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Imagination Tech Shares Plunge as Apple Ends Deal With British Firm

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Shares in Imagination Technologies plunged by nearly 70 percent on Monday, after Apple informed the British firm that it plans to stop using its graphics technology in Apple consumer devices in up to two years' time.

Imagination said Apple had made the decision because the tech giant was developing its own independent graphics processing chips, which would reduce its reliance on the company.


The news delivers a major blow to Imagination Technologies, which traditionally provides the PowerVR graphics architecture found in Apple's full range of iOS devices and receives a small royalty on every sale, which amounts to up to half of the British firm's revenue.

In a press release posted on the company's website, Imagination said it doubted that Apple could go it alone without violating Imagination' patents, intellectual property and confidential information.
Apple has used Imagination's technology and intellectual property for many years. It has formed the basis of Graphics Processor Units ("GPUs") in Apple's phones, tablets, iPods, TVs and watches. Apple has asserted that it has been working on a separate, independent graphics design in order to control its products and will be reducing its future reliance on Imagination's technology.

Apple has not presented any evidence to substantiate its assertion that it will no longer require Imagination's technology, without violating Imagination's patents, intellectual property and confidential information. This evidence has been requested by Imagination but Apple has declined to provide it.
The firm said that Apple's notification had triggered talks on alternative commercial arrangements for the current license and royalty agreement.

Apple has been a licensee and stakeholder in the company since at least 2008, and became a key investor in mid-2009 after raising its stake in the firm to 10 percent. Apple paid Imagination license fees and royalties totaling 60.7 million pounds for the year to end-April 2016 and is expected to pay about 65 million pounds for this year, Imagination said.

Late last year it was reported Apple was in "advanced talks" to acquire Imagination Tech after the British chip maker announced job cuts. Despite confirming the talks, Apple subsequently decided not to make a buyout offer, but several Imagination employees were recruited by Apple as part of its efforts to build an in-house graphics team.

Article Link: Imagination Tech Shares Plunge as Apple Ends Deal With British Firm
 
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recoil80

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Jul 16, 2014
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It is unusual for Apple to make such a statement about its future plans since they're talking about a couple of years.
And I don't understand why they didn't buy the company since they have plenty of cash. If they're building a custom GPU from the ground up they're going to need a lot of expertise, since they are already stakeholder of Imagination why don't just buy more stocks and acquire the company with all its patents and employees?
 
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Avieshek

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It is unusual for Apple to make such a statement about its future plans since they're talking about a couple of years.
And I don't understand why they didn't buy the company since they have plenty of cash. If they're building a custom GPU from the ground up they're going to need a lot of expertise, since they are already stakeholder of Imagination why don't just buy more stocks and acquire the company with all its patents and employees?

  • 15-24 months from today = iPhone 8s
  • Court Cases = Online Presence.
  • You have to send notice. As a corporate, you don't say, "We wouldn't use your services from tomorrow".
 
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G4DPII

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Jun 8, 2015
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Apple didn't make it public, Imagination did.

It will also be almost impossible to build a GPU from scratch without infringing on Patents already in place. This could come back to bite them in the backside in a few years.
 
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gnasher729

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Nov 25, 2005
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They asked Apple for evidence that Apple is not using Imagination's patents. Obviously Apple can't deliver that evidence, because right now, and for the next 15-24 months, they _are_ using these patents and paying for them.

Imagination doesn't have the imagination how Apple could build graphics hardware without infringing their patents. But you can work around _any_ patent, especially if the patent is known. And many patents are there for a slight improvement in efficiency; those can usually easily be worked around by giving up a few percent of efficiency. Other patents are not relevant anymore and there is no need to use them in a new chip.
 
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btrach144

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Aug 28, 2015
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It is unusual for Apple to make such a statement about its future plans since they're talking about a couple of years.
And I don't understand why they didn't buy the company since they have plenty of cash. If they're building a custom GPU from the ground up they're going to need a lot of expertise, since they are already stakeholder of Imagination why don't just buy more stocks and acquire the company with all its patents and employees?
They poached the employees instead. Way cheaper.

Is it a cheap shot? Yeah
 
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Nozuka

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Jul 3, 2012
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Apple also makes their own CPU design, but they still have to pay for an ARM Architecture License.
I'm sure a deal like that could be made for a GPU design too. And Imagination is not the only player they can make such a deal with.

Imagination probably didn't give them as much control as they wanted.
 
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recoil80

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  • You have to send notice. As a corporate, you don't say, "We wouldn't use your services from tomorrow".

I understand that, but I thought those kind of communication between companies were confidential and not made public.
As an example we read rumours about Samsung or TSMC manufacturing the next SoC, but we don't have official statements from Apple about that kind of things.
 
