Fight to force Apple to fork out billions
As crisis talks with UK chip maker end in deadlock
IPHONE chip maker Imagination Technologies has begun formal proceedings to secure a multi-billionpound divorce payout from Apple after talks hit a deadlock.
Imagination, which was once Britain’s most valuable tech company, has begun an official dispute process with the US giant over its bid to stop using the firm’s chips.
Apple sunk Imagination shares by 61pc last month, knocking £500m off the firm’s value, when it suddenly announced it planned to stop using Imagination’s technology within two years and would, instead, develop its own graphics chips.
Apple’s business accounts for about half of Imagination’s revenue.
Imagination has always claimed that Apple would not be able to develop its own chips without copying some or all of its designs. Since then it has been negotiating with Apple about the size of a payout.
Yesterday Imagination said it had failed to agree with Apple on divorce terms and so had started a ‘dispute resolution procedure’.
However, there are fears the British firm could not afford a legal spat with Apple, which has a track record of winning such multi-million-pound battles.
Imagination Technologies became a pioneer after designing a key component in Apple’s iPhones when they were launched ten years ago, turning it into one of the world’s leading chip designers. Shares climbed 1,200pc and the company was valued at £2bn. It receives royalties from every sale of an Apple device containing its designs, including the iPad.
Founder and former chief executive Hossein Yassaie was knighted in 2013 for his contribution to the technology industry.
In a sign of the seriousness of its current situation, Imagination is selling two divisions in a bid to free-up cash – its loss-making MIPS and Ensigma units. Bosses said they wanted instead to concentrate on its PowerVR arm, which makes the technology for Apple, as it ‘continues to address attractive growth markets’.
Bosses added: ‘While the group has continued to invest in its MIPS and Ensigma businesses, it has now decided to actively market these businesses for sale, concentrate its resources on PowerVR and strengthen Imagination’s balance sheet.’
Peter Richardson, a research director at Counterpoint Research, said: ‘It’s difficult to say [how Imagination will come out of it]. Imagination has a lot of really good technology so they have strength there.’ Imagination made the announcements as part of a trading update in which it said it expected full-year results to be in line with expectations. Apple declined to comment. Imagination’s shares have not recovered since the break-up was announced, although yesterday they rose 3.1pc, or 3p, to 99.75p.