Imagination Tech slumps on smartphone slowdown

Reuters News
Posted: Dec 11, 2013 3:28 AM

By Paul Sandle

LONDON (Reuters) - Imagination Technologies said a slowdown at the top end of the smartphone market would hit the number of chips shipped with its graphics and video technology in the second half of the year, sending its shares down 15 percent.

Its lower guidance, combined with disappointing first-half results, pushed Imagination's shares down to 205 pence, their lowest in more than three years.

The British company said it expected its partners, which include Apple, to ship 580-630 million units, excluding the MIPS technology that Imagination bought last year, down from a previous forecast of about 650 million.

Chief Executive Hossein Yassaie said growth in the smartphone market had come off the highs seen in recent years, resulting in a miss in revenue against consensus.

"It's primarily a softness in the market in general, but specifically in the rate of progress in mobile markets," he said in an interview on Wednesday. "But I don't see these variations as a trend."

Revenue, up 19 percent to 85.2 million pounds ($140 million)for the six months to the end of October, fell about 9 percent short of an analyst consensus forecast of 93.3 million pounds.

Adjusted pretax profit fell 13.2 million pounds ($21.7 million) from 16.8 million, hurt in part by growing losses at its Pure digital radio business.

Analysts at Investec said the interim results "look ugly", with misses versus consensus all the way down the numbers.

"The group is in a transitional year with major licensees having pulled out of the smartphone market; others have the potential to ramp up activity, but in financial year 2015," they said.

Yassaie said licensing had picked up in the period after a slump in the second half of last year, with deals signed with Intel and another with Broadcom that will help Imagination get its technology in more smartphones made by Samsung.

He said the group was still on track to report licensing revenue of 38-43 million pounds for the year.

We said the company's graphics and video technology would retain its share of being in about half of all smartphones. "Clearly Apple use our technology, and we have big routes into Samsung," he said. ($1 = 0.6087 British pounds)

(Editing by Sarah Young and Tom Pfeiffer)