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Here it is-Imagination Tech. article.
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Imagination checked by Arm’s strength
By Sally Davies
What’s in a name? As shares in microchip designer Imagination Technologies dived 20 per cent on Wednesday, investors seemed to think that the title said less about laudable ambition and more about undue optimism over the company’s decision to take the battle to Arm.
Imagination, whose strength is in graphics technology, blamed a slowing market in high-end smartphones for disappointing half-year results to the end of October. Revenues were below expectations at £85.2m, and Imagination revised downwards the number of chips its partners expect to ship for the full year.


“There will continue to be fluctuations and changes in the markets in which we operate, but we are confident that our strong and comprehensive IP families, and the solution-centric platforms they are enabling, will allow us to take advantage of the numerous growth opportunities ahead,” chief executive Sir Hossein Yassaie said.
Profit before tax fell year-on-year in the period from £10.4m to £2.2m, pulling down earnings per share from 3p to a loss of 0.4p.
The Hertfordshire-based company makes most of its money from licensing and royalties. Apple devices use half of the chips made with Imagination’s intellectual property.
But much of the growth in the smartphone market now comes from lower-cost handsets, particularly in China. Analysts say that Arm has moved quicker than Imagination in designing chips for these cheaper, less powerful phones.
“Arm has undoubtedly flipped Imagination at the low end – perhaps on price, perhaps on a reduced function set,” said Lee Simpson, analyst at Jefferies.
“Now they’re seeing their customer base asking them to address that space, but they’re coming to that market as the second player.”
But other analysts say that the company’s decision not to focus on chips for less powerful devices is correct.
“Growth in low-end in any market is only attractive in the short term,” said Nick James of Numis. “Prices get eroded and it all just becomes a race to the bottom.”
Imagination was also hurt by some of its chipmaking customers, such as Renesas and Texas Instruments, pulling away from smartphones and tablets.
The company is banking on investments in central processing units and communications technology to take advantage of an era of connected devices, often called “The Internet of Things”.
Its longer-term gambits include the February acquisition of lossmaking US company MIPS that places Imagination more squarely at odds with Arm in CPU design.
“No market likes a monopoly; the advantage for Arm is that they haven’t had a real competitor,” said Sir Hossein, saying that the advantage of the MIPS technology is its efficiency, size and low power consumption.
But it will be hard to crack Arm’s market dominance. “It’s a slow process of pulling back Arm’s tight fingers in this market, and there’s no guarantee that they’re going to do it,” said Mr Simpson.
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