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bollman

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One can always argue it was a **** move of Apple to poach the employees and then leave the company to shrivel away, but it was of course way cheaper and we have no idea, perhaps the CEO was impossible to work with or something.

What is for sure though is that for every empty company carcass that Apple leaves behind after just eating them up and spitting out the remains, some companies might actually get second thoughts about working with Apple. Sure, in the short run, they might make loads of money, but in the long run, the companies might go belly up when Apple leaves them after poaching all the employees and knowledge.
It might actually hurt Apple that they seem very reluctant to buy companies they've worked with for years. Someday some company with vital technology might decline to work with Apple due to the risk of being "destroyed".
 
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Larryzuluking

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Dec 14, 2015
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It is unusual for Apple to make such a statement about its future plans since they're talking about a couple of years.
And I don't understand why they didn't buy the company since they have plenty of cash. If they're building a custom GPU from the ground up they're going to need a lot of expertise, since they are already stakeholder of Imagination why don't just buy more stocks and acquire the company with all its patents and employees?

They didn't really need them. Apple has an insane Graphics team that they have been building, that consists of top talent from Nvidia, AMD, Intel, & Imagination. In fact, they hired the COO of imagination. Right now, With Apples latest chips, they make 2 of the 3 components needed to make there own Graphics chips (shader cores & Graphics driver). They now only use imagination for there fixed function Graphics, which is the last part needed to create there own Graphics chip. Imagination holds the title for consistently making the most powerful mobile Graphics chips in the industry, & its said that Apples (shader cores & Graphics driver) are alot more powerful & efficient than even Imaginations.
 
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BBCWatcher

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Jan 28, 2008
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But you can work around _any_ patent, especially if the patent is known.
Many other scenarios are possible, often in combination. Examples:

1. The entity holding the patents is itself infringing patents you hold, or your ally holds. So if Company I wants to go to war with Company A, Company A (and/or Company C) might sue Company I for infringing Company A's (or Company C's) patents. The patent portfolios need not be related.

The courts might then determine in the end that, yes, everybody is infringing everybody. ("Ooops!") So, financially, the patents cancel each other out, more or less. (The attorneys win, of course.) Positive net cash flow in one direction then becomes zero net cash flow.

Apple has lots of patents, and so do Apple's friends. Imagination might be violating some of them yet not paying Apple any patent royalties...yet.

2. Patents expire, and some of them may be expiring just before Apple wants to do something else.

3. Somebody else is infringing one or more Imagination patents but agrees to indemnify Apple partially or fully, to win Apple's business.

4. There are better patents available, perhaps expired ones. Patent registration offices aren't known for rejecting many patent filings, and perhaps the patents Imagination holds are of dubious quality.
 
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gnasher729

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Nov 25, 2005
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They poached the employees instead. Way cheaper.

Is it a cheap shot? Yeah

Remember that Apple, Google, Facebook and others had to pay a major fine (9 digits) because they were caught having an agreement NOT to poach employees from each others. So obviously poaching employees is absolutely fine and expected behaviours. I wouldn't mind being offered a much higher salary from a competitor.
 
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recoil80

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Jul 16, 2014
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They didn't really need them. Apple has an insane Graphics team that they have been building, that consists of top talent from Nvidia, AMD, Intel, & Imagination.

You mean they don't need the employees or the patents?
 
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solipsism

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Jan 13, 2008
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Apple could end up losing a lot of money in lawsuits , they should've just bought the company to save time and money.

There's no "should've." We have no inside information as to what the best course of action would be for Apple, but we can reason out that Apple has access to vast amounts of information, experts and other resources to figure out what they "should" do.

We can also apply a little understanding of the industry to know that if they're within 2 years of dropping their license with ImgTech, it means they've been working on their own designs for some time, believe that they "will" have them built into their bespoke chips by then—yet, probably still with contingency plans—and, as had the bean counters figure out the financial range of success and failure across an exhaustive number of scenarios.
 
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gnasher729

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Nov 25, 2005
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4. There are better patents available, perhaps expired ones. Patent registration offices aren't known for rejecting many patent filings, and perhaps the patents Imagination holds are of dubious quality.

An old, expired, patent together with the ability to put a billion transistors into a chip can produce something very powerful. Or let's say Imagination has a patent that lets you save half a million of ten million transistors - Apple can afford to just ignore this.
 
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Larryzuluking

macrumors newbie
Dec 14, 2015
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You mean they don't need the employees or the patents?

I don't think they need the company or the patents anymore. See, there Graphics team is made up of Graphics engineers from so many different companies, Apples ground up Graphics chip design may have nothing to do with Imaginations patents, or a small number of them, that's easy far Apple to pay for.
 
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