Market Report: Smartphone fears see Imagination fall back

Its chip designs may be found in Apple's iPhone, but fears over its future share of the smartphone market left Imagination Technologies deep in the red last night.

The Hertfordshire-based group slumped 27.4p to 437.7p on the mid-tier index after Royal Bank of Scotland said expectations for the number of units it will ship this financial year were overly optimistic. Saying they believe the percentage of smartphones sold that are low-cost – an area in which the chip designer is weak – is set to rise, the broker's analysts cut their advice to "hold" from "buy" and its target price to 450p from 590p.

"We expect that low-priced smartphones [costing less than £185] could account for more than 50 per cent of... demand over the next 18 to 24 months," they said, adding that current forecasts were also refusing to take into account the decision by Samsung not to use Imagination's technology in its Exynos mobile processors. As a result, estimated the analysts, the group's share of the market – which used to stand at 50 per cent – will drop to 31 per cent by the end of the current financial year.

Imagination was knocked as well by figures from across the Atlantic, where Research in Motion announced late on Thursday its first-quarter revenues had dropped 12 per cent.

With Liberum Capital saying the BlackBerry manufacturer's update was in part "a reflection of a slowing handset market", Arm Holdings – which announced the acquisition of Texan processor validation group Obsidian Software – was also behind, falling 5.5p to 556p.

Elsewhere in the technology sector, Sage shifted back 0.7p to 280.1p despite the re-emergence of takeover rumours. The latest vague talk suggested the company was in talks with SAP and IBM, but Matrix's Rajeev Bahl said the chatter was "still as red a herring as last time", calling the group "an unlikely bid target [and] hugely expensive to digest".

The analyst was also downbeat on another bid story in the sector, dismissing recent rumours the Swiss group Temenos may approach Misys, which still advanced 4.1p to 385.9p. He was more positive on Micro Focus' takeover potential, however, saying "a bid... is more likely than not" following the announcement by the company – up 6.5p to 360p – last month that it had received a number of approaches.

despite initially threatening a third consecutive dramatic sell-off as it touched a low of 5,644.98 points, the FTSE 100 ended up moving 16.13 higher to 5,714.94 after sentiment around Greece was raised by speculation the country could be in line for a potential aid package worth €150bn (£132.66 bn).

BP, which confirmed its commitment to its TNK-BP joint venture, crept back 0.7p to 433.2p, even as Royal Bank of Scotland argued the valuation gap between the oil giant and its peers was "likely to be temporary". Reiterating his "buy" advice, the broker's analyst David Cline said there were a number of potential catalysts that could soon spark a rally, including upcoming reports on the Gulf of Mexico disaster.

Aggreko was knocked at the start of the week by the news its closest competitor in the power generator market, APR Energy, will receive an influx of cash after being bought by Horizon Acquisition. Yesterday, however, it surged forwards 3p to 205.1p as Goldman Sachs said that, instead of worrying about increased competition, investors should see the deal as highlighting "the unfulfilled demand and attractive growth opportunities" for both companies.

On the FTSE 250, market gossips turned their attention back to Tate & Lyle, reheating speculation the food ingredients group could be in line for an approach. The sugar trader Bunge was once again named as a potential aggressor, and – although traders played down the chatter – with a possible price of 800p-a-share being discussed, Tate was lifted 11p to 656p.

Persistent vague bid talk failed to prevent Home Retail slipping back 2.4p to 172.9p, while there was widespread disbelief over the continued presence of speculation Abercrombie & Fitch could be interested in SuperGroup. However, the retailer still took the top spot, gaining 63p to 900p, with market voices optimistic ahead of its investor day on Monday.

Laird continued to rise following the news earlier in the week it had rejected a 185p a share offer from Cooper Industries, climbing 8.4p to 197.3p. The electronics group, which said it was closing its handset antennae unit, has now added nearly 44 per cent in just two sessions, and Arden Partners approved the rejection, saying the amount offered "reflects the undervalued nature of the company rather than a premium for control".

The news that Capital Pub Company had rebuffed two approaches – one worth 200p a share – saw the group soar 36p higher to 191.5p on the Alternative Investment Market. Fuller, Smith & Turner, which was 32.75p better off at 685.5p on the small-cap index, was the thwarted bidder, with the London Pride brewer saying it wanted to "work towards a recommended transaction".

FTSE 100 Risers

Imperial Tobacco 2,016p (up 37p, 1.87 per cent)

Cigarette manufacturer rises despite losing its appeal against vending machine sales ban.

Intertek 1,969p (up 32p, 1.65 per cent)

Testing company advances as Goldman Sachs keeps its "buy" recommendation.

Glencore 482p (up 6.2p, 1.3 per cent)

Commodities trader ahead after Charles Stanley starts coverage with a "hold" rating.

FTSE 100 Fallers

ENRC 716p (down 7p, 0.97 per cent)

Falling takeover hopes have played part in miner's retreat by nearly 8 per cent in last four sessions.

BT 195p (down 0.9p, 0.46 per cent)

MF Global's reiteration of telecoms group as a "conviction buy" fails to prevent fall.

BG Group 1,322p (down 5.5p, 0.41 per cent)

Energy company behind despite Royal Bank of Scotland changing its rating to "buy".

FTSE 250 Risers

Stobart 149.5p (up 10.3p, 7.4 per cent)

Maintains advance following Thursday's news easyJet is to start flying from its Southend airport.

Howden Joinery 104.1p (up 2.9p, 2.87 per cent)

Kitchen supplier helped by Peel Hunt initiating coverage with a "buy" recommendation.

CSR 313p (up 4.9p, 1.59 per cent)

Chip maker finishes in the blue after agreeing $484m (£299m) reduced price to acquire the US group Zoran.

FTSE 250 Fallers

Dunelm 398.8p (down 27.5p, 6.45 per cent)

Retailer takes the wooden spoon as Citigroup starts coverage with a "hold" rating.

Dixons Retail 16.2p (down 0.46p, 2.76 per cent)

Electricals chain slides ahead of the release of its preliminary results next week.

Paragon 194p (down 5p, 2.51 per cent)

Drops after buy-to-let lender has its price target cut by UBS to 225p from a previous target of 235p.