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SoftBank Group Nears Deal to Buy ARM Holdings
- dbcooper 10y agoThe FT claims that the deal has been done for £23.4bn. https://next.ft.com/content/0cc23483-7681-3018-8e9d-80c2dd77fbda https://next.ft.com/content/0cc23483-7681-3018-8e9d-80c2dd77... >Japan’s SoftBank has agreed to acquire Arm Holdings, the UK’s preeminent technology company, for £23.4bn in an enormous bet by the Japanese telecoms group that the smartphone chip designer will make it a leader in one of the next big tech markets, the internet of things. Apparently that is a 40% premium on market cap. [1] [1] http://www.bbc.com/news/business-36822272 http://www.bbc.com/news/business-36822272
- adamnemecek 10y ago> in an enormous bet It's a lot of money but I'm not sure it's that much of a bet.
- voltagex_ 10y agoDoes anyone know how (if) currency conversion is done with amounts this large? I imagine with the volatility of the GBP right now this could have been more expensive if the conversion was done a few weeks ago.
- akiselev 10y agoIt's more likely that currency con version at this scale will be largely on paper accounting because 10s of billions of pound sterling is probably more than most foreign currency reserves of countries much bigger than SoftBank usually carry. For example, a SoftBank subsidiary can probably take out huge loans from UK/international institutions and collateral/pay the loan with other assets in other jurisdictions. I believe this is how many companies avoid repatriation taxes: by taking out a loan in the US and making the payments to financial institutions overseas.
- lancewiggs 10y agoIt's pretty easy - the nominal amounts for derivative trades can be extraordinarily high and currency markets are smaller but in the trillions of dollars per day. They can hedge this (lock in the price in Yen or USD) now and be sure of not losing on currency shifts when it comes time to make the transaction work.
- lordnacho 10y agoIt's not hard to do an FX trade of this size. I've written programs that trade billions of FX a day, and that was for a teeny tiny fund. For large amounts, you call the broker, which I suppose whatever investment bank is running the deal will have figured out how to do. But 24B is a drop in the ocean.
- deleted 10y ago[deleted]
- ktamura 10y agoThis is the opportunistic genius of Masayoshi "Masa" Son as one of the most successful technology investors of our time. He's taking advantage of the weak GBP thanks to the whole Brexit fiasco. As a major carrier in Japan and an owner of Sprint, this move makes total sense.
- adamnemecek 10y agoThis makes me wonder when did the acquisition talks begin.
- adventured 10y agoEven more so when you look at the Yen vs GBP in particular. The Yen is up ~40% against the GBP in the last year.
- hendzen 10y agoFYI, much of ARM is held via ADRs (American Depositary Receipts) denominated in USD. This is how ARM shares trade on NASDAQ (under the ticker ARMH) in addition to trading on LSE.
- CyberDildonics 10y agoDon't forget a stronger yen which could face enormous volatility in the future.
- hkmurakami 10y agoSince ARM had been a mainstream acquisition target for years now, I'd suspect this owes more to their M&A team rather than their CEO. Estimating ARM's future earnings is relatively straightforward, and Softbank, like Berkshire, loves free cash flow. It doesn't require a visionary to go through the calculus of an acquisition under these parameters; it requires a team of shrewd finance professionals.
- jldugger 10y agoIntel doesn't exactly shy away from purchases either; is it likely that the only reason they haven't made an offer anti-trust regulations?
- anonbanker 10y agoNeat! now my company can no longer worry about FIVEEYES having control of the spec, or the company that makes it. probably the best news of the year for me.
- analog31 10y agoMaybe I'm not thinking straight because I'm up to my ears in ARM chips (my cell phone, tablet, half a dozen homemade gizmos, etc.). And I know they don't actually make the chips themselves, but GBP 2.2e+09 doesn't seem like a lot for a technology that has so much influence. Correction: 2.2e10, as noted. Now I know I'm not thinking straight.
- davidfrankl 10y agoIt's 2.2e+10
- deleted 10y ago[deleted]
- wlievens 10y agoIt's 40% above the current market cap.
- jhou2 10y agoI was surprised ARM hasn't been bought by a larger conglomerate yet. SoftBank is way ahead of the game.
