Investors might think there’s a cash windfall in the offing from Imagination Technologies (IMG), but that looks well wide of the mark.
The Hertfordshire-based graphics chip technology designer has today unveiled plans to sell its MIPS and Ensigma units to bolster its balance sheet as it readies for an almighty scuffle with Apple.
The US tech giant announced plans to ditch using Imagination’s graphics processing unit (GPU) technology in its iPhones and other products. Once its licensing deal runs out, in around 15 months to two years, Apple hopes to develop its own intellectual property (IP).
Imagination comes out fighting
Imagination reckons that will be impossible and plans to fight any Apple attempts to infringe its IP patents. Dispute resolution procedures under its existing licence agreement have been triggered.
MIPS is Imagination’s central processing unit (CPU) business, the brain that powers computers.
Ensigma develops connectivity technology designs with Internet of Things (IoT) applications.
The sale of MIPS and Ensigma makes strategic sense, but is badly timed. Both units are relatively small, loss-making and facing increasing competition.
First half results to 31 October 2016
Imagination’s net debt then stood at £40.8m, although analysts calculate a figure nearer £30m for the end of the last financial year, just closed on 30 April 2017.
Given the company’s weakened hand, securing much more than £30m for MIPS/Ensigma combined looks like a stretch.
It might make sceptics wonder if this is all part of Apple's grand scheme that might end with it buying Imagination after all. First distress the UK business, wait for it to shed unwanted parts, then launch a takeover. We'll have to wait and see.
