Imagination Technologies Group Plc (LON:IMG) should sell-up altogether rather than just two business units, so says City broker Liberum Capital.
The company this morning updated investors on its ongoing dispute with Apple, which plans to stop using Imagination’s intellectual property in future products, and revealed plans to divest its MIPS and Ensigma business units.
The idea is to boost the balance sheet and support the development of the PowerVR unit.
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Liberum analyst Janardan Menon, in a note, said there would be buyers for the units but highlighted other more attractive options.
He said: “a better solution would have been for Imagination to sell the whole company in our opinion, rather than continue to run the PowerVR business in the absence of Apple revenue.
“We believe this decision was taken probably because the company was already close to finalising a JV with a partner for MIPS, which could perhaps now be converted into a full sale.
“However, slashing costs and getting PowerVR to a level of profitability without Apple revenue will be a challenge in our opinion.”
Apple dispute
Imagination Technologies this morning told investors that it is moving to a more formal process as its attempts to reach a ‘commercial resolution’ to its dispute with Apple Inc.
It comes after the group’s share price collapse last month as it emerged that Apple won’t use its intellectual property in future products, in 15 months to two years’ time.
Around half of the group’s revenue for 2016 came from Apple, and as such last month’s news spooked investors and that saw Imagination Technologies shares lose about two-thirds of their value in April.
In an investor update today, Imagination Technologies said it has been unable to make satisfactory progress with Apple regarding alternative commercial arrangements for the current licence and royalty agreement.
“Imagination has been unable to make satisfactory progress with Apple to date regarding alternative commercial arrangements for the current licence and royalty agreement,” the company said.
It added: “Imagination has therefore commenced the dispute resolution procedure under the licence agreement with a view to reaching an agreement through a more structured process.”