Updated from 4:45 p.m. EST

Sigmatel ( SGTL) already expected to post a crummy first quarter. Now the company is warning that things will be worse than expected -- a lot worse.

Blaming lower than expected demand, technology delays and a transition issue at a major customer, the chipmaker's sales could be as little as half of what it initially forecast. The company, which provides chips for some of Apple Computer's ( AAPL) iPods, also warned that its loss will be "considerably" wider than expected, noting that an unexpected tax expense alone will hurt its bottom line by about 50 cents a share.

Shares of Sigmatel slumped after the announcement; they were recently off 92 cents, or 9.1%, to $9.21 in after-hours trading on Instinet.

"Our results are disappointing and we have put in place several initiatives to return Sigmatel to operational excellence," company CEO Ron Edgerton said in a statement.

Among those changes were some management shuffling and a decision by the company to re-evaluate its tax strategy.

Sigmatel now expects to post sales in the quarter of between $30 million and $35 million. The company declined to give an updated earnings target.

Previously, Sigmatel had predicted it would lose 10 cents to 17 cents a share in the quarter, or 1 cent to 8 cents without charges, on sales ranging from $52 million to $60 million. At the time the company gave that outlook it was already below analysts' estimates.

According to Thomson First Call, analysts were more recently calling for the company to lose 9 cents a share on a pro forma basis on $54.5 million in sales.

The company blamed its problems, in part, on one of its "large customers." That unnamed customer is in the process of upgrading the chips it uses from one of Sigmatel's older processors to a more updated one, Sigmatel said. But that transition is going more slowly than Sigmatel expected, leading to fewer-than-expected orders of its updated processor in the quarter.

Sigmatel also experienced delays and problems with an FM tuner microprocessr, the company said. Those problems also led to smaller orders than the company anticipated.

Another factor affecting the company's sales was a "precipitous" decline in prices for NAND flash memory. NAND flash has become the medium of choice for most lower-end MP3 players, particularly since Apple launched its flash-based iPod nano last fall.

But with a glut of flash on the market, prices have dropped 40% for some memory capacities since the beginning of the year, Sigmatel reported. With prices dropping so much so quickly, retailers are holding back on ordering new flash products for fear of being stuck with high-priced inventory, Sigmatel officials said on a conference call.

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