Imagination buys HelloSoft to boost Wi-Fi offer

LONDON, UK: British chipmaker Imagination Technologies said on Wednesday it had agreed to buy HelloSoft for up to $47 million to boost its ability to handle audio, video, voice and graphics delivered over Wi-Fi networks.

It is paying about $20.2 million in cash for the U.S.-based firm, funded by a placing of 12.2 million shares, and up to $26.9 million in a combination of cash and shares over the next three years depending on performance.

Imagination's Chief Executive Hossein Yassaie said HelloSoft's software enabled voice and video exchanges over the Internet in wireless networks such as Wi-Fi, Wi-Max and the next generation mobile network LTE.

"HelloSoft has strong technology in Voice over IP (Internet Protocol), Video over IP, and the communication and software stack that goes with it," he said in an interview on Wednesday.

"It is very complementary to our graphics and multimedia engine in bringing end-to-end media over Internet Protocol."

Smartphones, such as Apple's iPhone, which uses Imagination's graphics technology, can switch between Wi-Fi and 3G networks, which uses a different type of data transfer.

The market, however, was sceptical on the merits of the deal, marking Imagination's shares 3.7 percent lower at a four-month low of 313 pence by 1126 GMT.

Seymour Pierce analyst Ian Robertson said he was concerned that the acquisition added minimal value to the overall business.

"Imagination is effectively using the high rating placed on video/graphics to fund an unproven and uncertain venture," he said.

Imagination said it expected the deal to be marginally dilutive to earnings per share for the current financial year before the impact of the placing.

The placing, which could raise up to 38.6 million pounds ($61.3 million) based on the current share price, would give headroom for another deal, and Yassaie said one or more bolt-on acquisitions in video and graphics were "underway".

Imagination also said on Wednesday it was trading in line with market expectations, and expected to ship nearly 100 million chips in the first half.

Yassaie shrugged off speculation that Samsung, a major customer, had defected to rival ARM's graphics technology for one of its new processors, news which sent Imagination's shares down more than 11 percent in September.

"I see no reason why we will not maintain a leading position in the graphics market," he said.