter, Wolfson said, while sales for mobile phones more than tripled.
Two unnamed Chinese smartphone-makers have agreed to use Wolfson’s audio components, increasing the company’s presence in the world’s fastest-growing smartphone market. The contracts follow Wolfson’s deal to supply parts for Lenovo’s flagship IdeaPhone K900.
Mr Hickey also said that in future Wolfson would benefit from a shift to wearable technology, with customers looking to use its components in devices that measure blood pressure. “A lot of wearable tech relies on the real world interface – mostly audio signals,” he said. “We see our audio hubs evolving into real world interface hubs.”
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