The company’s business model is based on licensing its IP – graphics processors, microcontrollers and the like – then collecting royalties. But it found out towards the end of 2015 that ‘the pace of deal closure’ was falling short of its expectations. In other words, it wasn’t selling enough stuff.
The first move – as is often the case – was to throw the chief executive Sir Hossein Yassaie overboard. Then it embarked on a £27.5million cost cutting exercise and rumours started to swirl about disposals.
In March 2016, New Electronics asked whether Imagination’s Ensigma division was being readied for disposal. We also asked whether the MIPS business unit was being offered around. At the time, financial company Investec suggested Microchip might be prepared to pay something for it.
Now, speculation has turned to reality. Both the MIPS and Ensigma units are being offered for sale so that Imagination can focus on its PowerVR graphics technology.
How much the disposal of MIPS and Ensigma is to do with Apple remains to be seen. The consumer electronics giant has, apparently, abandoned PowerVR in favour of developing its own technology. That news saw Imagination’s share price drop by 60% in a day. Unable to reach agreement on ‘commercial arrangements’ for the future, Imagination has now launched a dispute resolution procedure.
Imagination’s financial statement says its 2016/17 financial year finished strongly, reflecting the positive effects of the restructuring implemented during the last 15 months. But it’s still carrying some $40million worth of debt and the sale of MIPS and Ensigma could make a nice contribution to paying that down.
