Imagination on Monday announced that Apple would no longer use its intellectual property, and the company’s stock sank faster than a bottomless boat on the news.
Apple planned to discontinue its use of the company’s IP in new products in 15 months to two years, ending the license and royalty agreement between the companies, Imagination said.
Those royalties currently account for about half the revenue of Imagination, in which Apple has an 8 percent stake.
Imagination’s technology and intellectual property is used in the graphics processor units in Apple’s phones, tablets, iPods, TV products and watches.
Following Imagination’s announcement, Reuters reported the UK company’s stock price fell 70 percent, to 76 pence, the lowest since 2009.
“I cannot see how Imagination would survive this, given Apple is such a large customer,” said Patrick Moorhead, principal analyst at Moor Insights and Strategy.
Difficult to Cut Cord
Imagination cast doubt on Apple’s assertion that it could build a GPU with only its own intellectual property, however, contending that such an effort would e extremely challenging and might violate Imagination’s intellectual property rights.
Imagination wants its investors to believe that Apple won’t be able to totally cut it out of the picture, suggested Ben Bajarin, a principal at Creative Strategies.
“It is certainly true that building a GPU from the ground up will likely require someone’s IP in some way for Apple, unless of course they acquired the IP they need via some other acquisition they have made,” he noted in an analysis of the announcement.
Another possible scenario is that Apple will customize the Mali graphics solution offered by ARM, which Apple already is licensed to use, Bajarin said.
What many people don’t realize is that Apple has been doing a great deal of customization of the Imagination GPU IP to fit its own needs, Bajarin explained.
“Imagination provided the GPU core, but Apple began adding more and more of its technology and displacing Imagination’s technology,” observed Kevin Krewell, a principal analyst with Tirias Research.
“It may have gotten to the point where Apple wasn’t using enough of Imagination’s technology to make it worthwhile to continue paying for it,” he told the E-Commerce…