UPDATE 1-Imagination Tech warns on profit on licence deal delays

Thu May 2, 2013 7:56am EDT

* Says licensing hit by shift in emphasis at chipmakers

* Sees licensing revenues 27 mln stg vs forecast 35 mln

* Shares fall as much as 27 pct

By Christine Murray and Paul Sandle

LONDON, May 2 (Reuters) - Imagination Technologies said annual profit would miss forecasts due to delays in signing licensing deals as some of its chipmaking customers diversify from smartphones and tablets into areas like smart technology for cars.

Shares in the British firm, whose technology is in Apple's iPhone and Samsung's Galaxy S4, fell as much as 27 percent on Thursday as it cut revenue forecasts for the year ended April and for its new financial year.

Chief Executive Hossein Yassaie said he was confident the issue would be a short-term phenomenon, related to the "lumpy" nature of licensing revenues, and that demand for its graphics and video processors had not fundamentally weakened.

However, some analysts were concerned by the magnitude of the slowdown in second-half licensing revenues and by the downgrade to forecasts for the new financial year.

"Perhaps the company is just taking the opportunity to set expectations very low, but the market is likely to ask whether there are more structural reasons behind licencing weakness," Investec analysts said.

They cut their earnings forecasts by 28 percent for the year ended April and by 19 percent for the current financial year.

Shares in Imagination, in which Apple and Intel hold stakes of 8.7 percent and 14.5 percent respectively, were down 19 percent by 1130 GMT to 342 pence, giving it a market valuation of around 924 million pounds.

Chipmakers like Renesas and Texas Instruments are battling to capture new markets beyond smartphones and tablet computers, as so-called smart technology spreads into a broader range of consumer goods.

Imagination said this had delayed some new licensing deals, but CEO Yassaie denied there was a bigger problem.

"It doesn't mean there is a fundamental issue with our relationships; it means we have to give these customers time to refocus and re-engage," he said. "There is no long lasting impact on our business; we have very strong design wins in all of our segments, from graphics to video.

"In connectivity, a new area for us, the interest and growth in engagement has been dramatic, and that will show up going forward in our licensing activities."

Licensing revenue for the year ended April 30 would be around 27 million pounds ($42 million)- analysts were forecasting about 35 million - and for the new financial year would be 30-35 million, which Yassaie said was conservative.

Some analysts have expressed concern that the firm is losing market share to British rival ARM Holdings, which is increasingly targeting the graphics segment.

Imagination said difficult trading in the first four months of 2013 at Pure, a division which designs and manufactures digital radios, would also hit annual profit.

Yassaie said there were a number of new products in the pipeline at Pure, and there were no plans to sell the business.

Before the statement, analysts were forecasting the firm would make a pretax profit of 41.75 million pounds for the year ended April, according to a Thomson Reuters I/B/E/S poll.

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