Shares in UK tech firm fall by £½bn as Apple axes deal
ALMOST half a billion pounds was wiped off the value of one of Britain’s biggest tech firms yesterday after Apple suddenly announced it was pulling the plug on a deal. Imagination Technologies became a pioneer after designing a key component in Apple’s iPhones when they were launched ten years ago.
The success of the invention made the firm one of the world’s leading designers. But Apple has told Imagination it will be designing its own chips, and plans to stop using them within the next two years when it launches the iPhone 9.
It is a major blow for the company – wiping off more than £468million from its value yesterday as shares sank by 61.6 per cent.
Imagination relies on Apple for half its revenue and faces an uncertain future with the jobs of more than 1,200 workers at risk.
The firm may launch a legal challenge, after suggestions the American giant would not be able to make its own chips without ripping off Imagination’s designs.
Paraag Amin, an independent technology analyst, said: ‘It is a complete disaster for anyone who works there.
‘Apple has changed its suppliers over time and they like to bring technology in-house. But it leaves suppliers in a tricky situation. Apple is huge so if you lose a contract like that you can’t just replace it.
‘If Imagination wanted to launch legal proceedings they could. But look at who has more cash and who can spend more.’ Neil Wilson, market analyst at eTX Capital, said: ‘It’s the worst nightmare for Imagi- nation. Apple accounts for about half its revenues – you simply cannot easily replace a customer of that scale in a hurry, hence the gigantic selloff in the stock.’ Imagination became a darling of the pioneering British tech scene after launching 32 years ago. It clinched deals with games console maker Sony, and its graphics chips were snapped up by Samsung and Apple.
With the launch of the iPhone in 2007 its fortunes soared. Shares climbed 1,200 per cent, and the company was valued at £2billion and was once a core part of the FTSe 100.
Founder and former chief executive hossein Yassaie was knighted in 2013 for his contribution to the UK technology industry.
It became such a valuable asset that Apple raised its stake in the firm to 9.5 per cent, prompting rumours of a takeover. In March last year the rumours were confirmed.
Part of Imagination’s success was that it did not manufacture chips, but instead invented them and received a small royalty on every device using them.
That may prove crucial in any subsequent legal arguments.
In a statement issued yesterday Imagination said: ‘Apple has not presented any evidence to substantiate its assertion that it will no longer require Imagination’s technology, without violating Imagination’s patents, intellectual property and confidential information.
‘ This evidence has been requested by Imagination but Apple has declined to provide it. It would be extremely challenging to design a brand new graphics processor unit without violating Imagination’s patents, intellectual property and confidential information.’
Apple did not respond to a request for comment.
‘It is the worst nightmare’