Imagination Technologies falls after Apple results

With Apple reporting its first fall in sales in 15 years, one of its suppliers has seen its shares come under pressure.

Chip designer Imagination Technologies, which gets around half its revenues from the iPhone maker, is down nearly 2% at 235.75p after the overnight news from the US. Apple’s revenues declined by 8% to $215.6bn (£177bn) while profits fell 14% to $45.7bn.

But analysts at Liberum said Apple sold more iPhones in the fourth quarter than expected, and maintained the company’s update was positive for Imagination:

Apple sold 45.5m iPhones in its fourth quarter, higher than market expectations of 44m. The company said that demand is outstripping supply in the vast majority of places, particularly for the iPhone 7 Plus.

Guidance for the December quarter is for $76bn to $78bn of revenue, broadly in-line with market expectations and flat year on year. Apple’s share was down after results because of gross margin being guided down in the current quarter, with no revenue upside despite Samsung’s issues.

However, from Imagination’s point of view these results and guidance is positive in our opinion. Strong third quarter iPhone shipments are positive, while the flattish December quarter guidance with supply shortages suggests that there is unlikely to be an inventory correction.

This is likely to support higher royalties for Imagination from Apple in 2017.