(BN) Imagination Technologies Falls on Royalty Squeeze: London Mover

>> commoditization of the Tool << 

Sept. 13 (Bloomberg) -- Imagination Technologies Group Plc, the Apple Inc. supplier partially owned by the iPhone maker, fell the most among major U.K. tech stocks after saying its royalty rate dropped as more people buy cheaper smartphones.

Imagination Tech declined 7.2 percent to 566 pence, the largest drop in more than four months and the biggest fall among the 26 stocks on the FTSE All-Share Tech Index.

"Strong unit volume growth has steadily extended to the lower end of the smartphone market," reducing the royalty rate, the company, based in Kings Langley near London, said today in a statement.

The designer of components including graphics processors soared to the highest price in 18 years in March after Goldman Sachs said royalties from designs used in Apple's iPad and other products would boost earnings. Apple unveiled a speedier iPhone yesterday that is poised to become the fastest-selling technology gadget in history.

There is "very little to get excited about" as the slipping royalty rate counters bullish arguments that the figure will increase, Eoin Lambe, an analyst at Liberum Capital, said today in a note. Lambe has recommended selling the stock since at least Jan. 17, 2011, according to data compiled by Bloomberg, and since then it advanced almost 50 percent through yesterday.

Volume Growth

Imagination Tech said today it is experiencing "strong growth in unit shipment volumes" for mobile phones, table computers, mobile gaming and other applications.

"A major opportunity here is to benefit from Apple's future product plans for the TV market," Nick James, an analyst at Numis Securities, said in a note to investors. The London- based analyst reduced his recommendation on the stock to hold from buy, saying the shares have had "a good run," and maintained a price target of 590 pence.

Chief Executive Officer Hossein Yassaie reiterated today that the company plans about 1 billion annual unit shipments by 2016.

"The licensing pipeline remains robust, although there is the usual uncertainty over the timing of deal closures," the company said. "Significant design wins" will soon reach production to "drive strong growth in royalty volumes and revenue."