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After Bruising Apple Fight, Imagination Tech Up For Sale

After Bruising Apple Fight, Imagination Tech Up For Sale
In a disappointing end to a once-great European tech success story, putting itself up for sale was Imagination Technologies, the British firm that lost 70 percent of its value after being ditched by its biggest customer Apple.
It was developing its own graphics chips and would no longer use Imagination's processing designs in 15 months to two years time, Apple announced in April, which rocked the company that was founded in 1985 and listed in 1994.
Imagination's shares were sent plummeting 70 percent on April 3 and they have barely recovered since after Apple's decision, which analysts said posed an existential threat to the company.
However, after the sale announcement to 149.5 pence, giving the company a market capitalization of 425 million pounds ($538 million), the stock jumped as much as 21 percent on Thursday.
While Apple itself could be interested, Intel, Qualcomm, Mediatek, CEVA and various entities from China could be included in the list of potential buyers, analysts said.
"Imagination Technologies announces that over the last few weeks it has received interest from a number of parties for a potential acquisition of the whole group," the company said.
"The board of Imagination has therefore decided to initiate a formal sale process for the group and is engaged in preliminary discussions with potential bidders."
Doubts about whether Apple could go it alone without violating Imagination's patents, have bene expressed by Imagination even though Apple accounts for about half of its sales. Imagination started a dispute resolution procedure in May with the U.S. giant, which is valued at $761 billion and analysts said legal battles were likely.
By putting two of its main divisions up for sale, the British company initially responded to Apple's decision to walk away.
"That was a pretty dire scenario, akin to selling off the family silver to keep the estate going a little longer," said Neil Wilson, Senior Market Analyst, ETX Capital. "Now the shutters are up and a buyer sought. A pretty ignominious end to what was a great British tech success story."
Imagination receives a small royalty on every device using its graphics and has licensed its processing designs to Apple from the time of the first iPod.
Apple and Intel were prompted to buy stakes in Imagination and the company was valued at more than 2 billion pounds in April 2012 as the company 's shares rose sharply between 2009 and 2012 as sales of smartphones boomed.
British rival ARM, which developed its own graphics to complement its core processor blueprints and the likes of chipmaker Qualcomm provided stiff competition Imagination even as the company struggled to reduce its reliance on Apple.
Fears that it could lose Apple contract for years were downplayed by Imagination. the British firm told investors that Apple was just improving its customization of the technology Imagination sold, rather than replacing it after facing reports that Apple was building a graphics operation and hiring Imagination staff.
Those groups that want to develop their own processing technology across platforms such as mobile, wearable tech, vehicles and the so-called Internet of Things could be part of the interested parties, analysts at Stifel said.
"This could include a coordinated Chinese bid, a hyper-scale vendor from the cloud or some other IP player," they said.

Christopher J. Mitchell

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