Given that NVidia can already license designs from ARM and given that companies will trust ARM less in rival NVidia's hands then in a neutral party it looks like the value of ARM is going to go way down after the sale, effectively lighting a giant pile of millions of dollars of economic value on fire. But the literature says that that's actually pretty typical of how mergers and acquisitions end up playing out. In general they're tributes to the CEO's ego that impoverish shareholders, though there are exceptions. I can't help but think that NVidia is paying $40B for a company that'll be worth $15B to them but would be worth $30B on the open market.
The actual value produced by ARM may go down, but the merger can be very effective in helping prop up NVidia's stock price.
The company is valued at $300 billion currently. The ARM deal will apparently be paid mostly in stock, making Softbank NVidia's largest shareholder. If they succeed in creating the perception among investors that NVidia controls the ARM market, the share price increase would dwarf a $15B loss in the value of the ARM unit itself.
for the arm unit itself, i agree. but what about the threat that arm poses to the rest of their business?
"acquisitions diminish value of thing being acquired" may generally be true but "acquisitions can be a way to stave off a threat" i believe may also be true, though to your larger point this may lead to less value in the market overall.
I’m curious if EU antitrust watchdogs will try to stop this.
The US will gladly accept it, since this is a massive plus for national security. This deal would mean a US entity owns pretty much every important chip architecture.
It’s already a huge strategic loss for the EU & UK that ARM doesn’t have European owners.
The US govt can't protect the chip manufacturers from malicious actors. It takes an obscene number of people with the right culture and expertise to have a company that can secure its chip platforms. Even then, the chips and associated software has to be sold to specific trusted customers.
I am totally okay witht he U.S. owning it for strategic reasons. I just wish it wasn't Nvidia...Too much centralization. Another company (IBM?) would help ensure ongoing competition.
This is the second major company in past few years where SoftBank pretty much served as an intermediary for merging of companies. They bought Sprint a few years ago and merged it with T-Mobile. Now they are selling ARM, which they bought just 4 years ago, to NVDA. Wonder if this was their plan all along or if they had to change plans due to financial issues or if they faced regulatory/geopolitical issues.
Isn't this the standard private equity playbook? Buy, hold, and flip? Though Softbank isn't a VC and I haven't heard of mass cost-cutting after they buy something.
There is some hypothesis in the RISC community that this sale will be a boon for RISC-V. With NVIDIA at the helm, ARM is no longer a neutral third party, so we may see a bunch of investment into RISC as it replaces ARM's SoC prevalence.
If Softbank needs cash now (re:WeWork), can they sell a minority stake to Nvidia, in preparation for future IPO? That would provide a path to Arm regaining their role as neutral supplier of ISA & IP. Nvidia would get a preferential driver's seat for a year or two, long enough to cut favorable deals. If Softbank could get a valuation for Arm larger than $40B, from sale of a partial stake now, that helps with their future return from an IPO. Why sell 100%, if they can get enough from Nvidia to solve their near-term cash needs? They have IoT assets, a market which has huge growth ahead.
Wonder what Apple’s reaction will be. Their relationship with Nvidia has been bumpy to say the least. Any ARM licensee now has a competitor as a supplier. The smaller ones will have to swallow but the larger licensees? Do they have options on the table - other than trying to throw a wrench into nvidia’s presumed acquisition plans?
Are not they already years independent of ARM? I thought they had one of these universal licenses allowing them to design their own processors which they seem to do very successfully?
What's the play here? To make it more expensive for competitors to license ARM chip designs? So that Nvidia just gets to make more chips, or to make non-Nvidia, ARM chips less tempting over x86?
I would certainly like to know the plan as well. If we're just guessing, there's a lot of benign reasons, like nVidia expects lean into ARM and they would rather buy the ARM than pay the license. I'm surprised there's not a lot of info on the reasoning yet.
"The announcement of the deal hinged on SoftBank ending a messy dispute between Arm and the head of its China joint venture, Allen Wu, who earlier rebuffed an attempt to remove him and claimed legal control of the unit.
Several people close to SoftBank said the matter was now “resolved,” though one person close to Mr Wu said he “remains the chairman of Arm China.” A spokesperson for Mr Wu declined to comment."
Yahoo shareholders got shafted when Alibaba spun out their multi-billion dollar payments division, AliPay, "without informing other shareholders ... because the CCP made us." lol.
[+] [-] Symmetry|5 years ago|reply
[+] [-] pavlov|5 years ago|reply
The company is valued at $300 billion currently. The ARM deal will apparently be paid mostly in stock, making Softbank NVidia's largest shareholder. If they succeed in creating the perception among investors that NVidia controls the ARM market, the share price increase would dwarf a $15B loss in the value of the ARM unit itself.
[+] [-] aaronblohowiak|5 years ago|reply
"acquisitions diminish value of thing being acquired" may generally be true but "acquisitions can be a way to stave off a threat" i believe may also be true, though to your larger point this may lead to less value in the market overall.
[+] [-] kory|5 years ago|reply
The US will gladly accept it, since this is a massive plus for national security. This deal would mean a US entity owns pretty much every important chip architecture.
It’s already a huge strategic loss for the EU & UK that ARM doesn’t have European owners.
[+] [-] dogma1138|5 years ago|reply
Also there is absolutely no way for the EU to take any action now with Brexit.
[+] [-] holidayacct|5 years ago|reply
[+] [-] crb002|5 years ago|reply
[+] [-] mahkeiro|5 years ago|reply
[+] [-] SubiculumCode|5 years ago|reply
[+] [-] disown|5 years ago|reply
[+] [-] Hongwei|5 years ago|reply
[+] [-] candiddevmike|5 years ago|reply
[+] [-] yardstick|5 years ago|reply
[+] [-] walterbell|5 years ago|reply
[+] [-] israrkhan|5 years ago|reply
[+] [-] aleppe7766|5 years ago|reply
[+] [-] oaiey|5 years ago|reply
[+] [-] oliwarner|5 years ago|reply
[+] [-] jayd16|5 years ago|reply
[+] [-] partingshots|5 years ago|reply
[+] [-] unknown|5 years ago|reply
[deleted]
[+] [-] unknown|5 years ago|reply
[deleted]
[+] [-] StaticChamp|5 years ago|reply
[+] [-] quattrofan|5 years ago|reply
[+] [-] redis_mlc|5 years ago|reply
"The announcement of the deal hinged on SoftBank ending a messy dispute between Arm and the head of its China joint venture, Allen Wu, who earlier rebuffed an attempt to remove him and claimed legal control of the unit.
Several people close to SoftBank said the matter was now “resolved,” though one person close to Mr Wu said he “remains the chairman of Arm China.” A spokesperson for Mr Wu declined to comment."
Yahoo shareholders got shafted when Alibaba spun out their multi-billion dollar payments division, AliPay, "without informing other shareholders ... because the CCP made us." lol.
https://www.ft.com/content/40a66dd2-b9ec-11e0-8171-00144feab...
https://innovator.news/how-an-alibaba-spin-off-became-a-150-...
[+] [-] bumblebritches5|5 years ago|reply
[deleted]