IMAGINATION TECHNOLOGIES has kicked off a "dispute resolution procedure" with the world's biggest tech company Apple, after after the two sides were unable to come to an agreement over licensing.
According to Reuters, the firm is also planning to sell two of its businesses, its embedded processor technology MIPS division and mobile connectivity unit Ensigma, in what is probably a desperate effort to raise cash after the clash.
Apple was Imagination's biggest customer until April this year, when the Brit chipmaker announced that the Cupertino company will no longer be using its PowerVR graphics tech inside its iPhones and iPads. Apple had used Imagination's tech from the time of the iPod, and received royalties from every sale of an Apple device containing its designs, including the iPhone and iPad.
However, the firm said Apple would stop licensing its designs within '15 to 24 months' in favour of developing its own graphics chips, hinting that next year's iPhone could be the first to feature an A-series chip with both a fully Apple-designed CPU and GPU.
The potential loss of Apple, which accounts for about half of the British firm's revenue, saw Imagination's share to take a nosedive, plummeting 70 per cent on the day. The stock has barely recovered since.
When the announcement was made, Imagination said that it doubted Apple could make its own chips without violating its patents, and analysts predicted a wave of legal battles ahead. It seems they were right.
On Thursday, Imagination revealed it had been unable to make satisfactory progress with Apple on "an alternative commercial arrangements for the current licence and royalty agreement".
It said in a statement: "Imagination has been unable to make satisfactory progress with Apple to date regarding alternative commercial arrangements for the current licence and royalty agreement."
"Imagination has therefore commenced the dispute resolution procedure under the licence agreement with a view to reaching an agreement through a more structured process. Imagination has reserved all its rights in respect of Apple's unauthorised use of Imagination's confidential information and Imagination's intellectual property rights."
While the dispute does not involve legal action, it is the formal process for reaching an agreement under the contract between the two companies.
Nevertheless, this is a major blow for Hertfordshire-based Imagination Technologies, which currently relies on Apple for about half of its revenue and will likely stop receiving royalties on iPhone and iPad devices within the next two years. µ
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