SHARES in Wolfson Micro-electronics plunged 37 per cent yesterday after a shock profits warning from the Edinburgh-based maker of microchips for digital gadgets.

It was the first profit warning from Wolfson in two years and triggered fears that it might be an early sign that Christmas sales of electronics goods will be weaker than last year.

The company, which emerged from an Edinburgh University research project and supplies microchips for mobile phones, iPods and Xbox computer games consoles, said that it had not witnessed the usual pre-Christmas spike in demand.

David Milne, chief executive, said: “There is not some really hot product that is causing a lot of buzz this year, so there is no sudden burst of enthusiasm from consumers. Last year we had Xbox, iPod Nano and the PlayStation Portable. This year, the PlayStation 3 has been delayed.”

The bad news from a company that is regarded as one of Britain’s high-tech champions, came only days after Sony hinted that its technology woes would hit profits.

Last month, CSR, the Cambridge-based microchip company, which is regarded as the standard bearer for the semi-conductor industry, also issued a profits warning.

Wolfson yesterday cut its own fourth-quarter revenue forecasts from about $70 million (£37 million) to between $52 million and $57 million and reduced its full-year range from $220 million to $225 million to $204 million to $209 million. The shares fell from 445¾p to 279p, wiping £195 million off its stock market valuation in just one day.

The cautious outlook came as Wolfson reported strong third-quarter figures, with revenues up 40 per cent to $58 million and underlying pre-tax profits up 43 per cent to $16.5 million. However, headline profits fell from $11.5 million to $10.7 million after being hit by a one-off non-recurring charge of $5.8 million, of which $5.3 million had already been paid. The charge was related to tax that had to be paid on a share option scheme for 23 employees granted before the company went public. Wolfson had originally believed that the grant, part of an enterprise management incentive scheme, would not incur tax.

The $250 billion global semiconductor industry is savagely cyclical and early signs of corporate weakness are seized upon by analysts as evidence of a change in fortunes. Experts believe the market is already at, or close to, the top of the cycle and are bracing themselves for a significant downturn in the first quarter of next year.

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