- cstross 10y agoThe problem with ARM is that the most likely suitors don't dare buy them -- if Intel, Apple, Microsoft, or Google bought ARM Holdings, the others (all rivals) would start looking for an alternative architecture to run on and the licensing fees would take a nose dive. It's one thing to license an architecture from an independent, scrupulously neutral third party: another entirely to gamble your business platform's future on a rival's goodwill. Softbank isn't an obvious direct platform-level competitor for Intel or Apple or Samsung or the others, so may be an acceptable acquisitor who won't frighten ARM's licensees into abandoning ship.
- viycyjcutc 10y agoVery much this. If this deal goes through, I have a feeling that we may see ARM begin to give way to RISC-V. Perhaps it might happen slowly at first, but the mobile space is already prepared for a switch given that Android is virtualized and Apple is switching to abstracted "bitcode."
- techdragon 10y agoAn Apple switch is unlikely due to their significant in-house advantages being geared towards ARM directly. PA semi was an ARM shop and their innovation in their A$ line of chips is driven by significant experience working with the ARM ISA... They have a licence which gives them the freedom to design their own chips and unless the new owners decided to do something disastrous with respect to existing contracts, that license will remain valid and its terms unchanged. Something ephemeral to the facts of the existing contracts is unlikely to motivate Apple to do anything so drastic. They already have the ongoing Intel sky lake laptop debacle and a future of less and less certainty regarding Intel's promises to deal with. Tldr: Apple are more likely to move macOS to ARM than iOS to RISC-V
- nashashmi 10y agoI once read an article where the CEO of ARM reasoned against raising prices because its partners would then have less healthy businesses. I never forgot that piece of wisdom. But now with this acquisition, is there any room for such generous mentality?
- venomsnake 10y agoIt is not generosity. It is knowledge of your own business model. ARM wants to earn 1penny on every chip sold, but to put chips everywhere. So increasing royalties, but preventing market expansion is bad. Especially with the internet of appliances rapidly approaching.
- ma2rten 10y agoNot just that, it also prevents other companies from entering this market. Maybe forward thinking is a better term that generous.
- dingo_bat 10y agoI'm curious. Does ARM get royalties even on custom designed chips like apple's? Or only on reference cores?
- masklinn 10y ago> Does ARM get royalties even on custom designed chips like apple's? Designing custom cores requires holding an architecture license which is ARM's highest-level license (beyond the perpetual multi-use — use a core in any product indefinitely — and the subscription — use any ARM product for a set duration). There are about a dozen architecture license holders.
- SixSigma 10y agoThat's standard supply chain theory. You will read it in books about the Toyota Way.
- pavlov 10y agoMaybe this explains why SoftBank recently chose to sell its controlling stake of Supercell for about $7.3B USD -- they needed the cash for something bigger. SoftBank had purchased Supercell for about $2B only a few years ago, so it was a genius investment. Will be interesting to see if they can turn ARM into another one of those.
- obmelvin 10y agoI did wonder why they would sell their Supercell stake considering they just introduced a new game which is looking to be another cash cow. This certainly does seem to put the sale into some perspective.
- hrrsn 10y agoUhh, what did they just introduce?
- jng 10y agoClash Royale.
- wastedhours 10y agoClash Royale - one of the top grossing games of the past few months.
- rkangel 10y agoIf they've just introduced a new game which demonstrates continued earning potential, then now is an excellent time to sell.
- tdicola 10y agoI'm kind of surprised Apple didn't swoop in and buy ARM long ago. I guess as others mentioned that might mean all the Apple competitors using ARM chips would flee and leave them with a lot less partners.
- lostlogin 10y agoThey seem happy to screw their suppliers right down instead and leave the risk to them - the sapphire screens saga being an example.
- ausjke 10y agoIsn't he already bankrupt due to the "wrong" acquisition of Sprint? This is hard to believe. I did notice he was preparing cash for something(selling Supercell, and Alibaba shares for cash), I thought those cash are used to cover Sprint's losses. Gosh this is really, really hard to believe.
- mrlambchop 10y agoMixed feelings on this - huge congrats to ARM friends but I feel it's 1 act too short for an exit like this. I'd love to have seen a British owned tech company higher up the Global 2000 before transferring ownership.
- chrisseaton 10y agoYes I too wish that there was a big British tech company I could work for in the UK (being British myself). Unfortunately I can't imagine ARM ever being competitive as an employer. When I was applying for internships during my degree a couple of years ago I looked at US companies like Google and Oracle and ARM in the UK. I think ARM paid about a quarter of what Google and Oracle were offering. One quarter. And that's just cash before I included the housing, car costs and massive relocation grant that the US companies included and ARM didn't. Today Glassdoor tells me that ARM pays interns about half, and graduates about 60%, of what Microsoft does, in the same city (Cambridge) a few miles apart. But they have good people working for them so it must be enough I guess!
