Have Apple just killed Imagination Technologies?

Wednesday, 5th April 2017 15:19 - by Rajan Dhall

Shares in Imagination Technologies fell 60% at the start of the week, this came after tech giant Apple announced they would stop using the Co.'s products in 15 months time.

Interesting times as Apple have now said they will be looking into making their own technology for future product lines, but its hard to see how they will do this without infringing Imagination Technologies intellectual property rights. The income from Apple amounts to a huge amount of total revenue for the Co., in the region of GBP 65mln. According to the Co's IR page group revenue from continuing operations for the period ending 30 April 2016 decreased by 23% to £120.0m, so does this mean half of its revenue comes from Apple!. 

Looking forward the company still produces good products in a growing market, but I feel virtual reality will only carry them so far (I may be wrong). In the interim period look out for any comments in relation to the contract being extended by Apple, any potential copy-write infringement and any potential contracts that could supplement the loss of income from Apple (i.e. another tech giant). A big question that hangs over my mind is a acquisition, if Apple will struggle to produce the products without breaking infringement laws a company like Imagination Technologies is small potatoes.  Especially as in a statement the Co. said it would be  “extremely challenging” for Apple to design a new technology from basic without infringing its intellectual property rights.

All in all the situation looks bleak and from a chart perspective I would look to sell on any bounce. I am looking for a support levels of around 50p on the downside but that would be very low. looking up, 1.20p looks to be where the share price will be capped for now.

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.