Why Imagination Technologies Group PLC Fell 10%

Intell sells down stake in Imagination Technologies Group PLC (LON: IMG) for £54m.

Mark Stones

Mark Stones (TMFMumbojumbones) joined The Motley Fool in 2014 and initially worked as a writer for Fool.co.uk, before joining the Fool’s analyst programme. Mark earned a BA in English from Loughborough University. Although he spends more time reading annual reports than Russian literature these days, he still appreciates a novelist’s antipathy toward the accepted view, which is a useful attitude when trying to sniff out hidden gems on the stock market. His approach to investing has been largely influenced by the principles of Warren Buffett and Peter Lynch. He also takes a special interest in the work of healthcare companies. Outside of investing, Mark plays guitar, enjoys good writing and has a guilty passion for combat sports.

Published 27 June, 2014 8:54 am BST

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

What: Shares of microprocessor design company Imagination Technologies (LSE: IMG) fell by as much as 10% in early trade after Intel Capital, the investment arm of Intel Corporation, reduced its holding in the FTSE 250 company from 13% to 4%. Intel’s licence agreements with Imagination are unaffected by the move.

So what: Intel placed 25m shares at 205p raising £54m. Apple, Imagination’s biggest customer, still has an 8.6% stake.

Earlier this year year Apple and Imagination extended a licensing deal which lets the iPhone maker use Imagination’s chip designs in its mobile devices. The deal allayed concerns that Apple, which is responsible for 20% of Imagination’s revenues, would turn to a rival company.

Now what: Even after this morning’s fall, shares of Imagination have posted a 17% gain in a flat market this year. The company unveiled its full-year results on Wednesday with rising revenues (up 13% to £171m) cheering shareholders.

But Credit Suisse has said it’s concerned that lower growth in the smartphone market might make shipment targets “optimistic”.

The smartphone market is expected to grow from 1bn units to 1.4bn units by 2016 and Imagination believes that ultimately achieving a graphics market share of 40% to 60% of the total smartphone market is “reasonable and realistic”.