Shares in Wolfson Micro-electronics plunged almost 4% yesterday after the Scottish microchip maker for many of the world's must-have electronic consumer gadgets reported a 37% fall in third-quarter profit and reduced its fourth-quarter sales outlook on the back of increasingly weaker consumer demand.
The Edinburgh-based company's warning on "deterioration in order intake and rescheduling of orders" for microchips - its second profits warning this year suggests retailers are expecting a not-so-merry Christmas for sales of electronic goods.
The maker of microchips for mobile phones, MP3 players, Playstations and sat-nav systems said its fourth-quarter revenue was now likely to be between $35m (£23m) and $45m, having already significantly downgraded its forecasts this month.
The grim forecast at Wolfson, which also makes chips for the Apple iPhone, is set against an economic climate that has sliced profitability across the consumer electronics sector.
In July, the company warned falling demand for electronics would hit sales, and that costs and jobs would have to be cut to combat the downturn - although the company, which employs most of its 370 staff at its Edinburgh headquarters, has declined to be specific about the extent of the job losses.
Shares in Wolfson, which have underperformed the FTSE All Share technology, hardware and equipment index by around a quarter over the last three months, yesterday fell a further 2.5p to 67.5p - a far cry from the 469p it hit in September 2006.
Nick James, an analyst at Panmure, said: "The market's confidence in Wolfson's business is likely to take another dent, which means the stock could rapidly approach its cash value in the short term."
The company, which took a $2.9m hit after the staff cuts and had previously announced it was replacing chief executive Dave Shrigley, said it would continue to control costs tightly.
Wolfson's chips are best known for tasks such as converting digital data into analogue signals for speakers.
They are key components of the fast-growing number of portable listening and communications devices, such as Apple iPod music players and multimedia mobile phones.
Wolfson also provides the chips for DVD players, flat-screen televisions, digital radios, digital set-top boxes and cameras - most of which have been hit by the global economic slowdown.
The company yesterday reported adjusted operating profit of $9.1m for the 12 weeks to the end of September on revenue 14% lower at $60.5m.
Pre-tax profits came in at $4.5m for the quarter, compared with $14.7m during the same period last year. Before non-recurring items, pre-tax profits were $8.3m.
Wolfson said customers across its businesses are paring back their orders to volumes well below normal seasonal patterns.
Meanwhile, the company yesterday ruled out making any further redundancies in the fourth quarter and said it would only hire for key positions within the business during the period.
Mark Cubitt, Wolfson's finance director, said he expected the group to achieve fourth-quarter and full-year margins of around 51% and annual pre-tax profit would likely be "in the ballpark" of around $21m.
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