It's been a long time coming but microchip designer Imagination Technologies (IMG) has finally signed, sealed and delivered the sale of its digital radio technology business PURE. The Austrian's Aventure AT have agreed to pay £2.6 million cash and it has also got an option to buy up a relevant property at Imagination's Kings Langley HQ site for £4.5 million, if it wants it.

Interesting to also note that the UK company is also in talks are also ongoing over further non-core, cash eating, unit sales. A small bit of its IMG Systems consumer tech unit was sold earlier in September for minimal consideration, the rest looks soon to follow, including Hellosoft, its VoIP business.

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We have gone over the rationale for the PURE sale before, most recently in May (read here),and in more detail, February. Last year (to 30 April 2016) PURE put up revenues of £18.8 million, although that was bolstered by discounted sales as stock was aggressively run down, some below cost. It ran up a £24.3 million operating loss when the tiny IMG Systems bits and pieces are included, PURE's eighth-straight year of losses.

Attention now turns to what's left. There's MIPS, the CPU arm (central processing unit), Ensigma, which develops connectivity technologies and could be a big internet of things winner (in time) and, by far the most important bit, PowerVR, it's industry leading graphics tech part. It designs the GPUs (graphics processing units) that Apple uses across its iPad and iPhone ranges.

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Investors may feel that Imagination will now fall to a huge overseas buyout, ARM did after all. But it's worth remembering that Imagination, outside of possibly graphics, has never enjoyed the sort of industry dominance that ARM did.

The firm's stock has soared this year, from 133.5p on 31 December, and 105.5p in January (the 2016 low point) to 263.5p last week.

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The shares are today trading about 2.5% off at 240p for a £664 million market value. Expecting a hefty take out premium on that valuation at a time when pressure is on both licensing and royalties revenues may be asking too much. The again, the enormous £24.3 billion ARM takeover shows that technology firms worldwide are willing to pay massively for very good tech, and Imagination has its fair share of that.


Issue Date: 29 Sep 2016