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Why Imagination Technologies Group PLC Fell 10%

What: Shares of microprocessor design company Imagination Technologies (LSE: IMG) fell by as much as 10% in early trade after Intel Capital, the investment arm of Intel Corporation, reduced its holding in the FTSE 250 company from 13% to 4%. Intel’s licence agreements with Imagination are unaffected by the move.

imgSo what: Intel placed 25m shares at 205p raising £54m. Apple, Imagination’s biggest customer, still has an 8.6% stake.

Earlier this year year Apple and Imagination extended a licensing deal which lets the iPhone maker use Imagination’s chip designs in its mobile devices. The deal allayed concerns that Apple, which is responsible for 20% of Imagination’s revenues, would turn to a rival company.

Now what: Even after this morning’s fall, shares of Imagination have posted a 17% gain in a flat market this year. The company unveiled its full-year results on Wednesday with rising revenues (up 13% to £171m) cheering shareholders.

But Credit Suisse has said it’s concerned that lower growth in the smartphone market might make shipment targets “optimistic”.

The smartphone market is expected to grow from 1bn units to 1.4bn units by 2016 and Imagination believes that ultimately achieving a graphics market share of 40% to 60% of the total smartphone market is “reasonable and realistic”.

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Mark does not own shares in Imagination Technologies. The Motley Fool owns shares in Imagination Technologies.