Higher operating costs weigh on Imagination Tech
By Paul Sandle
LONDON (Reuters) - Profit growth at Imagination Technologies has been dampened by higher research costs, overshadowing a 90 percent jump in shipments of chips containing its graphics technology used in products like Apple's iPad.
Shares in the British company reversed early gains and were trading 4 percent lower as analysts said the operating expenses had weighed on earnings.
Imagination, which counts both Apple and Intel as shareholders, said the rise in operating expenses to 43.8 million pounds in the first half from 31.4 million a year ago was down to increasing research costs and recruiting more staff.
It said it expected the rate of operating expense growth to slow in the second half and in the next year.
Analysts at UBS said the higher expenses had offset a solid revenue performance.
"While Imagination highlights that the speed of increase (in operating expenses) is short term and in response to a growing customer base, it poses a significant headwind to the profit growth expected," they said on Wednesday.
Imagination, whose shares were trading at 429 pence by 6:41 a.m. ET, posted adjusted pretax profit of 16.8 million pounds ($27 million) on revenue of 71.4 million, up 27 percent and beating analysts' expectations of 68 million.
Some 237 million chips containing its technology were shipped in the six months through October, it said, putting the group on track to reach 500 million chips for the full year and 1 billion annually by 2016. Continued...