ibusinesslines.com
ibusinesslines.com May 26, 2018


Imagination likely to see Apple royalties slashed, then end

20 April 2017, 06:51 | Charlene Valdez

UBS predicts that Apple will initially reduce the royalty rate it pays on each iPhone and iPad produced to just ten cents per device before ceasing payments altogether after two years ...

Earlier this month, the British designer of graphical processing units used in smartphones said its largest customer would stop using its technology within 15 to 24 months, causing the stock to lose almost two thirds of its value in a single day. The move resulted in a 71% single-day plunge in Imagination's stock.

The prediction includes the expectation that British-based Imagination will become loss-making by 2019 without any Apple royalties to fall back on, and that the firm will have to work out a cost-cutting strategy if it is to survive.

Imagination is reportedly in talks with Apple over a new licensing deal, but UBS analysts forecast that Apple is likely to bring down the royalty rate, now at around $0.30 per unit, to closer to $0.10, which is the rate Imagination now charges customers such as MediaTek. That's where Apple might see an opportunity to move in and buy.


Earlier this month Imagination announced that Apple would be cutting all ties over the next two years, and as such would not be eligible for royalty payments under its current agreements with the tech giant.

Apple, the world's most valuable company, commands a market capitalization of $741 billion US that is around 2,000 times greater than Imagination's equivalent of 370 million U.S.

Apple shares closed Tuesday at $141.20 USA, very near their 52-week peak of $145.46, versus a gulch of $89.47 US, plumbed in mid-May.



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