One of Apple’s UK partners is in full-blown crisis mode and shares are tanking

Getty/Justin Sullivan Imagination supplies graphics chips to Apple for the iPhone and iPad.

Imagination Technologies, a microchip designer that works with Apple and counts the US tech giant as its third biggest shareholder, is in big trouble.

On Monday, the company announced a huge overhaul of its business in a bid to reverse recent losses and adapt to a slowdown in the market. The changes include:

• CEO Sir Hossein Yassaie stepping down;
• The sale of Pure, Imagination’s consumer technology business known for digital radios;
• A cost-cutting drive and restructuring to save £15 million by year-end April 2017;
• A full operational review, including R&D spending.

Sir Hossein has been CEO of Imagination Tech for 18 years. Non-executive director Andrew Heath is being parachuted in as the new turnaround CEO. Heath was previously CEO of chemicals group Alent and was also an executive at Rolls-Royce.

The panic button manoeuvres came as Imagination warned that the recovery in the market it had hoped for in the second half of its financial year had failed to materialise and it is now expecting to make a loss for the year.

Imagination’s shares dropped 10% last year when it first announced it was set to make a first-half loss and shares collapsed as much as 18% when trade began in London on Monday. They’ve pulled back slightly and are now down just over 8% at 8.50 a.m. GMT (3.50 a.m. ET).Investing.com

Imagination Tech designs graphics microchips and is one of the few publicly named suppliers of Apple, with its graphics chip designs used for iPads and iPhones. The US technology giant owns 8.42% of the Hertfordshire-based Imagination and is its third biggest shareholder.

Imagination gets revenue from microchip licensing and royalties — earning cash from letting people build its microchip designs and then again when they are used in devices like phones and tablets. The company’s share price rose the smartphone boom of the late 2000s, with its share price rocketing 600% between 2008 and its peak in 2012.

The company’s share price rose in-line with the smartphone boom of the late 2000s, rocketing 600% between 2008 and its peak in 2012.

But the company has struggled to adapt to a slowdown in smartphone sales in recent years. Imagination’s share price is down 50% over the last year and over 80% lower than its 2012 peak.Investing.com

The company says in Monday’s update:

Since the Group published its half year results in December 2015, market conditions have not improved and the slow-down in the overall semiconductor sector has continued, reinforced by global uncertainty about future trading prospects with China.