Bloodbath at Imagination after half year profits tumble

Shares plunge a fifth in early trading, wiping millions off cap
But insists $100m MIPS acquisition is still paying off

roadmap for MIPS receiving good traction - yassaie

Claims of “strong progress” in its markets for multimedia, processors and communications failed to improve investor sentiment towards Britain’s Imagination Technologies today [11th December 2013], as nearly a fifth was wiped off its capitalisation in line with a similar drop in its profits. Though Imagination posted a 19 per cent increase in group half-year revenues, coming in at £85.2 million compared to £71.4 million last year, its official pre-tax profit was down to £2.2 million against £10.5 million for the same six months of last year. In the first hour of frenzied trading, more than a million shares were bought and sold as investors largely headed for the hills.

Earlier this year Imagination acquired US counterpart MIPs after trumping bidding rival Ceva with a $100 million offer.

With MIPS’ customers now under its belt, Imagination’s total number of chips shipped topped 640 million for the period, of which its own designs counted for 280 million – an 18 per cent increase on 2012.

In particular, Imagination reported a significant uplift in volume shipments in all mobile segments including mainstream and entry smartphones, tablets and PCs. Sales to the smartphone market, it stated, continued to grow strongly albeit with lower growth rates.

In a statement released with the trading update, CEO Hossein Yassaie further underlined his decision to acquire MIPs as a positive move.

“Our plans and roadmap for MIPS are receiving good initial traction from existing and potential new partners,” he declared.

“All the indications are that the alternative that MIPS processors offer is respected and welcomed, both for the technological benefits and the much needed industry balance they can help to bring about.”

But Imagination’s latest results held no sway with the market, as its share plunged to their lowest in three years to the 202 pence mark.

They had already been in the doldrums since the summer when they tumbled heavily following renewed fears that the company had been usurped by rival designer ARM in one of Samsung’s new chips and separate concerns that Apple, its largest royalty payer, was losing market momentum.

*Footnote: In September this year US research group Jon Peddie posited that Imagination remained the leading supplier of chips for personal mobile devices in the first half of 2013, with 37.6 per cent market share, but warned that it continued to lose ground despite the number of shipments increasing by 81 per cent. The main winners, it claimed, were proprietary GPU user Qualcomm and IP licensors ARM and Vivante.

About Dave Evans

Dave Evans is a long established commentator on both the IT and cellular industries. His current focus is on share price trends within the sector. You can email him here
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