Sign up UNITED KINGDOM
Proactive Investors - Run By Investors For Investors

Imagination Technologies slumps after warning on profits

Structural uncertainty in the semiconductor industry is making customers reluctant to commit to new contracts, thereby hitting licensing revenue for chip designer Imagination Technologies. Reduced licensing revenue expectations for the financial year just ended prompted the company to issue a profits warning today.
Imagination Technologies slumps after warning on profits

Chip designer Imagination Technologies (LON:IMG) lost a fifth of its value on Thursday morning after issuing a profits warning.
The chips are down for the group after it warned that profits for the year to 30 April 2013 would be below market expectations – currently £34.6mln – after trimming back its guidance on licensing revenue to £27mln.

The group said it is experiencing delays in the closure of a number of deals in the sales pipeline.

Imagination expressed confidence that these are just delays, and not lost deals, and put the timing issues down to uncertainty caused by structural and organisational changes among a number of semiconductor partners across the globe.

Last year’s acquisition of MIPS Technologies, a pioneer in days gone by of chip architecture, seems to be unaffected by the timing issues, with the company saying the performance integration of MIPS remains on track, with licensing and royalty revenues in line with expectations.

For the current financial year the group is currently expecting licensing revenue to be in the range of £30m - £35m (excluding MIPS).

Meanwhile, things remain tough at Pure, its digital radio arm. The company diversified into digital audio broadcasting (DAB) some 11 years ago, but despite being touted as the next big thing, DAB has never really caught on, and looks to be left behind in a lo-fi world where consumers are happy to listen to MP3s through cheap headphones connected to their smartphones.

The group said performance in the second half of fiscal 2013 at Pure was much the same as the first half. Not for the first time, the company is tipping a much improved performance in the future for Pure, which is pinning its hopes on its wi-fi based multi-room audio distribution technology and its Internet-connected devices that will facilitate the streaming of music from sites such as Grooveshark, Spotify, Last.fm and We7.

“Despite these short-term timing issues, we continue to see growing partner engagements across our key technologies - these include a number of very significant, strategic deals,” stressed Hossein Yassaie, Imagination’s chief executive.

"The volume shipment ramp up continues apace towards our target of one billion units in 2016 (excluding MIPS) whilst the licensing pipeline remains as active, strong and sound as ever," he added.



Register here to be notified of future IMG Company articles

Timeline

Article
September 17 2014

Related Articles

January 28

e-commerce specialist blur reported a more than doubling of project bookings on its online platform last year.

May 14
Tungsten is gaining momentum with its offerings, and has made some changes at the top as it prepares itself for the next stage of its growth strategy.
August 05
Planet Payment continues to motor as it reported an improved financial performance in its second quarter.

© Proactive Investors 2015