What happens
when the biggest tech company in the world stops buying your products?
Imagination
Technologies (IGNMF) is learning that lesson right now -- and it's very
painful.
Apple (AAPL,
Tech30) told the British company it plans to stop licensing the firm's
technology in about two years. As soon as the news came out on Monday, Imagination
shares plunged by as much as 72%. They've recovered slightly since.
Imagination
Technologies owns and licenses intellectual property that helps power the
graphics on the screens of Apple's iPhones, tablets, iPods, TVs and watches.
Just over
half of the company's annual revenue comes directly from Apple.
In a
statement, Imagination said Apple had said it is "working on a separate,
independent graphics design in order to control its products."
But the
British tech firm doubts Apple will be able to come up with a standalone
solution.
"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," the company
said.
Apple
declined to comment.
Imagination
Technologies is now discussing potential alternative sales arrangements with
Apple. It's also looking to diversify its business to serve the mid-range phone
market. But investors clearly are panicking about its prospects.
The firm was
worth almost $1 billion last week. Now its market capitalization has slumped to
around $348 million. Apple is also getting hurt. It owns an 8% stake in
Imagination Technologies.
The firm's
future was looking much rosier less than a month ago when it unveiled brand new
graphics technology that could be used in self-driving cars, virtual reality
devices and high end smartphones.
Back then, Liberum
analyst Janardan Menon predicted happy days ahead for the company and said
shares in the company could rise by about 25% as it began getting its
technology into new kinds of devices.
(CNNMoney)
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