EMI issued a profit warning today in the wake of poor Christmas sales of new albums such as Robbie Williams's Rudebox.
The label also announced the departure of its head of music and plans to slash costs.
Shares in the world's third-biggest music group, which were boosted throughout 2006 by regular takeover speculation, fell almost 10 per cent in early trading.
"EMI Music's second-half performance to date, in terms of revenues and profits, has been below prior expectations," EMI said in a statement that also unveiled plans for £110 million sterling of annual cost savings, including an unspecified number of job cuts.
"This has resulted from weak market conditions, particularly over the Christmas period, and lower-than-expected sales from EMI Music's portfolio of second-half releases to date."
EMI, which is also home to Coldplay and holds the Beatles catalogue, rejected a bid approach in December that a source familiar with the situation said was from private equity group Permira. EMI has also been locked in a takeover battle with rival Warner Music on and off for the past six years.
EMI shares were down 9.6 per cent at 239 pence at 8.10am, valuing the business at about £1.9 billion.