July 7 (Bloomberg) -- Bang & Olufsen A/S forecast lower annual profit and sales for the third time this year because of weaker orders for its luxury consumer electronics and costs to settle legal disputes.

Operating profit for the fiscal year that ended in May will come to about 195 million kroner ($41 million), the Struer, Denmark-based company said today in a statement, below its prior prediction of between 225 million and 275 million kroner.

The electronics maker charges more for its products than the likes of Sony Corp., leaving it vulnerable as the global credit crunch spurs financial companies to eliminate jobs and reduce pay for their remaining employees. Bang & Olufsen's BeoSound 6 MP3 music player costs $600 on Internet retailer Amazon.com Inc.'s Web site, more than triple the price of Apple Inc.'s iPod Nano. The shares has lost almost two-thirds of its value this year.

``The fact that we're heading into an economic slowdown makes the situation much more difficult for them,'' said Rune Moller, an analyst at Silkeborg, Denmark-based Jyske Bank A/S with an ``accumulate'' recommendation on the stock. ``It's going to be more challenging for them in coming years.''

Bang & Olufsen rose 3 kroner, or 1.6 percent, to 191 kroner in Copenhagen trading after earlier falling as much as 11 percent.

Partnership?

Bang & Olufsen may be forced to seek out a larger partner as profit dwindles and electronics become increasingly complex, said Stephen Rammer, an analyst at Alm. Brand Henton in Copenhagen. He singled out Samsung Electronics Co., the world's largest maker of flat-screen televisions, and Pioneer Corp., the third-biggest Japanese manufacturer of plasma-screen TVs.

``As technology becomes more sophisticated, it's harder to keep up,'' said Rammer, who advises selling Bang & Olufsen stock. ``I'm worried about what 2008-09 will look like. They'll have to take some big cuts to the workforce.''

Profit probably will improve in the current year, said Bang & Olufsen, which is scheduled to release earnings for fiscal 2008 on Aug. 13.

Bankers' Paychecks

Pay packages in the financial-services industry are likely to slide as much as 20 percent this year, recruiters surveyed by Bloomberg said last month. Goldman Sachs Group Inc., Morgan Stanley, Merrill Lynch & Co. and Lehman Brothers Holdings Inc. set aside smaller amounts to pay employees in the first quarter as revenue tumbled.

Pretax profit for fiscal 2008 will be about 155 million kroner, 45 million to 95 million kroner less than estimated. The new forecasts are based on annual sales of 4.10 billion kroner, Bang & Olufsen said, below its prior prediction of 4.25 billion to 4.35 billion kroner. The company also said it has settled ``a number'' of legal disputes, without giving more information.

The financial industry's cutbacks are hurting demand for higher-priced goods from PPR SA's Gucci fashions to Bulgari SpA's jewelry, along with weaker economies, rising inflation and higher food and fuel bills.

Bang & Olufsen reported a 78 percent drop in third-quarter earnings in April and said business at the start of the fourth quarter was ``challenging.'' The electronics maker ousted Torben Ballegaard Soerensen as chief executive officer in January, a day after the first cut to the profit forecast.

To contact the reporters on this story: Louisa Nesbitt in Dublin at lnesbitt@bloomberg.net

Last Updated: July 7, 2008 11:51 EDT