Ditched by Apple, Imagination is now for sale

Article By : Dylan McGrath

Analysts believe that putting the company up for sale makes sense but without Apple, Imagination's value has significantly dropped.

Imagination Technologies Group has announced that the entire company is on the market. The company has been through a lot. It lost its top customer, Apple Inc., which led to Imagination selling its SoC design group and putting its MIPS processor core licensing business up for sale.

The U.K.-based company said that after receiving interest from multiple parties, its board of directors has initiated a formal sale process for the entire company and is engaged in preliminary discussions with potential bidders.

Imagination also noted that it remains in a dispute with Apple, a key GPU core licensee for years. Apple notified the company in April that it will no longer use Imagination’s intellectual property in new products. In May, Imagination said that it was engaged in a "dispute resolution procedure" with Apple and that negotiations had stalled.

Apple dropped Imagination to instead focus on its own internal graphics technology. In April, Imagination expressed doubts that Apple could go about it alone without violating Imagination’s patents. Analysts have said that Imagination may ultimately sue Apple, though sources told EE Times in April that the company wasn't planning any lawsuits.

Analysts reached by EE Times saw many potential possibilites for an acquisition of Imagination, though the value of the company is diminished with the loss of the Apple business.

Jim McGregor, principal analyst at Tirias Research, said the possibility that Imagination would be sold has been around for a year, but that he sees few prospects for a blockbuster deal.

“I would expect the company to be sold either in pieces or at a discount, because I see little value in the MIPS and Ensigma group, especially since the MIPS IP portfolio was sold to a consortium including ARM when Imagination bought them and the MIPS architecture has not won many new sockets in the recent past,” McGregor said.

Imagination’s current value proposition really comes from the graphics group, McGregor said. Intel had been a major investor, but sold its stake in Imagination in 2015, McGregor noted.

Apple would be a logical acquirer of Imagination because Apple remains a stakeholder in the firm, but because Apple is developing its own graphics technology so it seems unlikely, according to McGregor. There are a few other possibilities such as Taiwanese SoC vendor MediaTek, but they also seem like longshots, he added.

“The most likely reason to buy Imagination is the IP portfolio,” McGregor said. “With this in mind, there are many companies that could potentially be interested in Imagination ranging from patent trolls to major IP vendors, semiconductor vendors, ODMs, contract manufacturers and even OEMs.”

Rob Lineback, a senior research analyst at IC Insights Inc., said Imagination’s decision to put itself up for sale makes sense since it lost the Apple business and it’s primary competitor, ARM, appears to be getting strong financial backing from its parent company, SoftBank.

Lineback said Imagination's graphics processing technology and design cores could attract interest from a wide range of companies—including cellphone vendors that develop their own SoC application processors, like Samsung or more recently Xiaomi in China. Imagination might also be an attractive sales target for Google, Lineback said.

“A sale could have a significant impact on suppliers of application processors for phones and mobile devices,” Lineback said. “It could also cause more companies to move to ARM's graphics cores or in some cases develop their own GPUs and video cores for MPUs.”