Web: Softbank's $32B Bet on ARM and IoT

July 2016 by: From The Web

Softbank, one of the largest telecommunication companies in the world, just bid $32 billion to acquire ARM Holdings, designer of the chips found in everything from your iPhone to the Nest smart thermostat. On the surface, such an eye-popping number nearly sounds reasonable. After all, some 95 percent of smartphones have ARM-based chips, according to the company’s own estimates. But as ubiquitous as smartphones may be, sales of new devices are slowing down. For SoftBank’s bid to make sense, ARM will have to win the Internet of Things the way it did smartphones.

If ARM is unfamiliar, it’s because you don’t interact directly with ARM products. Its core business isn’t making the processors that are in your devices; it rose to prominence by drawing up the blueprints for them, and licensing those to outside companies. Its intellectual property is near-ubiquitous in mobile; by the company’s own estimates, ARM-based processors can be found in 95 percent of smartphones.

As you might imagine, being integral to the smartphone ecosystem has been a very good business over the last decade. ARM’s stock price prior to the SoftBank takeover bid (which sent it shooting skyward by over 40 percent) had already more than quadrupled since 2010.

It’s tempting to see that dominance alone as validation of SoftBank’s aggressive ARM valuation. In 2016, however, the smartphone market has leveled off. Even sales of the iPhone have fallen. That’s potentially scary news for a company that designed the tech behind nearly nearly two billion mobile chips that shipped in the first quarter of this year alone.


Continue Reading: Wired