Comment by walterbell | Hacker News Reader

Comment by walterbell | Hacker News Reader

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> Nvidia is the only suitor in concrete discussions with SoftBank, according to the people.

Would Arm stakeholders (i.e. much of the computer industry) prefer an IPO?

In 2017, Softbank's Vision Fund owned 25% of Arm and 4.9% of Nvidia, i.e. these are not historically neutral parties, https://techcrunch.com/2017/08/07/softbank-nvidia-vision-fun...

After WeWork imploded, https://www.bloomberg.com/opinion/articles/2019-10-23/how-do...

> Neumann created a company that destroyed value at a blistering pace and nonetheless extracted a billion dollars for himself. He lit $10 billion of SoftBank’s money on fire and then went back to them and demanded a 10% commission. What an absolute legend.

Is the global industry (cloud, PC, peripheral, mobile, embedded, IoT, wearable, automotive, robotics, broadband, camera/VR/TV, energy, medical, aerospace and military) loss of Arm independence our only societal solution to a failed experiment in real-estate financial engineering?

ARM was public for a long time. In 2016 they were taken private by Softbank via a $32bn acquisition.

ARMs IPO value is under $10B, revenue/profits too small, growth not strong enough.

Why would Arm be valued at $10B publicly and $32B+ privately? Nvidia shareholders would be paying a premium for ... what exactly? Did Softbank overpay for Arm?

Is Arm not profitable as a standalone business? They recently raised some license fees by 4X.

I don’t believe NVidia will pay $30B. But certainly they might believe ARM has value outside its current cash flow and mediocre growth. Like strategically combining technologies.

I’m skeptical that will work, but Son was dumb enough to pay $31B with no strategic value.

I’m skeptical that will work, but Son was dumb enough to pay $31B with no strategic value.

At the time I thought Son had clever telco synergies in mind, but I gave him far too much credit

ARM is actually an okay choice and $31B probably wasn't even that out of whack.

The problem is that Son needs cash, so he's flogging off everything he can to get it.

Apparently Son had a stake in Nvidia too which was sold off last year at a slight loss if you believe BI. Crazy.

https://www.businessinsider.com/running-list-softbank-invest...

>Softbank overpay for Arm

Grossly so. They paid like 45 percent above what the stock was trading at the time.

That's a pretty normal premium for a buyout. You'll never be able to buy a company completely just by using the stock price * number of shares.

The company is currently valued by analysts as high as $40 billion. Most seem to believe it's worth more than the $32bn Softbank paid in 2016.

> Nvidia shareholders would be paying a premium for ... what exactly?

They'd be paying a premium for a path to an all-nvidia datacenter & supercomputer.

Consider HPC applications like Oak Ridge's Frontier supercomputer. They went with an all AMD approach in part due to AMD's CPUs & GPUs being able to talk directly over the high-speed Infinity Fabric bus. Nvidia's HPC GPUs can't really compete with that, since neither Intel nor AMD are exactly in a hurry to help integrate Nvidia GPUs into their CPUs.

This makes ARM potentially uniquely valuable to Nvidia - they can then do custom server CPUs to get that tight CPU & GPU integration for HPC applications.

Hmmmm.

There is [0] https://en.wikipedia.org/wiki/NVLink

which is supported by [1] https://en.wikipedia.org/wiki/POWER9

those two combined give you [2] https://en.wikipedia.org/wiki/Summit_(supercomputer)

currently the worlds number 2 supercomputer(only very recently dethroned) according to the article.

Installed at Oak Ridge.

So they are already there, just needing some premium POWER?

Can't they make custom Arm server CPUs without buying Arm, as the Amazon/Annapurna team and others have done with their Arm licenses?

Amazon paid 350MM for Annapurna, ~ 1/100th of 32B.

For embedded devices, Nvidia already ship Jetson boards with Arm CPUs and Nvidia GPUs.

Sure, but they'd need to buy or build a CPU design team. Which they'd get as part of buying ARM, the teams that make the Cortex reference designs.

