iPod chip maker PortalPlayer informed investors late Thursday that it has not been selected by Apple to power certain future flash memory-based iPods. In a statement, PortalPlayer said that “the follow-on to its PP5021 System-on-Chip, which is expected to be available in the second half of 2006, has not been selected by Apple for use in their mid-range and high-end flash based iPods.” (Emphasis ours.) The company said it believes the PP5021 will continue to be used “in other members of the iPod family.” While PortalPlayer’s non-selection announcement may seem out of the ordinary, publicly-traded companies are legally obligated to make certain positive and negative disclosures to investors.
As Apple is believed to account for 90% of PortalPlayer’s revenue, such a loss could greatly impact the company’s performance.
Update: Following the warning announcement, shares of PortalPlayer tumbled 41 percent, or $9.46, to end Thursday trading at $13.13. “We were clearly surprised with the change,” PortalPlayer CEO Gary Johnson said on a conference call with analysts.
“We are shipping in today’s video iPod’s, (but) the visibility for us has become more clouded.” Analysts said the news is the company’s worst nightmare. “This is a disaster,” said Jeffries & Co.
