Mobile-audio technology firm Audience Inc. (ADNC) said Apple Inc. (AAPL) is unlikely to use its processor intellectual property in its next-generation smartphone.

Shares of Audience plummeted 53% to $8.77 in after-hours trading, as the news marked a setback for the company.

Audience, which launched its initial public offering in March, makes technology that can be used to improve sound quality and suppress noise in mobile devices like cellphones and tablets.

Audience had aimed to shift its revenue mix over time from processor sales to royalties and had inked an agreement to license intellectual property to Apple for its latest-generation smartphones.

Audience developed and licensed its intellectual property for use in Apple devices, in accordance with the agreement. But Apple is not obligated to use Audience intellectual property.

Audience said that while Apple is unlikely to enable the processor intellectual property in its latest phones, it is unaware of any intended changes by Apple to the use of Audience processors or intellectual property in prior-generation devices.

The company recognizes royalty revenue after the sale of the device. As a result, it doesn't expect any impact on third-quarter revenue and income. The impact would come on line one quarter after Apple launches sales of its newest phones.

"While we are disappointed by this development, we are confident in the diversification of our business and see sustainable growth in 2012 and beyond," said Chief Executive Peter Santos. He added that the company plans to expand into adjacent markets like smart TVs, automotive and notebooks.

Based on the strength of hardware shipments to date, the company raised its third-quarter guidance, now seeing total revenue of $35 million to $38 million, up from its previous view of $33 million to $36 million.

Write to Kristin Jones at kristin.jones@dowjones.com

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