Imagination finally lands chip firm MIPS after bidding frenzy

BRITISH chip designer Imagination Technologies has finally won the bidding for US-based company MIPS, in a deal that will speed up its entry into the fast-growing processor industry.

The company agreed a $100m (£61.7m) price for MIPS yesterday, and bidding rival CEVA said it would not up its offer.

The agreed price comes after a series of bids from the two parties. Imagination had agreed a $60m sum for MIPS last month, but then had to bid $80m after CEVA waded in. CEVA then offered $90m last week. However, the company backed down after Imagination’s latest bid. “Further increasing the purchase price would not meet our financial objectives,” CEVA chief executive Gideon Wertheizer said yesterday.

The deal, which is expected to complete in the first quarter of next year, will be paid for in cash.

It follows the majority of MIPS’s value – its patent warchest – being sold for $350m to a consortium including Cambridge technology company ARM Holdings.

Imagination will use MIPS’s operating business to diversify its offering as it moves into the processor market dominated by ARM. Shares fell yesterday on warnings the move could be risky.

WHY IS IMAGINATION SO KEEN ON MIPS?
■ Imagination, which designs microchips and makes royalties on sales of chips that use its designs, is now paying almost double what was agreed for MIPS last month. The price comes after two rival bids from California chip designer CEVA, which now says it will not bid further.

■ However, in buying MIPS, Imagination is not buying a successful, healthy business – the company made a $9m (£5.6m) loss in the year to July. It is, in fact, signalling a move into a new market, which some analysts have flagged as a risky manoeuvre.

■ While Imagination is generally seen as the market leader in smartphone graphics chips, which generate what is displayed on the screens of devices such as Apple’s iPhone, it has a much smaller presence in the processor territory dominated by another British chip designer – Cambridge-based ARM Holdings.

■ Processors are the “brain” of a computer – they crunch the numbers on applications, and are present in electronic devices from smartphones to televisions to car dashboards. Imagination – part owned by Apple – is signalling a move into this area with the MIPS deal.

■ Imagination’s chief executive Hossein Yassaie has outlined processors as an area of extraordinary growth in the next few years, as more everyday objects, such as fridges and central heating systems, become connected to the internet and thus need computing power.

■ Buying MIPS – which has a history in processors – would speed this transition up, although Yassaie was determined to make Imagination a processing powerhouse even if the MIPS deal had not gone through. Experts have questioned the viability of this move, with more established competitors in this space.