Chips are down at Imagination as Apple's iPhone sales slow

Chief executive quits British tech firm as value slumps from £2bn to £350m

Nick Goodway,Jamie Nimmo
Tuesday 09 February 2016 01:28
Some of these features are buried in the Settings menu while others are hidden in plain sight.
Some of these features are buried in the Settings menu while others are hidden in plain sight.

Sir Hossein Yassaie, the architect of the British chip designer Imagination Technologies’ success, has become the latest victim of slowing smartphone sales at Apple.

He quit yesterday as chief executive of Imagination after the firm said it will make another loss this year and put its Pure digital radio arm up for sale.

Sir Hossein, who was born in Iran and was knighted for services to technology in 2013, has run Imagination for the past 18 years but has been under increasing pressure from big investors in recent months as its biggest customer, Apple, cut orders.

He will leave with a six month pay-off. Last year his total package was worth £835,000 which was hugely down on the £6.4m he picked up in 2012 when Imagination shares peaked at 712p, valuing the company at close to £2bn.

The value of the company has since slumped to £350m, which forced its ejection from the mid-cap FTSE 250 index last summer. Imagination shares crashed 16 per cent in early trading yesterday before recovering to finish 2.5p lower at 129.25p.

Andrew Heath, a non-executive director who used to run chemical group Alent until its £1.35bn takeover last year, has become interim chief executive as Imagination looks for a successor to Sir Hossein.

Imagination said it would cut costs by £15m for next year but expects a “material reduction in [annual] revenues” along with lower royalty fees for the financial year ending April. The firm also admitted that it was closing deals more slowly than expected in 2016.

The company had hoped to return to the black after two years of losses, with analysts expecting it to turn an £8.9m profit. However, after its third profit warning of the year, the company admitted it will now register three successive years in the red.

Sir Hossein said: “I am proud of the successes Imagination has achieved over the last decade or so. We have built Imagination from very small beginnings into the leading provider of graphics processors as well as general purpose micro-processors and connectivity solutions.

“Imagination is now one of the genuine UK-headquartered companies with significant global influence and impact.”

Bert Nordberg, its chairman, said: “Trading conditions continue to be very demanding. The measures announced will allow the business to maintain the necessary investment in key areas, in order to further strengthen our unique IP [intellectual property], technologies and system solutions.

“They will also set the group on track to deliver attractive returns in the coming years.”

Broker Peel Hunt, which put its 270p target price under review, said “all options are on the table”, including a sale of part or all of the business.

News of Imagination’s struggles hit other UK-listed suppliers of Apple, including Arm Holdings, the FTSE 100 designer of chips for the iPhone, whose shares dropped 63p or 6.4 per cent to 920p yesterday.

Slowing sales of the iPhone in China, which is now the world’s largest smartphone market, has wiped more than $200bn (£139bn) off the value of Apple over the last six months.

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