When You Lose Apple, Make Lemonade

(Bloomberg Gadfly) -- It was only a matter of time before InvenSense Inc. got added to the list of suppliers caught out by losing orders to Apple Inc.

Shares of Imagination Technologies Group Plc tanked after it said the maker of iPhones would wean itself off the British company's technology. Dialog Semiconductor Plc also took a dive when an analyst warned of a similar fate.

Then Bloomberg's Alex Webb and Ian King broke the newssense

InvenSense's stock has a floor under it because the San Jose company is on the cusp of being bought by Japan's TDK Corp. Also different is that while Imagination and Dialog appear to be victims of Apple's quest to become technology independent, InvenSense is merely losing out to a competitor. Replaceable is arguably preferable to redundant.

That said, InvenSense's sale to TDK is indeed fortuitous timing. While InvenSense is one of the best makers of motion sensors around, that doesn't mean much if it can't turn a profit.

Losing a large chunk of business to its biggest client makes the $13 per share TDK is paying look even more expensive. At 4 times sales, InvenSense is already trading well above the 2.97 times average of its peers. TDK might be able to renegotiate the price, but there's only a slim chance of that.

Besides, TDK isn't buying InvenSense for its revenue stream -- at least, shareholders had better hope it's not. Instead, what the acquisition brings to the table is a suite of technologies that are set to be even more crucial to a hardware industry on the verge of explosive growth in driverless cars, drones, virtual reality and internet of things.

News of this loss of orders to Apple may make TDK think it's buying a lemon. That's not a bad thing so long as the Japanese acquirer knows how to make lemonade.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Tim Culpan is a technology columnist for Bloomberg Gadfly. He previously covered technology for Bloomberg News.

To contact the author of this story: Tim Culpan in Taipei at tculpan1@bloomberg.net.

To contact the editor responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net.