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Imagination Declines as ARM Takes Share at Samsung: London Mover

Imagination Technologies Group Plc was the second-biggest decliner among companies on the FTSE 350 index after Goldman Sachs Group Inc. said Samsung Electronics Co. is using competing technology in its new smartphones.

Imagination, a U.K. designer of chip technology for phones and tablets, dropped 6.4 percent, the biggest fall since Oct. 10 in London, giving the Kings Langley, U.K.-based company a market value of 1.15 billion pounds ($1.85 billion). The volume of shares traded was more than three times the daily average for the past three months.

The key risks to the company’s stock price are market-share loss and higher spending requirements to stay competitive, Simon Schafer, an analyst at Goldman, said in a note dated Jan. 12. The contribution from the company’s $100 million acquisition of MIPS Technologies Inc., to win new technology for mobile networks, is uncertain, said Schafer, who removed Imagination from a conviction buy list, while still recommending that investors purchase the shares.

“Anecdotal evidence suggests that Samsung Electronics’ next-generation smartphone chip contains plenty of intellectual property from ARM Holdings,” Schafer said. “This removes upside potential to our market-share forecasts.”

Evidence indicates ARM technology in Samsung’s new line-up will include the Mali-T604 Graphics Core, Schafer said.

Imagination Chief Executive Officer Hossein Yassaie said last month that the company had accelerated investment in graphics and that would bear fruit in the middle of this year. Imagination controls about 50 percent of the market for graphics chip designs, Yassaie said.

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