- steton 10y agoA decade or so ago, ARM was offering graduates about £25K. I believe they still offer the inflation-adjusted equivalent of that: ~£32K. Does this mean that Microsoft Cambridge are offering graduates ~£50K? It's interesting that I consider that to be very high for a graduate salary yet, at USD 66K equivalent, it is significantly less than would be available in an area of the USA with a comparable cost of living...
- chrisseaton 10y agoGlassdoor says £70k to £90k for the same grade ('senior' but of course it's hard to compare). That's about what I would expect. This is for PhD interns and grads I should have made more clear. I'd say £32k is beyond taking the piss for someone with a CS undergraduate degree and having to live in Cambridge (you couldn't buy a house there on that) but if they're getting the people they want then it must be right for them.
- plainOldText 10y agoApparently, $32 billion is how much they'll pay for this deal. [1] [1] http://www.wsj.com/articles/softbank-agrees-to-buy-arm-holdings-for-more-than-32-billion-1468808434 http://www.wsj.com/articles/softbank-agrees-to-buy-arm-holdi...
- peterburkimsher 10y agoThey bought Sprint before. It's costing them an ARM and a leg.
- mtgx 10y agoFinally, a hardware-related acquisition that is more expensive than the Whatsapp acquisition.
- unexistance 10y agoI wonder what SoftBank can add to ARM technologically? Obviously besides swimming in dollar
- elsen 10y agoThey took 95% ownership of Aldebaran Robotic a while ago, and it's a huge success in Japan. I'm no expert but isn't that building a vertical? AFAIR the robots are running on Intel Atom, but well... embedded... ARM... (not saying that's the only reason though)
- unexistance 10y agohuh, that sounds cool, energy-efficient factory robots, sounds like something the Japanese love
- ZenoArrow 10y agoMaybe it's just me, but I see this as a foolish move. ARM was better suited to being an independent company due to their licencing model. With the purchase by SoftBank now there's greater incentive for licensees to move away from ARM. I suspect we'll see much more investment in RISC-V as a result of this, which would be a good thing for most of us, but a less good thing for ARM.
- kev009 10y agoFoolish for the downstream integrator, maybe even the longevity of the platform, but shrewd for creditors and shareholders. I'm laughing because integrators flocked from MIPS to ARM, and events could unfold such that they run back to MIPS etc
- toyg 10y agoThat depends on how Softbank manages the acquisition. If they keep the company separate and just keep cashing in dividends, I don't see the problem. Softbank afaik is also very much focused on the Japanese market only.
- Animats 10y agoFirst sentence: "SoftBank is nearing a deal to acquire ARM Holdings, the British semiconductor company, said two people briefed on the matter who asked not to be named discussing private information." Editing standards at the Grey Lady have declined.
- pritambaral 10y agoI find that sentence grammatically correct. What is it do you think editing has missed? Disclaimer: I'm not related to the BBC
- jjawssd 10y agoSoftBank WiFi access points are the most user unfriendly on the planet. You have to call them to be able to register to get online. And guess what? If you are not a Japanese resident you can't get a Japanese phone number. And even before registering the WiFi craps out 80% of the time within 60 seconds of connecting, no matter where you are in Tokyo. I am extremely disappointed. SoftBank will shake you down for all you are worth.
- deleted 10y ago[deleted]
- mtgx 10y agoThis could be great for RISC-V's prospects, especially if Softbank decides to be more partial to which customers it gives the license, or if it increases prices, and so on - basically anything Softbank might do in the future that would piss customers off, could be a win for RISC-V. Don't expect any major shakeup over the next 3 years though. Even if some customers decided to drop ARM right now, it would still take 3+ years before they come up with a strong RISC-V alternative. First, Android would have to give RISC-V its blessing (support it), too, but Google is a member of the RISC-V foundation, so I assume that's not an impossible task.
- jimmytidey 10y agoApparently Arm's Founder isn't particularly into it: "ARM is the proudest achievement of my life. The proposed sale to SoftBank is a sad day for me and for technology in Britain." https://twitter.com/hermannhauser/status/755008815553273858 https://twitter.com/hermannhauser/status/755008815553273858