iPod audio chip manufacturer Wolfson Microelectronics saw its shares fall over 13 per cent on news of lower than anticipated fourth quarter performance.

The Edinburgh-based company saw revenue slide to £26.9 million from £31.37 million in the year-ago quarter. It blamed weak gadget sales in the run-up to Christmas: the company sells its digital audio chips to other consumer electronics companies, not just Apple.

There was some good news despite the disappointing overall results: company revenues increased by 23 per cent to $204.1m (2005: $166.6m); portable segment revenues rose 40 per cent to $151m (2005: $108m) and sales in multimedia mobile handsets rose 73 per cent.

Discussing the results chief executive David Milne said: “In spite of challenging market conditions in Q4, we are pleased to report another year of strong growth in 2006."

He added: "Looking ahead we expect the first quarter revenues to be impacted by seasonality, which is characteristic of dynamic consumer markets. For the year as a whole, we are well positioned to benefit from our expanding product portfolio and a strong design win position, particularly in portable devices. As a result, the Company looks forward to delivering further growth in 2007.”

Analysts calculate that Wolfson makes around 70 per cent of its money selling chips for the iPod, and it's believed the company is supplying chips for the iPhone.