Beleaguered Imagination Technologies (IMG) appears to be preparing for battle. The tech group has put its two secondary business divisions up for sale in what seems like an attempt to shore up its balance sheet.
In April, Imagination lost £500m of its market capitalisation after it revealed Apple (US:AAPL) - which contributes half of its overall revenue - will stop licensing its Power VR graphics component in future models of the iPhone. Management has failed to "make satisfactory progress" in its attempts to form a new commercial relationship with the US tech giant and has now commenced a dispute resolution procedure.
But Imagination is not approaching this battle from a position of financial strength. A little under a year ago it was forced to pay a one-off fee to its credit supplier, HSBC, after it breached its banking covenants. That's why Oliver Knott, an analyst at N+1 Singer, thinks that the sale of its two secondary divisions - MIPS and Ensigma - is "a logical step to free up available resources". Mr Knott expects the sale of these assets to cover the group's current net debt position of roughly £33m, but does admit that the group is "not selling from a strong position".
Richard Holway, chairman of technology sector analysis group Tech Market View, thinks the situation is "desperately sad". But Mr Holway has not given up hope of salvation. "The solution, of course, for both Apple and Imagination, would be for Apple to take [Imagination] over."
