Comment: IoT made ARM takeover inevitable

Most observers believe that the processor IP which is the main ARM business was so important to so many chip makers that ARM’s independence was too strategically important to the market to be broken.

As a result it was thought that its artificially high share price would not attract a buyer. SoftBank has made nonsense of this.

It seems to see a business case for paying $32b for ARM which has a business driven by markets as diverse as mobile comms, automotive, data servers and the internet of things.

ARM’s chip making customers sell to some of the biggest global brands including Apple and Samsung.

So is the proposed takeover a good deal for ARM and its shareholders?

Mark Skilton, a Professor of Practice at Warwick Business School, who specialises in technology businesses, believes it is. He sees a definite logic to the move by SoftBank.

“The 50% premium on valuation is a good price,” says Skilton, “assuming the UK government doesn’t block the deal for national strategy reasons.

“The concern of brain drain and ARM business moving from the UK must be considered in this equation based on its knowhow and leadership in chip design.”

SoftBank is mainly focused on telecoms infrastructure and services businesses, and the Japanese firm has a positive track record in investing in its company purchases. And this could bring much needed investment to the Cambridge-based processor firm.

“This move by ARM is recognition of the limits of this current market and the need to invest to expand beyond PC and mobile into the multitude of consumer home, building, car and other platforms emerging in the IoT. This needs bigger pockets to take on completion to scale these markets,” says Skilton.

A world with billions of devices connected to the internet, the internet of things, is changing the came for telecoms firms as well as operators and service providers.

ARM is uniquely positioned  as its low power processors are becoming a de facto standard for IoT connected terminals and sensor devices.

“Telecoms companies have had an interesting challenge to position the vital network ‘glue’ to connect all these devices and services, but seek a bigger part of the market share through similar integration into the delivery device end.

By purchasing ARM, SoftBank dramatically expands its business into the area of chip design for the IoT market.