Arm in a world without a daddy

Arm (Acorn RISC Machine) started out in 1983 as a captive developer for Apple and Acorn. It slowly became an independent company and even went public in 1998. It changed its name from Advanced RISC Machines Ltd to ARM Ltd.. In 2016 Softbank acquired Arm for $31 billion, Arm did about $1.5 billion in sales that year, so they were purchased for 20-times revenue and about 60 times earnings. Nice payday for the Arm shareholders at the time. Four years later Nvidia offered $40 billion for 130% more than Softbank paid, pretty nice profit for four years of ownership, Arm did not increase its sales by 30% over that period.

It was a bold move by Nvidia and would have changed the dynamics in multiple industries—too many it seems. The concept of it scared the bejezus out of a lot of companies who saw Nvidia getting more control of their destiny and possibly an insider’s view of their plans. Those companies and their supporters lobbied various governments and the governments listened—it happens sometimes. But if you give Nvidia credit for nothing else, you’ve got to give it credit for a huge idea that would transform industry and perhaps nations.

This week Nvidia and SB declared the deal was terminated. Nvidia forfeited the $1.36 billion it put down but got back 219 million shares that were in escrow at the September 2020 price of $125. And today it's at $265, so that’s a gain of $30.8 billion. Terminating the deal didn’t hurt Nvidia financially.

Between Nvidia’s announcement and now the industry shifted. Speculation was that some of Arm’s licensees slowed down their developments waiting to see what would happen with Nvidia. Some competitors to Arm promoted RISC-V as an alternative to Arm that accelerated RISC-V uptake, Intel being the most prominent with its recent Intel Foundry Services (IFS) offer and new $1 billion investment fund for startups interested in RISC-V. China too has put funding into RISC-V companies like Alibaba, and Taiwan’s Andes.

Some companies have pushed Arm out of their developments plans because they don’t want to go through the anxiety of someone else picking up Arm after it goes public—after all, that’s how Softbank got the company.

Organizations that don’t rely on the latest state of the art Arm processor designs will stay with Arm and continue to use it as a cheap microcontroller. Others that don’t have an architectural license will move away from Arm to RISC-V suppliers. Companies like Qualcomm, Samsung, Nvidia, and MediaTek will continue to design their own Arm processors and have long-term agreements. They just won’t quite be so forthcoming with information about their roadmaps and plans as they used to be with Arm.

Speculation by some hedge fund managers and some system integrators is that Arm’s sales will flatten if not decline due to this turmoil and uncertainty.

Windows has been ported to Arm and people point to the Chinese supercomputer using it and other server products. Windows has not been ported to RISC-V—yet.

The effect on AMD & Intel from the termination of the proposed acquisition of Arm is generally seen as beneficial for Intel. It will simplify their push to introduce their dGPU into the public cloud. Also, with Arm out of the picture as an Nvidia asset, some think it will open up a crack in Nvidia’s hold on the HPC accelerator market. They point to MS, AWS, and Google building their own AI processors. Meanwhile, Nvidia’s share price has risen and the company’s market cap is greater than AMD,  Intel, and Qualcomm combined.

Almost none of these mega financial movements have affected the Arm employees since they have no stake in the deal and one owner is about the same as another to them. One notable exception to that short-sighted conclusion is the departure of Simon Segars who was Arm’s CEO for the past nine years.

So the mega-rich and Wall Street sharpshooters will exchange some money, but not many other people will be impacted by this. You’ll still be able to buy a $1,200 smartphone, be driven to work in your autonomous EV, and watch the Super Bowl on your 90-inch 8k HDR.

But wasn’t it exciting while it lasted?

Postscript—Nvidia says there’s no impact on Cambridge-1, Nvidia’s HPC supercomputer project in England, which will address challenges in medical imaging, genomics, and drug discovery.