Imagination Technologies, a microchip designer that works with Apple and counts the US tech giant as its third biggest shareholder, is in big trouble.
On Monday, the company announced a huge overhaul of its business in a bid to reverse recent losses and adapt to a slowdown in the market. The changes include:
- CEO Sir Hossein Yassaie stepping down;
- The sale of Pure, Imagination’s consumer technology business known for digital radios;
- A cost-cutting drive and restructuring to save £15 million by year-end April 2017;
- A full operational review, including R&D spending.
Sir Hossein has been CEO of Imagination Tech for 18 years. Non-executive director Andrew Heath is being parachuted in as the new turnaround CEO. Heath was previously CEO of chemicals group Alent and was also an executive at Rolls-Royce.
The panic button manoeuvres came as Imagination warned that the recovery in the market it had hoped for in the second half of its financial year had failed to materialise and it is now expecting to make a loss for the full-year. Imagination’s shares dropped 10% last year when it first announced it was set to make a first-half loss.
Shares are down over 12% on Monday’s announcement, less than 10 minutes after trading began in London.
Imagination Tech designs graphics microchips and is one of the few publicly named suppliers of Apple, supplying graphics chip designs for iPads and iPhones. The US technology giant owns 8.42% of the Hertfordshire-based Imagination and is its third biggest shareholder.
Imagination gets revenue from microchip licensing and royalties, earning cash from letting people build its microchip designs and then again when they are used in devices. The company rose the smartphone boom of the late 2000s, with its share price rocketing 600% between 2008 and its peak in 2012.
But the company has struggled to adapt to a slowdown in smartphone and other device sales in recent years. Imagination’s share price is down 50% over the last year.
The company says in Monday’s update:
Since the Group published its half year results in December 2015, 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.
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