MIPS will live on, says Imagination

U.K.-based Imagination Technologies has announced that it will purchase the operating business of struggling semiconductor design firm MIPS Technologies in a deal worth $60 million. In a separate negotiation with ARM, MIPS has agreed to sell rights to its portfolio of 498 patents to Bridge Crossing consortium, which counts Avaya, HP, IBM, Intel, Motorola, Oracle, Philips, Research in Motion as members.

MIPS CEO Sandeep Vij insisted after word of the deal broke that it was "done in the best interest of our industry partners, shareholders and employees."

Indeed, the transaction "returns over three times the book value per share [of MIPS] and more than the current market capitalisation value of $380 million," said J. Scott Gardner, a senior analyst at The Linley Group. It appears that MIPS employees are OK for now since Imagination said it plans to retain most of its current MIPS workforce of about 160 employees.

The deal's price tag ($350 million from an ARM-led consortium and $60 million from Imagination) illustrates the value placed on MIPS' IP.and the fact that MIPS is also a winner in this deal.

Gardner said "the MIPS patents could have been used to extract licence fees from most of the companies building CPUs."

MIPS, a pioneer of 32- and 64bit CPU architectures, "invented many of the key microprocessor concepts," said Gardner. These were considered so essential that ARM led the group that was one of the keys to the acquisition, the Allied Security Trust, a consortium of companies with a history of buying up patents.

The most important element of the deal may be Imagination's promise not to kill MIPS.

Many observers were undoubtedly worried about the future of the MIPS architecture. During a conference call, Imagination CEO Hossein Yassaie (left) stressed that Imagination will keep the MIPS architecture "going forward" while calling the growing CPU market "the fundamental business we need to get engaged in."

Noting that Imagination currently has about 100 engineers on its CPU development team, Yassaie said "we will be almost doubling the team by adding MIPS engineers." Yassaie also reiterated his intention to raise the stakes in a CPU battle that is expected to be fought over connected devices.

The endgame is to merge the internal CPU development efforts at Imagination and MIPS. "There are significant similarities between our in-house CPU and that of MIPS," Yassaie said.

Gardner, the analyst, said the new development effort means "the gloves coming off in its competition with ARM." This could create near-term discomfort among industry players since ARM will still need to work closely with Imagination. Imagination also is Apple's GPU vendor.

The company's GPUs are also used by Intel, but Gardner doesn't believe Intel has as much to fear from the Imagination-MIPS deal as ARM.