Just over a month ago, Imagination Technologies dropped the bombshell announcement that their largest customer, Apple, would be phasing out their use of Imagination’s GPU IP in their SoC GPU designs. Specifically, Apple expects that they will no longer be using Imagination’s IP for new products in 15 to 24 months. This put Imagination in a significant pinch, as Apple is a full half of the company’s overall revenue and 69% of their GPU revenue. As a result, Imagination stands to lose the bulk of their GPU revenue starting two years down the line.

At the time the company announced that they would be engaging with Apple to discuss “potential alternative commercial arrangements” to the companies’ current agreement, and now a month later, Imagination has published a further update on that. Discussions in the last month have not made what Imagination considers satisfactory progress, and as a result they are escalating the discussion to go through the dispute resolution clause of their current contract.

Just what this will entail is unknown since the contract isn’t public, but as Imagination so delicately puts it, they’re seeking to reach an agreement with Apple “through a more structured process.” It’s unknown what will happen if this process fails, but for the moment it does not appear that a further escalation is off the table. If nothing else, Imagination will have the option of taking Apple to court for patent and IP violations once the current agreement expires. Though the company is also making it clear that they’d rather not go that far; it’s hard to imagine Imagination wants to go toe-to-toe with the most valuable company in the world, especially once their revenue takes a significant hit.

Meanwhile in Imagination’s bombshell of the month, alongside today’s Apple update, the company is also announcing that they are going to be refocusing the company to focus entirely on the GPU business. To that end, the company is putting their remaining non-GPU businesses – the MIPS CPU business and the Ensigma communications business – on the market. Imagination is not listing an expected price for either business at this time – or if they have already lined up any suitors – but the company believes that given the improved fiscal performance of these two divisions, that they are in a good position to sell the two divisions.

MIPS and Ensigma have been two of Imagination’s major efforts to diversify the company away from their original core business of GPU IP. MIPS was acquired by Imagination for $60M $100M in 2012 – about 4.5 years ago – while Ensigma has been part of the company since the turn of the millennium. MIPS in particular has been a long-running architecture in the embedded space, and along with x86, is the other alternative CPU architecture supported by Google’s Android OS. So the news that the engineering team and product portfolio behind the #2 architecture in mobile and embedded are being sold is a major development. MIPS and Ensigma are now joining Imagination’s Pure business, which is also in the process of being sold off.

In announcing this latest sale, Imagination noted that they are doing this to strengthen their balance sheet. At the risk of reading too much into a short fiscal statement, this doesn’t sound like a move that they are making with gusto, but rather something they have to do to save the company. Selling these divisions means that the company’s efforts to diversify have failed, but given their situation, it appears that focusing on their core competency is their best bet. Still, it does risk certain efforts in the long-term, such as Imagination’s OmniShield virtualization security technology, since that was a synergy play between owning both CPU and GPU IP.

As for Imagination’s GPU business, the sale of MIPS and Ensigma means that Imagination will be transitioning to a pure-play GPU IP provider. The company continues to develop new IP here, including the recent Furian architecture, so they have products. The question that remains is how they will survive (and ideally thrive) a post-Apple world; even if the companies sign a new agreement, Imagination’s fate is going to be based on how well they can sell GPU IP to the remaining SoC vendors, particularly in the STB and Android mobile spaces. With all other businesses in the process of being sold, the fate of Imagination’s GPU business will determine the fate of Imagination itself.

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  • melgross - Thursday, May 04, 2017 - link

    Apple has $257 billion in the bank, and you have to subtract the $88 billion they borrowed for share buybacks and expansion one the US.

    Read my earlier posts on this.
    Reply
  • Tams80 - Saturday, May 06, 2017 - link

    A company can't just be bought, and the UK government have become wary of British companies being bought due to some rather bad experiences. Reply
  • redzo - Thursday, May 04, 2017 - link

    I feel obliged. No word about mali? No comments at all about mali. Am I not getting things properly? They should have grabbed the bull by its horns: compete with arm's mali at all cost. Too late? Just go bankrupt!
    Apple was in a highly comfortable position to begin with. Im deserves all of this.
    Reply
  • melgross - Thursday, May 04, 2017 - link

    In a way, it's a shame. Imagination's IP has been ahead of everyone else. But Apple's "special sauce" had their own SoC well ahead of everyone else. Who knows just what percentage of their GPU's superiority, in apple's designs, was of Apple's own IP, in addition to Imagination's?

    And other companies have been getting closer to Imagination, in performance. I suggested Mali in an earlier post, though not by name. I said that other Imagination customers might want to go to ARM for their GPU as they already license the CPU, and ARM has been getting better in GPU IP.
    Reply
  • squiggsy - Thursday, May 04, 2017 - link

    "it’s hard to imagine Imagination wants to go toe-to-toe with the richest company in the world, especially once their revenue takes a significant hit."

    What??? Apple aren't the richest company in the world, they are only just in the top 10
    Reply
  • vladx - Thursday, May 04, 2017 - link

    Don't mind it, AnandTech has an obvious Apple bias since theor founder works for them. Reply
  • melgross - Thursday, May 04, 2017 - link

    You know, these various lists all encompass different things. Which list is "correct"? One is for sales, another is for liquid assets, but not short term, medium term or long term investments, another counts funds from depositors (for banks), another counts oil in the ground, which varies by a 4:1 ratio over time. There are so many lists, and most have different companies on them. I don't pay attention to them. Reply
  • ZolaIII - Thursday, May 04, 2017 - link

    I think they are doing quite opposite than healthy by selling MIPS. Instead they should push with it more to a consumer market towards satellite receivers where they are dominant & even more towards smart TV set's where they can achieve victory again thanks to by far superior state of software written only for MIPS regarding S2 STB tuners. It's a large enough market to partially compensate for Apple & embedded industrial sector where MIPS is still dominant is steady market without much turbulence so actually they want to sell most secure thing they have & whit which they can push a lot of their GPU IP's. Reply
  • melgross - Thursday, May 04, 2017 - link

    They've been working on it.but the best they can say right now, it that it's stable. I doubt there's a large market there, or they would have spent more energy on it. Companies make mistakes. One big mistake they often make is thinking they can buy themselves,out of trouble. If your main business is in trouble, and it was, then buying something else won't help you. Reply
  • ZolaIII - Friday, May 05, 2017 - link

    Well they certainly can't find they way out of it by selling out, stock holders can but company certainly not. To be honest with you Imagination didn't entered into smart TV market which is a large one & they can with certain advantages that MIPS do have regarding written software for STB S2 tuners it's also a potentially good market to sell more GPU IP's as today's 4K & beyond TV sets do need & graphics horse power & certainly can host more of it then a smartphones. MIPS still rules regarding self stand S2 STB tuners again mostly to developed community & supported emulations & from the start written software only for it. Reply

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