Second day of mass sell-off threatens its FTSE 250 standingWorried investors wiped millions more off Imagination Technologies’ market cap today [12th December 2013], as shares slumped a further 10 per cent – taking nearly a third off the British chip designer’s worth in just two days. Yesterday Imagination’s share price closed at 193 pence after opening at 250 pence. But today it fell steeply again, closing another 10 per cent down at 169 pence. It contrasted starkly with the price Imagination commanded until early Wednesday, when its disappointing half year trading update sparked a mass sell-off. The two-day slump came despite CEO Sir Hossein Yassaie’s appeal to investors afterwards to continue backing his company, describing a projected drop in sales of smartphone chips as “absolutely a short-term thing.”
Imagination had earlier cut its projection for annual sales in its core smartphone microchip business from 650 million units to between 580 and 630 million.
But Sir Hossein’s insistence that the anticipated dip was also down to one-off events, such as the decision by key customer Texas Instruments to abandon the smartphone sector, fell on deaf ears with investors.
By today’s close nearly four million shares had been transacted in London, echoing yesterday’s mass sell-off and threatening Imagination’s position as a FTSE 250 company.
The chip designer’s biggest business remains in graphics processor for smartphones where it has around half the global market.
But analysts have recently raised concerns over the threat from UK rival ARM, which has a similar business model and has diversified from main processors to graphics processors, winning major deals recently.
Ironically, in June this year  – and soon after Imagination purchased chip firm MIPS for £65 million – Sir Hossein boasted how he would soon be “eating ARM’s lunch” as it muscled into its rival’s territory.
Sir Hossein still contends his main competitor remains the American giant Qualcomm, which builds graphics chips as well as designing them, but now admits ARM’s recent deal with the Taiwanese chipmaker Mediatek had weighed on Imagination’s outlook.
At its height in the past year Imagination’s share price stood at around 560 pence – more than three times higher than it commands now.