UPDATE 2-Audience forecasts weak quarter after Samsung's profit warning

Thu Jul 31, 2014 5:57pm EDT

* Expects Q3 revenue of $25 mln-$28 mln vs $41.3 mln

* Expects adj loss $0.37-$0.43/shr vs est loss of $0.05

* Second-quarter revenue $37.5 mln vs est $38.5 mln

* Shares down 11 pct after market (Adds CEO comment, details on revenue from Samsung, background; updates shares)

By Aurindom Mukherjee

July 31 (Reuters) - Audio chip maker Audience Inc forecast current-quarter results largely below analysts' estimates after its biggest customer, Samsung Electronics Co Ltd , warned of increasing competition and weak earnings.

Shares of Audience, which makes chips that improve voice quality in mobile devices by filtering out background noise, were down 11 percent in extended trading.

"We are forecasting a significant drop in revenue for the third quarter. Much of this relates to our business with Samsung," Chief Executive Peter Santos said on a conference call.

Samsung issued unexpectedly weak quarterly earnings forecast on July 8, citing increasing competition from Chinese rivals who are offering high-end models at cheaper prices.

"This has affected all of Samsung's key suppliers and we expect a significant financial impact to our business with Samsung in the second half of this year," Santos said.

Samsung accounted for 72 percent of Audience revenue in the second quarter, compared with 74 percent in the first quarter.

Chardan Capital Markets analyst Jay Srivatsa blamed Samsung for "pretty much all of" Audience's "terrible" third-quarter forecast.

"With Samsung struggling ahead of Apple's iPhone 6 launch, outlook for Audience for the rest of (the year) looks bleak"

Though the South Korean company said it saw better business conditions in the third quarter, it faces slowing market growth, intensifying price competition at the lower end and the looming threat of Apple Inc's next iPhone.

Research firm IDC predicts global shipments growth will slow to 19.3 percent this year from 39.2 percent in 2013, while average sales prices will also drop.

Audience said it expects to report a loss of 37 cents to 43 cents per share, on an adjusted basis, on revenue of $25 million to $28 million in the third quarter.

Analysts on average were expecting a loss of 5 cents per share on revenue of $41.3 million, according to Thomson Reuters I/B/E/S.

The company reported a loss of $4.4 million, or 20 cents per share, in the second quarter ended June 30, compared with a profit of $2.7 million, or 11 cents per share, a year earlier.

Revenue fell to $37.5 million from $45.3 million.

On an adjusted basis, Audience reported a loss of 10 cents per share.

Analysts on average were expecting a loss of 12 cents per share on revenue of $38.5 million.

Audience shares closed at $9.53 on the Nasdaq on Thursday.

Audience shares plunged in September 2012 after the company warned that its technology was unlikely to be used in the latest iPhone. (reut.rs/1uM3hF2) (Reporting By Aurindom Mukherjee in Bangalore; Editing by Don Sebastian)