Imagination Technologies, the designer of graphic chips for mobile phones, netbooks and set top boxes, has slumped nearly 8% on suggestions it may have lost out on a new contract from a key customer.
Analyst Philip Sparks at Evolution Securities said he believed Samsung had decided to use graphics from rival Arm in its forthcoming Orion processor, possibly confirming earlier speculation. He said:
A blog video taken at this week's Arm's technology conference appears to confirm that Samsung's Orion processor uses Arm graphics. Assuming that the report is accurate, this is a blow for Imagination. Samsung Mobile
(the most likely launch customer for the Orion chip) is currently Imagination's leading customer among Android handset makers. Samsung has ambitions to ship 40m smartphones next year.
This reaffirms our view that Imagination's market share will come under pressure as Android shipments rise. The shares are priced for perfection, but Samsung's decision is a reminder that Imagination, unlike Arm, has plenty of competition. [We have] downgraded to sell, target price 325p.
Imagination's shares are currently 31.6p lower at 371.9p, while Arm is also down, 3.9p lower at 346.7p.
