Imagination Says Sale Talks Continuing After Losing AppleBy
Graphics supplier returned to profitability after job cuts
Apple accounts for more than half of Imagination’s sales
Imagination Technologies Group Plc said it continues to hold preliminary talks with potential buyers as the company looks to sell itself after Apple Inc. said it would stop using its graphics technology.
Imagination, which gets more than half its sales from Apple, announced last month that it was initiating a formal sale process. The company makes chips used for displaying graphics in games and apps in iPhones and other devices.
Apple’s decision dealt a blow to Imagination just as the U.K. company has begun showing the results of a restructuring. Following hundreds of job cuts last year, the company announced Tuesday a return to profitability. It had operating profit of 7.8 million pounds ($10.1 million), compared to a loss of 26.8 million pounds last year. Sales grew 19 percent to 145.2 million pounds. Shares rose as much as 7.54 percent to 155 pence in early trading in London.
Imagination said in June that it had received takeover interest from several parties, and is being advised by Rothschild & Co.
"It is very difficult to quantify the value," said Oliver Knott, analyst at N+1 Singer Equity Research. "We would expect a potential offer to be broadly in the 100 pence – 150 pence range."
Imagination said in April that Apple was developing its own graphics technology after years of using Imagination’s work for the iPhone, iPad, iPod, Apple TV and Apple Watch. After the transition is made over the next 15 months to two years, Imagination said Apple will no longer pay royalty payments under an existing contract.
"It is therefore highly regrettable that this progress has been so severely impacted by the stance taken by Apple," Peter Hill, the company’s chairman, said in a statement.
Apple’s decision has led to a dispute between the two companies, with Imagination saying Apple’s new graphics chips may be in violation of its patents. Andrew Heath, the chief executive officer of Imagination, called Apple’s assertions about the new technology "unsubstantiated."