Masayoshi Son (SoftBank Founder) – ARM Acquisition Press Conference (July 2016)
Chapters
Abstract
SoftBank’s Strategic Acquisition of ARM: A Major Bet on the Internet of Things and Beyond
In a move that reinforces its confidence in the technology of tomorrow, SoftBank has announced its acquisition of ARM Holdings for £24.3 billion (~$31 billion, 3.3 trillion yen). The acquisition, unanimously approved by ARM’s board, aims to propel both companies into the forefront of the Internet of Things (IoT) era. SoftBank’s Masayoshi Son places special emphasis on ARM’s market dominance in chip design and future growth prospects in IoT and automotive sectors. This acquisition also signals Son’s unwavering commitment to the UK as an investment hub, irrespective of Brexit uncertainties.
The Strategic Importance of ARM in SoftBank’s Portfolio
Masayoshi Son stated that the acquisition of ARM is part of SoftBank’s long-term investment strategy, particularly focusing on the Internet of Things (IoT). SoftBank aims to privatize ARM to focus on long-term growth without the pressures of quarterly financial reporting. Son considers this acquisition as a major bet on the future of technology, emphasizing that everything with a semiconductor will be interconnected in the upcoming IoT era.
Funding and Transactional Aspects
SoftBank plans to finance two-thirds of the acquisition from its cash reserves, while the remaining one-third will be funded through debt. Proceeds from the sale of Alibaba and Supercell stocks, along with a bridge loan, are earmarked for this acquisition. The deal is expected to proceed smoothly without major regulatory hurdles, as there is no competitive overlap or conflicts of interest between SoftBank and ARM.
Growth and Market Potential of ARM
ARM’s technology is omnipresent in smartphones and is making inroads into the automotive and IoT sectors. The company has witnessed exponential growth, with 15 billion units shipped, generating revenues of $1.5 billion and a net income of $660 million. ARM’s technology is crucial not only for smartphones but also for emerging sectors like autonomous driving and IoT. Son expects ARM’s reach to grow further, fueled by SoftBank’s investment in R&D and engineering talent.
SoftBank’s Investment Philosophy and Financial Health
SoftBank’s approach to investments has always been to focus on future technology trends, even if it entails short-term losses. Masayoshi Son cited SoftBank’s successful turn-around of Vodafone Japan and its highly profitable telecom operations as testaments to the company’s long-term vision and financial acumen. At present, SoftBank enjoys a market cap of $68 billion with revenues of $87 billion.
Commitment to the UK and Legal Obligations
Despite Brexit uncertainties, Masayoshi Son remains committed to investing in the UK. He has pledged to double ARM’s UK employee count in five years and maintain its headquarters in Cambridge. These commitments will be made legally binding and will be submitted to the UK Takeover Panel for verification.
Addressing Security Concerns
As IoT gains traction, security remains a concern. Son notes the importance of enhancing hardware security, particularly in Wi-Fi routers. ARM’s “Trust Zone” function aims to make IoT devices more secure, representing another avenue for growth and innovation.
Unanswered Questions and Future Prospects
The acquisition leaves some questions unanswered, such as ARM’s specific growth strategies under SoftBank. However, with SoftBank’s history of enabling its subsidiaries to operate autonomously and its focus on long-term technological trends, the acquisition is likely to provide ARM with a stable platform for innovation and growth.
Concluding Remarks
SoftBank’s acquisition of ARM is not just a business transaction but a strategic move aimed at positioning both companies at the forefront of technological advancement, particularly in the IoT and automotive sectors. Son’s endorsement of the UK as an investment destination, despite ongoing political uncertainties, reflects his optimistic outlook for both SoftBank and ARM. As the acquisition process unfolds, it would be worth watching how ARM integrates into SoftBank’s dual organizational structure and how this impacts the rapidly evolving landscape of IoT and smart technologies.
Notes by: T_Soprano