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Re: Arm to be sold to Japanese

Tue Jul 19, 2016 9:15 am

Except Softbank is very much embroiled with China. This is all very bad news for non-chines ARM users.
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jamesh
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Re: Arm to be sold to Japanese

Tue Jul 19, 2016 9:40 am

I have some minor insight, since my recently departed boss has just gone to work for ARM, and my previous boss at Brcm is General Manager of Imaging and Vision, and working in and around Cambridge you pick up stuff.

ARM licences fee are about as high as people are happy to spend. Increasing them will likely result in fewer customers. Softbank must surely know this. And there are alternative, Imagination's MIPS for example,or even Intel, so they need to be careful.

Most of the hardcore ARM engineers are based in Cambridge. They won't want to move (I know; when Brcm tried to move office, to somewhere about 5 miles out of town, they were practically rioting in the streets - that level of 'I'm not moving'!). Trying to move the company abroad will mean they lose the huge majority of their best engineers, and the skill set required is not easily transferable - there is a LOT of experience in those engineers. Going for cheaper engineers in China or India would be a disaster. Softbank will know this, and AIUI, that's not how they work anyway.

Softbank intend on increasing the workforce. I'm not sure where they are going to live (one reasons I've never seriously considered working for ARM is that their office is a right pain to get to from the North of Cambridge), but any increase would be welcome. ARM recently bought Apical, so their workforce is increasing anyway.

Most of the people I know at ARM are NOT up in arms (ouch) about this. Might be because they have lots of shares though...!

On the whole, I suspect there will be little change for a few years at least.
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paddyg
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Re: Arm to be sold to Japanese

Tue Jul 19, 2016 9:48 am

I'm a bit confused by financial appraisals being banded around here. As far as I can tell SoftBank seems to have assets of 148 (x10**9 GBP) and liabilities of 123 giving a net 25. If goodwill and intangibles are taken out it's still only -32. It also seems to be making a profit and paying tax.*

Surely the pundits above aren't confusing the issue by quoting the total liabilities figure? On that basis we should all be panicking because Apple has recently announced that it has debts of over 170 billion USD and increasing at an alarming 50 billion a year.

Also... all this talk about 'UK company' is confusing. The owners of ARM were mainly financial institutions such as banks, insurance and pension companies - all reasonably international and the owners of those financial institutions were also reasonably international. SoftBank is quoted on the Tokyo and New York stock exchange (and others?) so existing ARM shareholders can re-invest their windfall profit in its new holding company.

And, yes, you do detect a slight bitterness: I recently suggested to my dad that ARM was a good share to buy but didn't follow my own advice!

*EDIT - OK looking at the balance sheet again I accept that there is 85B GBP interest bearing debt up from 83 last year; much of it corporate bonds (so low interest and not on instant recall - all big companies (such as Apple, IBM, Toyota, BP etc) have raised large amounts of cash this way, especially over the past few years)
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Jim Manley
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Re: Arm to be sold to Japanese

Sun Jul 31, 2016 8:40 am

OK, so here's some additional reality to ponder. I know Mr. Son personally, as he occasionally attends the National Model Railroad Association (NMRA) local meetings for the Coast Division of the Pacific Coast Region, i.e., the NMRA division which includes Silicon Valley (and you thought corporate DoubleSpeak was nonsense!). So, your first data point is that Mr. Son is a life-long model railroader - he's one of us - a totally complete geek!

When Softbank built its offices in Silicon Valley, it didn't put up yet-another brand-new shiny building that looked like every other one built that week. It renovated one of the former railroad station buildings along what is now the Caltrain commuter route that uses Union Pacific trackage and rights-of-way up the San Francisco peninsula from Gilroy, and through San Jose. So, your second data point is that Mr. Son understands big pictures. He has a real and healthy appreciation for history, including architecture, as do many Japanese, wealthy or not (I lived in Japan for 5.5 years, BTW).

Mr. Son has been away from Softbank after turning it over to a successor who turned out to be a typical business school idiot, and is the one primarily responsible for that upwards of $100 billion in debt. Mr. Son built Softbank from essentially nothing into a premier, world-class technology company, and not just a large Japanese telecommunications company, as the media incorrectly report. So, your third data point is that he is a very shrewd, intelligent, and patient man, and he is not one to do stupid things. This deal was not just a knee jerk reaction when the Brexit vote happened, either - he's been eyeing ARM for two years, and Brexit simply made the decision a fait accompli because the price was irresistible. I can see him laughing about how easy it was made for him.

Softbank isn't Mr. Son's only interest - he hasn't been off being a typical billionaire out yachting, jet-setting, and otherwise hobnobbing with "celebrities", unless they have money they insist on giving him, and even then, he's not available to such people on a social basis, it's just good business. So, your fourth data point is that he has principles and he sticks to them.

Mr. Son not only stated that ARM will remain in Cambridge in perpetuity, but he plans to double it in technical personnel alone over the next few years. I can't say 100% that will happen, but I will tell you this - I'm a military man, and I would put my life in Mr. Son's hands. The civilians Out There won't understand a whit of what that means, but my fellow Brothers and Sisters in Arms certainly will. So, your fifth data point is that there's no such thing as a true sure bet, but he's about as close as you're ever likely to come to one.

I don't know what his inclination will be wrt the licensing fees, but I'll repeat my previous observation. He is a very shrewd, intelligent, and patient man, and he is not one to do stupid things. Raising the fees would be a very stupid thing to do, especially with 95% market share. ARM didn't get there by overcharging their customers, and he's not about to do that now. So, your sixth data point is that his statement about doubling the size of the technical staff in Cambridge (not Mumbai, Shenzhen, etc., you'll note) tells me that he's planning on expanding ARM's market well beyond their nearly-saturated dominance of the mobile device market. I won't say what those expanded markets are because I intend to make some money through some shrewd, intelligent, patient investments of my own, and I don't need any of you clowns jacking the prices up on me until after I've bought low, and will later sell high thanks to uninformed late-comer market-followers.

As noted by others, a large debt by this kind of company is not a big deal, and will be less of a deal as Mr. Son works on the problem, so that's your seventh data point. Apple has had more cash on hand recently than the entire U.S. federal government, and who do you think is more at risk of collapsing, especially watching what's been going on at the political primaries and conventions? Word has it that tickets out of the U.S. starting November 8th are now non-existent at any price - the entire airline, business jet, passenger ship, railroad, bus, limo, Uber, and Lyft fleets have been bought out, regardless of which candidate lies, cheats, and steals the election. I suspect that some tickets will show up on ePrey, etc., but if you have to ask the price, you won't be able to afford them.

For those tut-tutting the loss of another great British company, it was never British to begin with from a financial standpoint - the technical and management principals who founded it just happened to be of that lineage, but not the investors. I've never been in ARM's Cambridge offices, but I'm guessing that its diversity reflects that in their offices that I have been in elsewhere, and they're about as diverse as any current Millenials-oriented ad pablum you're likely to see, except for the ratio of women in the technical departments - that's a problem pretty much everywhere. There's your eighth data point.

One thing is for certain - we are definitely fulfilling the Chinese curse/blessing: "May you live in interesting times."
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