Does that add up?
From the figures presented here, it will take 50-100 years for ARM’s revenue to match the purchase price.
I know that the Japanese have a better sense of long-term investment than Australian investors, but … ?
Cambridge-based processor design business ARM has posted substantial revenue and profit increases for the months in the runup to the Brexit vote. The company being bought by Japanese megacorp Softbank for £24.3bn, though Softbank has promised that this will be a Brexit in ownership only. ARM will retain its "senior management …
Well, quite. It doesn't add up unless Softbank have a dead cert cracking idea up their collective sleeves that the market hadn't already priced in. Considering the ongoing complete mess at another of their holdings (Sprint) I am rather doubtful of this!
Cringely has a theory the plan at Softbank is to compete with their customers (Apple*/Qualcomm/Samsung/etc) to increase revenues by grabbing a larger share of the cost of a micro controller. From my PoV that's the same doomed avenue as the cry often wailed by M&A analysts - "Why don't Apple buy ARM?".
The inherent value in ARM is that it's largely independent of everyone so is happy to deal with anyone, and customers will be happy that the future roadmap won't be overly influenced by one of their competitors to their own disadvantage. To put it another way if Apple had bought ARM their $32bn acquisition would drop in value like a stone as a result of other customers going elsewhere rather stay beholden to Apple's priorities. I'm sure Apple could secure a perpetual architecture license for a lot less than $32bn.
If ARM decide to compete with their customers, those customers will vanish in droves to alternative architectures and designs. Apple has shown that their desktop line can transition between architectures so I'm sure others are capable of it. I'm just a lay observer, so I could be wrong, but ARM seem to have made a pretty good business out of not overtly abusing the dominant position they find themselves in (to their credit).
As for the promises to double the workforce in Cambridge and keep everything in the UK. It's already been said it all sounds a bit like Kraft's promises with respect to Cadbury. I'll believe it, if it ever happens.
* Yes I know Apple have an architecture license then make their own processor
For the mirco controller market if royalties for ARM Cortex M? designs go up or SoftBank does something else that pisses off silicon vendors we will see all them start pushing their pre-ARM stuff again. Which would be a shame. While I'm not an ARM fanboy having decent free toolchains, debuggers etc that work across thousands of different parts from different vendors is very useful.. I don't really want to go back to using the 500MB zip with a bunch of unworkable crap and $200 or $300 debug tool per vendor/family days.
For the medium performance stuff like phone and tablet chips I'm not sure Apple etc have anywhere else they can go aside from Intel or AMD. SoftBank buying ARM could be just what Intel have been waiting for.
A lot of the recent huge acquisitions do not add up.
For example, I really do not think the upside of Verizon buying Yahoo was worth the money. Sure, it's "lots of seats" but those seats are cheap folk that aren't going to stand for Verizon's prices.
Another example: Unilever bought Dollar Shave Club for a BILLION dollars. These are blokes that send me a pack of razors every month for US$9. This keeps me from having to deal with the asshole razor dispensers at the grocery/drug stores that often are jammed, empty, or otherwise impossible to buy from, and are more insulting and humiliating than a TSA search.
Anyway, there are 3.2m DSC customers (http://www.businessinsider.com/how-unilever-dollar-shave-club-deal-went-down-2016-7) so they paid about $325 per member.
DSC does not make a profit. This $1B is about 5x DSC's yearly sales.
They say Unilever is trying to stick a finger in the eye of Procter & Gamble, but I don't see it being worth the $1B. Really.
What are these people thinking?
ARM's revenue & profit have been growing, and Softbank is buying with the belief/intention that they will continue to grow. They presumably think IoT is going to be a big deal, and instead of selling 10 billion chips a year or whatever the ARM market is now, it will be hundreds of billions or even trillions. Even if the per chip royalty is lower in order to support such a market, it is at least potentially feasible. They obviously wouldn't buy if they though the revenue ARM had today was about the peak that was possible.
Another possibility is that they intend to raise royalty rates. Some customers have "perpetual" contracts (I imagine Apple is one) so they wouldn't be affected, but that could get them more money as new licensees come along.
'ARM will retain its "senior management team, brand, partnership-based business model and culture" while Softbank "at least doubles the employee headcount in the UK over the next five years."'
We've seen such wonderful promises ahead of previous takeovers. What should be needed in order to gain regulatory consent is a way of holding buyers to them. Maybe if they attempt to move the production overseas (who could I be thinking of?), sack the management team or whatever, the business gets offered back to the market at the same price as it was before the original offer was made and, where there was a cash surplus previously, with that surplus intact or alternatively with no more debts than it had originally.
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