Imagination Technologies, a microchip designer that works with Apple and counts the US tech giant as its third-biggest shareholder, is cutting deeper and further as it tries to rescue its business.
Imagination announced in a statement on Thursday that it was taking additional cost-cutting measures as part of its company restructure including:
- An additional £12.5 million of cost cutting by April 2017, taking the total to £27.5 million;
- 200 more jobs being axed, in addition to 150 announced last month;
- £5 million write-down on parts of the business.
Interim CEO Andrew Heath says in Thursday’s update:
This swift and decisive action will put us back on a sound financial footing and will enable us to have the necessary resources to further strengthen our three core businesses. They are unaffected by these cuts.
The ongoing operational review will identify clearly where we need to focus, building on our current strengths and allocating the right capital to ensure growth and attractive returns.
Last month Imagination announced a huge overhaul of its business in a bid to reverse recent losses and adapt to a slowdown in the market. The changes included the departure of long-running CEO Sir Hossein Yassaie and the sale of Pure, Imagination’s consumer-facing brand known for its digital radios.
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 was expecting to make a loss for the year.
Imagination’s shares dropped 10% last year when the company first announced it was set to make a first-half loss, and shares collapsed as much as 18% when the restructure was announced last month.
Imagination Tech designs graphics microchips and is one of the few publicly named suppliers of Apple, with its graphics chip designs used 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 like phones and tablets.
The company’s share price rose in line with the smartphone boom of the late 2000s, rocketing 600% from 2008 to its peak in 2012. But the company has struggled to adapt to a slowdown in smartphone sales in recent years. Imagination’s share price is down 50% over the past year and over 80% lower than its 2012 peak.
Imagination says in its Thursday update that the restructure will allow it to focus on its three core businesses: graphics and multimedia, processing, and communication. Despite the job cuts in other parts of the business, Imagination says it is looking for 50 new employees in its graphics and multimedia chip design arm as part of the restructure.
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