The shock announcement by Apple that it was planning sever the links with Imagination Technology, the British company whose patents Apple has been relying on in connection with the graphics in Apple devices, has caused Imagination’s shares to plummet by 70%.
Imagination relies on Apple for at least half of its license and royalty business and following Apple’s statement that it will no longer use Imagination’s intellectual property in any new products in two years’ time coupled with the fact that Apple has not only been developing a “separate independent graphics design in order to control its products” it has allegedly been poaching Imagination staff over the past two years, all of which leaves Imagination in an invidious position with a £500 million hole in its finances.
Apple’s killer blow comes in the wake of its unsuccessful attempt to buy Imagination. The deal faltered after lengthy negotiations broke down; questions may be asked as to why Imagination did not recognise that a global giant such as Apple who not only featured so much in the future and success of Imagination but was also the largest shareholder and the biggest client by a country mile would be unlikely to just give up and revert to the previous arrangement when clearly change was on the horizon.
It transpires that Apple had a fairly advanced Plan B that was ready to swing into action leaving Imagination reeling. It is difficult to see how Imagination can turn the situation round, having been caught by surprise with no prepared response, their comeback amounted to clinging to the fact that Apple couldn’t do without them by effectively saying that Apple hadn’t presented any evidence that it will no longer require Imagination’s technology; doubting that Apple can get by without infringing Imagination’s patents and a little sabre rattling about a potential legal battle. At the same time entering talks around “potential alternative commercial arrangements”.
If Imagination does decide to pursue the legal route it will face a David and Goliath fight without necessarily achieving the surprise result. Apple’s strategy has been planned for some time and almost certainly will have considered the intellectual property aspect. Imagination may pay a painful price for not landing a deal when the offer was on the table, particularly given the fact that Apple is known to for bringing external expertise in house.
It is unwise to believe that a business relationship, even if it has lasted a decade and even if you think your expertise is irreplaceable, is unbreakable.
Keep close to your clients and be aware of changes on the horizon, you may not be able to halt or change anything but you may be able to bend a situation to your advantage.
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