Does the sale of ARM Holdings to Softbank Group Corp. pose any problem to the design engineering community? Last year, 15 billion chips based on ARM architecture were shipped — nearly 3 billion more than the year before. Many of these were in mobile phones, but if you design with microcontrollers, you probably used one, too.
Will the giant global company rip ARM to shreds? No, most certainly not.
First, SoftBank is a Japanese multinational telecommunications and Internet corporation with operations in broadband, cellular, fixed-line telecommunications, e-commerce, Internet, and technology services and has about 6.70 billion. Softbank owns a majority of the shares of U.S. cellular company Sprint.
If you are completely paranoid, which I can be at times, you can see the shadows on the wall. In a few years, SoftBank would own the IP of all the CPUs in the practical world. All the robots and all the factory automation, all the Internet-connected things, most of the mobile phones, and quite a few tablet computers would be under the control of the SoftBank headquarters in Tokyo. I’m sure you saw that movie — what was its name?
SotBank’s CEO, Masayoshi Son, is said to have offered a series of legally binding assurances, including to maintain ARM’s headquarters in England, double its U.K.-based staff over the next five years, and increase its overseas headcount. Son also said that the management staff of ARM will remain intact. And, I expect that the ARM architecture will not be messed with.
These expansion plans are at odds with SoftBank's large $100 billion debt that has drawn investor criticism of late — a figure that will be even larger. The takeover of ARM for $32 billion, after subtracting ARM's $1.3 billion in cash, is 24 times ARM’s 2015 revenue of $1.268 billion and approximately 57 times its adjusted profit after tax. Hard to see how this will help their bottom line. What's more, SoftBank shares fell by 10% on the day of the acquisition announcement, but the share price stabilized the next day.
ARM CEO Simon Segars, left, and SoftBank CEO Masayoshi Son.
ARM has more than 1,400 partner companies that are critical to its success. I don’t see any reason for any of these companies to change their mind because of this deal, but it may be that some prefer not to have confidential information in the hands of such a big global player.
I talked with John Dixon, VP of Marketing and Communications at NXP Semicondutor who said “…it is really too early to understand if there will be an impact to ARM partners at this time. We have had communications with ARM that they will continue business as usual and focus on growth after closure of deal.”
Could the new ARM change pricing to its many chip maker partners? Could those partners afford to go elsewhere? What options do they have?
Reports say management at ARM Holdings could share a payday worth more than £300 million if the takeover is successful. Details in SoftBank’s proposal shows that there are 22.4 million outstanding shares in ARM’s employee schemes. Will some of these fine folks decide to leave and start another company? Quite possibly.
I'd love to hear your comments on Softbank's takeover of ARM. How do you think ARM's partners will respond?
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