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Ex-Apple supplier Audience under securities investigation

updated 05:59 pm EDT, Thu September 20, 2012

Review questions late announcement of iPhone 5 tech omission

Noise reduction technology company Audience is being investigated by New York law firm Harwood Feffer LLP regarding whether the board of directors has breached its fiduciary duties to shareholders. Allegedly, Audience misrepresented or failed to adequately disclose the risk that its technology would not be selected for use in the iPhone 5, despite the 8K Securities and Exchange Commission filing on September 6.

Audience, a voice quality chip manufacturer for Apple's iPhone, had said that its technology is unlikely to be used in the newest model from Apple, triggering a stock slide. The chips, which filter out background noise, are supplied to Apple manufacturers including Foxconn and Protek. Audience has been supplying chips to Apple since 2008, and the sales have accounted for up to 37 percent of its total revenue.

Audience Chief Executive Peter Santos said just two weeks prior to the debut of the iPhone 5 that events prior to the launch of the iPhone "led us to believe that our technology is not likely to be enabled in Apple's next-generation mobile phone." At the time of the remarks, the iPhone 5 had been in production for months.

Royalties are still expected from older iPhone models that use the technology. The company stated in a previous regulatory filing that a reduction in orders from one or more of its major customers such as Apple or Samsung could "significantly damage its financial condition and cash flow."

A previous S-1 filing noted that Audience was receiving royalties from Apple that were less than in previous quarters, after it was thought that the Audience-derived EarSmart technology was embedded in the iPhone 4S A5 processor. Audience noted that Apple had assembled its own noise reduction team, which is the likely cause of the removal of Audience's technology.



By Electronista Staff
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