Graphics component specialist Imagination Technologies (IMG) has put itself up for sale amid its ongoing dispute with tech giant Apple (US:APPL). Shares in the Hertfordshire-based company rallied as much as 20 per cent on the news, offering shareholders some salvation following a disappointing few months.
In April, Imagination's shares lost 60 per cent of their value in one day after Apple announced that future versions of the iPhone would not use its Power VR graphics hardware which have been used in the iPhone for the last decade. It was estimated that Apple contributed half of Imagination's revenue and even more of its profits.
One month after this set back, Imagination Technologies - now with a market capitalisation of just £350m - announced that it would be entering into a dispute resolution procedure with Apple - the world's most valuable listed company with a market capitalisation of $763bn (£603bn). Management claim that the US tech giant could not possibly have developed a graphics processing unit that did not breach the Power VR's patent. At the same time, the group announced that it would be putting its two smaller division - MIPS and Ensigma - up for sale in what tech analyst Ollie Knott described as "a logical step to free-up available resources".
Now management claims that it has received interest from a number of parties for a potential acquisition of the whole group. The question is if Apple - which has been using the group's technology for more than 10 years - doesn't want to buy the company, who does?
Analysts at N+1 Singer expect potential bidders to be primarily interested in the PowerVR patent portfolio, suggesting that one of Apple's competitors may want to get its hands on the technology. Imagination's management had previously suggested that its newer Mediatek Helio X3 technology had a future in virtual reality headsets. Therefore perhaps Alphabet (US:GOOGL), Amazon (US:AMZN) or Samsung might be interested.
The share price reaction to the news suggests that investors may be hopeful that multiple parties are interested in the company, which could create a bidding war and drive the sale price up. Although it could also be argued that Imagination may have had to put the entire business up for sale if companies were not interested in buying MIPS and Ensigma alone.
Richard Holway, chairman of technology sector analysis group Tech Market View, still thinks the best fit for Imagination would be within Apple. As the US group still owns 8 per cent, it is not entirely unreasonable to suggest it may make a bid.
