Apple in talks over acquisition of graphics partner Imagination Technologies

Mobile device giant Apple has confirmed it has had discussions with UK mobile graphics chip designer Imagination technologies about potential acquisitions.

It’s not at all common for Apple to ‘comment on rumours and speculation’, but the original story by Ars Technica prompted such a hysterical reaction from the stock market (see below), with IMG shares at one stage up over 20% on the day, that Apple felt compelled to act.

“From time to time, Apple talks with companies about potential acquisitions,” said the Apple statement to the London Stock Exchange. “We had some discussions with Imagination, but we do not plan to make an offer for the company at this time. This announcement is made in accordance with Rule 2.8 of the Code. As a result of this announcement, Apple will, except with the consent of the UK Panel on Takeovers and Mergers, be bound by the restrictions contained in Rule 2.8 of the Code.”

Among the stipulations in Rule 2.8, which is titled ‘Statements of intention not to make an offer’, is the condition that once such a statement is made, the party making the statement isn’t allowed to make an offer for six months or even allude to such a thing.

So that’s that for the time being. Imagination designs the GPU component of Apple’s SoCs, much in the same way as ARM does the CPU part. Apple is already a significant minority shareholder in Imagination (and ARM, incidentally, which was created to make the chip inside the Apple Newton), but that has always been viewed as a strategic position designed to prevent some other company taking it over. Intel has a similar position.

There have been many similar rumours about Apple buying ARM over the years but, apart from the fact that Apple could afford it with the money it finds down the back of the corporate sofa, it has been difficult to imagine (no pun intended) why it would bother.

Apple already has an intimate working relationship with both companies over chip design and taking either of them in-house would sacrifice all the knowledge and experience they get from working across the technology industry. Most significant, however, is the likelihood that Apple would be compelled, in the event of an acquisition, to continue to work with their other clients, such as Samsung, due to the lack of alternatives.

With that in mind the most surprising part of this story is that Apple was having those discussions at all. One reason could be that IMG’s share price is at a historical low – less than a third of its 2012 peak. The company seems to have fallen on hard times, as its recent restructuring update confirms, so maybe Apple is just keen to ensure its long-term survival.

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