A $30B acquihire would be impressive, 100 times more than Amazon paid for Annapurna, the team who built AWS Graviton server CPU on top of Arm's reference design. If the HR department is having so much trouble hiring Arm engineers that Nvidia needs to pay 30 billion dollars to hire a CPU design team, something's wrong. Nvidia already has CPU design teams, e.g. they made a 2014 Transmeta-like design.

https://hothardware.com/news/nvidias-64bit-tegra-k1-the-ghos...

> .. this chip is fascinating. NVIDIA has taken the parts of Transmeta's initial approach that made sense and adopted them for the modern market and the ARM ecosystem -- while pairing them with the excellent GPU performance of Tegra K1's Kepler-based solution.

https://www.extremetech.com/computing/174023-tegra-k1-64-bit...

> there’s an interesting theory ... that Denver is actually a reincarnation of Nvidia’s plans to build an x86 CPU, which was ongoing in the mid-2000s but never made it to market. To get around x86 licensing issues, Nvidia’s chip would essentially use a software abstraction layer to catch incoming x86 machine code (from the operating system and your apps) and convert/morph it into instructions that can be understood by the underlying hardware.

Which other Arm licensee has been talking about x86/Arm instruction morphing in 2020?

If the goal of acqui-billion-hiring the Arm reference design team is to prevent other companies from using those designs, that would endanger smaller vendors in the Arm supply chain, along with many of the devices that run modern society. Regulators may not like that.

Why would nvidia overpay by 22 billion dollars?

Because the sources for this story are investment bankers desperate for bidders?

An ARM owned and fully controlled by NVIDIA is probably worth more to them than an independent and reasonably neutral ARM who's willing to do business with NVIDIA's competitors. Maybe not $22B more, though.

That would imply the purchase is for the purpose of actions that could cause regulators in multiple countries to block the purchase.

There’s an opportunity for arbitrage here then...

Not really. You can't exactly cut in and buy arm from SoftBank for 16 and flip it to nvidia for 32. What's your pitch to SoftBank?

Get hired at arm with equity comp.

Doing IPO would mean they will use the money raised meaningfully. Shareholders probably see more upside with Nvidia integration. I’m not really sure what ARM need a bunch of money for in an IPO, they are pretty established.

> I’m not really sure what ARM need a bunch of money for

To buy themselves back from owner Softbank, who can return money to investor Saudi Arabia? https://www.cnbc.com/2018/10/23/softbank-faces-decision-on-w...

If that is the main idea your S1, not gonna get much interest unless you don’t raise much.

The goal of independence is typically to execute on a vision.

According to some comments in this thread, the alternative is the slow destruction of the neutral Arm ecosystem. While some new baseline could be established in a few years, many Arm customers could face a material disruption in their supply chain.

With the US Fed supporting public markets, including corporate bond purchases of companies that include automakers with a supply chain dependent on Arm, there is no shortage of entities who have a vested interest in Arm's success.

If existing Arm management can't write a compelling S1 in the era of IoT, satellites, robots, edge compute, power-efficient clouds, self-driving cars and Arm-powered Apple computers, watches, and glasses, there will be no shortage of applicants.

IPO'ing a business that only makes revenue from licensing arrangements is a recipe for disaster

ARM was publicly traded between 1998 and 2016. In that period its value multiplied about 25x, not counting the premium of the acquisition. Could you elaborate, please? Where do you see the disaster? (Honest question).

Because of Apple. Not to mention their last 40% price increase was because of the Vision fund's nonsense.

Publicly traded companies that rely on income from "licensing" peak in revenue then stagnate because innovation becomes harder to come by.

Apple is a small, although significant, part of ARM's total market share. And that 25x is, as I said, without taking into account the premium. If you do, and there are good arguments to do so, the valuation growth is 35x, in almost 20 years.

Regarding innovation, ARM's been at it since 1990. I'm sure it's not the same now as it was 30 years ago, but we're well past the point where one can reasonably fear it to be an unsustainable business. Last time I heard numbers, they were talking about more than 50 billion devices shipped with ARM IP in them. That is a massive market.

You don't answer my question. Why wouldn't licensing businesses work as publicly traded companies? What's the fundamental difference, specially in an increasingly fabless market, between a company licensing IP to other companies and a company selling productized IP to consumers?

How so? It seems like lots of businesses run successfully on that model for indefinite periods.

If a business is viable as a private company (as ARM certainly is), why wouldn't they be viable as a public company?

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