More doom from Imagination as it lowers shipment expectations

No improvement likely for well over a year
Shares plunge over 10% in early London trading

A slowdown in the global smartphone market and failure to win more share of the business for entry level handsets has led to UK chip designer Imagination Technologies into admitting that this year’s unit shipments are “behind expectations.” In an interim trading statement issued today [6th March 2014], Imagination also admitted it didn’t expect things to recover until the latter part of next year, though it also stated that low royalty margins from its entry level phone designs meant that the impact on overall revenues was minimal.

Imagination, whose major shareholders include Intel and Apple, says that in the meantime it has managed to slash operating costs through acquisitions of rivals such as MIPS and better synergies.

It added, “The progress on MIPS is very encouraging and has made a positive contribution to the business. We reiterate that this is a long-term strategy to offer real choice in the CPU and processor IP market.”

Imagination says it expects licensing revenue for the current year to be significantly stronger than in 2013 and, with deals struck in the final quarter, it now anticipates revenues to be in the range of £35 million to £40 million.

Total unit shipments are expected in excess of 1.2 billion units in the financial year to 30 April 2014.

In recent months Imagination’s investors have suffered from something of a bloodbath, with matters not helped last December when the company cut its projection for annual sales in its core smartphone microchip business from 650 million units to between 580 and 630 million.

In its latest update Imagination says that, excluding MIPS licensing, it now expects shipments to be even lower – in the 520 million to 550 million range.

In early trading in London today, Imagination’s shares plunged more than 10 per cent to 172 pence, having opened at 185 pence.

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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