Shares digital

Management shrugs off wider scepticism and focuses on the sales boost

by Russ Mould

Shares in Wolfson Microelectronics have rallied from April’s 40-month low of 105p and chairman Michael Ruettgers clearly believes this run is set to continue, acquiring 100,000 shares at 140p each.

Ruettgers only joined Wolfson in January, upon the retirement of John Carey, having previously been chief executive officer and then chairman of American IT giant EMC between 1992 and 2005. It could therefore be unwise to read too much into the purchase, which saw the 64-year old double his stake in Wolfson. However, non-executives Barry Rose and Robert Eckelman picked up 22,500 shares between them in March, just after Carey bought 100,000 at 132.5p, and took his stake to 4.6 million shares, or 3.9% of the outstanding total.

Management therefore seems to share chief executive Dave Shrigley’s confidence that Wolfson will bounce back from March’s loss of a key MP3 player design slot at a major unnamed customer, widely assumed to be Apple.

A 16% jump in first-quarter sales appeared to support Shrigley’s assertion that strong demand from the mobile phone and automotive markets will help compensate for any second half shortfall from portable music players. The Edinburgh-based firm, which specialises in the design of mixed-signal semiconductors for digital consumer electronics products, also expects to start gathering a return on heavy investment in its AudioPlus range of products and its Oligon and Sinaptic acquisitions.

However, even Shrigley’s forecast of ‘growth’ for 2008 still implies a deceleration in top line momentum for the rest of the year. A prospective PE of barely 11 for this year and a consensus estimate of an 8% drop in EPS suggests the market is still sceptical and pricing in further market share loss to rivals such as Texas Instruments and Maxim Integrated Products.