Softbank is said to have hired Goldman Sachs to help it evaluate what to do with Arm: stand it up for an IPO, or sell it outright?
Softbank is said to have been weighing the possibility of holding an initial public offering (IPO) for Arm Holdings, but now there’s said to be at least one company out there that wants to straight-up buy Arm from Softbank.
Balancing a possible IPO against a possible sale is complicated, so Softbank has engaged the services of Goldman Sachs to help it sort out what to do with the designer of microprocessor cores that it bought in 2016 for $32 billion. Softbank hiring Goldman Sachs was first reported by The Wall Street Journal. The WSJ’s source said Softbank called Goldman after receiving “inbound interest” from another company about buying Arm.
None of the three companies had commented publicly as this article was written. (Four – if you count the unidentified suitor.)
In 2016, when Softbank bought Arm, part of the attraction for Softbank was that Arm was branching out to target the Internet of things market. In 2018, Arm bought Treasure Data, and at about the same time announced its Pelion IoT platform. At the time, Arm cautioned that the pursuit might suppress profits in the short term.
Just last week, however, Arm said it would transfer its IoT operations to Softbank to focus on microprocessor IP – and on profitability.
In retrospect, if Arm is heading for either an IPO or being acquired, transferring an operation that is a drag on profitability is a sensible preparatory step.
Of course, this all begs the question of who might want to buy Arm.
Qualcomm has invested in RISC-V specialists SiFiv e. If SiFive’s efforts are bearing fruit, that would probably take Qualcomm out of the running. If.
Intel has long coveted the market for smartphone ICs (where Arm remains strong), and it just lost Apple’s Mac business. The Mac business has nothing to do with smartphones, but lost business is lost business, and compensating for lost business is motivational.
Nvidia? Nvidia is still in the process of buying Mellanox for just under $7 billion. It would have to need Arm very badly to initiate a deal five times bigger than that right now, and it’s not clear Nvidia needs to buy anybody all that badly.
AMD has been exceedingly ambitious, but it’s hard to imagine the company scraping up a financial package worth $32 billion (Arm’s sale price in 2016) or more — or wanting to go that deep into debt. The same might be said for NXP.
Samsung? Sony? The finances might be challenging for either as well.
Could another Chinese operation be interested? Huawei? That possibility is complicated to parse, but there are a couple of interested points. Would a Huawei-owned Arm would have access to a fab capable of producing Arm’s most advanced designs? Possibly not, given the Trump Administration’s campaign of trade restrictions against China. Another question after that would be if Arm’s other smartphone customers would object. That question might be answered with another: if they did, would Huawei care if it could finagle a way to build Arm’s most advanced designs?
Of course, if Chinese interests were to attempt to buy Arm, “all hell would break lose,” noted Tirias Research analyst Jim McGregor.
There might be another pool of candidates. Softbank, of course, has a giant venture fund called Vision Fund. Other giant venture funds do exist. Could one of those be interested in Arm?
So either way — whether it’s one of the companies just mentioned, or someone else entirely — it’s likely to be a surprise.