Wolfson reports third straight year of losses

Weak consumer demand for electronics and smartphone product delays contributed to increased losses at Wolfson Microelectronics in 2011, marking the third year in which the audio chipmaker failed to make a profit.

Prospects for the Edinburgh-based company, which lost a contract to supply chips to Apple three years ago, now hang on the popularity of mobile devices from customers such as Samsung and Research in Motion, both of which have faced delays in their smartphone plans.

Despite new partnerships with companies including ZTE, Toshiba, Fujitsu, and Acer, revenues were broadly flat at $156.9m for the year to January 1.

The pre-tax loss widened from $11.2m to $24.1m.

Alex Jarvis, an analyst at Peel Hunt, had been expecting a pre-tax profit $5.5m for the current year, but revised that to a loss of $700,000 following these results.

On Tuesday the chipmaker sought to temper concerns by saying it expected to be in all major smartphone platforms this year. Its mobile audio business was Wolfson’s fastest growing division in 2011 with revenues rising by 60 per cent.

Mark Cubitt, chief financial officer, said that even that growth was growth was “disappointing for us”.

“We’re relying now on our partnerships – our customers and their products – to ramp up. As they do, we expect to see growth,” he added.

Wolfson also provides chips for other non-mobile devices such as digital cameras, printers, ebook readers, which accounted for 37 per cent of revenues. Sales from these items fell 20 per cent to $50.8m as consumer demand weakened.

Ian Robertson, an analyst at Seymour Pierce said that the question for Wolfson now would be whether it could return to profit, which would depend in large part on how successful its customers’ smartphone devices are.

“All its ducks are in the row as it were and now it’s question of sitting here and waiting to see which products sell,” said Ian Robertson, an analyst at Seymour Pierce. However, he warned that the company might be overly optimistic about its growth prospects. “I think Wolfson will be profitable again, but my feeling is they will always be at risk of falling short of expectations,” he said, “because the board could be underestimating competition from rivals such as Yamaha, Cirrus Logic, and AKM.”

Shares in the company, which have nearly halved over the past year, fell by 2.5 per cent to 155p on Tuesday.

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