WOLFSON Microelectronics has posted a 156 per cent increase in annual profits after customers flocked to buy 'iconic' gadgets, like iPod music players.

The firm, which makes the chips that change digital signals to analogue so that people can hear sounds or see images, said the popularity of global positioning systems, flat-screen TVs and digital radios also drove sales.

This helped pre-tax profits come in at '21.7m in the year to December 31, beating analysts' expectations.

Edinburgh-based Wolfson said: 'The results reflect the strong demand for portable digital music players with MP3 offerings like the Apple iPod becoming iconic digital consumer products.'

The results come after a number of electronics retailers reported strong sales of products such as portable music players and flat-screen televisions over the festive season, with Dixons owner DSG International recently hailing a 'digital Christmas'.

Wolfson said it expected revenues for the first quarter ' covering the three months to the end of March ' to be between '22m and '25m.

Revenues lifted by 40 per cent to '93.6m over the year. Analyst Mark Davis at stockbroker Panmure Gordon described the results as 'excellent'.

He said: 'Momentum is likely to continue. The global recognition of the quality of Wolfson's products in the iPod, PSP, Xbox 360 and so on means that the door should always be open to the company as it looks to design new products.'