There have been rumblings over the last few months about Imagination’s financial performance. The company is, essentially, dependent upon licensing revenues and royalties from its graphics IP. But a business built on the basis of royalties needs to continue signing deals in order to keep the money coming in.
The company’s statement says it all. ‘Market conditions have not improved and the slow down in the overall semiconductor sector has continued, reinforced by global uncertainty about future trading prospects with China’. Crucially, the statement also noted ‘the pace of deal closure is falling short of prior expectations’.
In December 2015, Imagination reported a loss for the six months ended 31 October 2015 and, in its latest statement, says it expects to report a loss for its financial year. When you don’t close deals, you don’t make revenue and investors want action. In this case, it was removing the chief executive.
Sir Hossein joined what was VideoLogic 18 years ago. The company, renamed as Imagination, is one of the UK’s better electronics success stories and the country’s second largest IP developer behind ARM.
Maybe there was a hint of the future when, in an interview with New Electronics in 2012, Sir Hossein noted that, while 90% of what VideoLogic developed in the early days was disruptive, today’s profile is more evolutionary.
Imagination’s business model relies on deals that sees its technology integrated into high volume consumer electronics devices, such as the iPhone. While there is certainly the need for some evolution in its graphics technology, there also appears to be the need for some revolution. Unfortunately for Sir Hossein, the revolution has come from the investors.
