“Shares in chipmaker Imagination Technologies plunged over 60 percent on Monday after the British company announced that Apple plans to stop using its products,” The Associated Press reports. “The development highlights how, through its sheer size, Apple’s decisions can make or break the fortune of entire companies that work with it.”
“Imagination, a multimedia, processor and communications technology company, said Apple Inc. ‘will no longer use the group’s intellectual property in its new products’ within two years,” AP reports. “Imagination says Apple has for years used the company’s technology in the graphics processor units of its phones, tablets and watches but has asserted that it is working on a ‘separate, independent’ design to control its products.”
“Shares in Imagination Technologies were down 61 percent at 104 pence in London. That cut its market value from 759 million pounds to just 294 million pounds ($950 million to $368 million),” AP reports. “Apple itself owns 8 percent of the company, which would have resulted in a book loss of almost $50 million — a sum easily absorbed by the tech giant, itself worth $750 billion.”
Read more in the full article here.
MacDailyNews Take: This is hardly surprising (see related articles below). It’s also quite the cautionary tale to small companies that Apple wants who decide not to take Apple’s (likely lowball) offer: Reject Apple’s deal, get sold to the Chinese, lose your top talent to Apple, lose your Apple contract, lose 3/4 of your market cap in a single day, and face years of protracted legal battles. Not an appetizing prospect, is it?
Imagination’s official statement (below, verbatim) portends potential future legal action:
Imagination Technologies Group plc (LSE: IMG, “Imagination”, “the Group”) a leading multimedia, processor and communications technology company, has been notified by Apple Inc. (“Apple”), its largest customer, that Apple is of a view that it will no longer use the Group’s intellectual property in its new products in 15 months to two years time, and as such will not be eligible for royalty payments under the current license and royalty agreement.
Apple has used Imagination’s technology and intellectual property for many years. It has formed the basis of Graphics Processor Units (“GPUs”) in Apple’s phones, tablets, iPods, TVs and watches. Apple has asserted that it has been working on a separate, independent graphics design in order to control its products and will be reducing its future reliance on Imagination’s technology.
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.
Further, Imagination believes that it would be extremely challenging to design a brand new GPU architecture from basics without infringing its intellectual property rights, accordingly Imagination does not accept Apple’s assertions.
Apple’s notification has led Imagination to discuss with Apple potential alternative commercial arrangements for the current license and royalty agreement.
Imagination has reserved all its rights in respect of Apple’s unauthorised use of Imagination’s confidential information and Imagination’s intellectual property rights.
A further announcement will be made in due course.
Source: Imagination Technologies Group plc
SEE ALSO:
Apple nabs top talent from iPhone 7 GPU chipmaker Imagination Technologies – October 13, 2016
After failed takeover talks with Apple, Imagination Technologies sells stake to state-owned Chinese company – May 9, 2016
Apple in ‘advanced talks’ to acquire Imagination Technologies for PowerVR GPU – March 22, 2016
Per MDN’s take… makes Apple sound like Walmart’s relationship with its smaller suppliers. Not very flattering, especially if the highest market-cap company in the world lowballed the takeover offer too much. That’s Apple’s right, of course, but it can’t be so low as to be insulting either.
The more apt analogy is being an IBM supplier who went out of Big Blue’s favor in the ’50s and ’60s.
One misstep or IBM’s coming up with another answer and years of work in developing your tech company was toast.
yep…that Brexit thing is working just fine for UK industry.
Relevance please, I’m curious how does this relate to Britain’s planned exit of Europe? I would have thought that a 15% reduction in the value of sterling against the Dollar would make immagination’s exports far more attractive. This sounds like a purely strategic move on Apple’s part and nothing to do with Brexit.
uh, Brexit was just signed-off on last week with May per Article 50, which was only a formal notification of intention to leave the EU….yet, you correlate the cause of this story is an effect that has yet occur.
what a gross liar you are.
If you work under an elephant, you better have a big protection cage.
“Imagination believes that it would be extremely challenging to design a brand new GPU architecture from basics without infringing its intellectual property rights, accordingly Imagination does not accept Apple’s assertions.”
It appears Imagination lacks imagination. That may be the problem.
Apple giving Imagination 2 years notice seems like a reasonable amount of time for them to drum up new business. Their letter would indicate it’s not and they look forward to the courts instead of seeking new partners.