back to article Goldman Sachs reportedly set to head up $60bn Arm IPO

Goldman Sachs is reportedly lined up to be the lead underwriter for Arm's public offering in a move expected to value the chip designer at up to $60bn, higher than the purchase price first offered by Nvidia. Owner SoftBank is said to be favoring Goldman Sachs to head up the Arm flotation, according to Reuters, which cited …

  1. Andy The Hat Silver badge

    I don't understand capitalism

    How can a company with revenues of $2.6bn and pre-tax profits of $300k (projected) be worth $60bn?

    1. Yet Another Anonymous coward Silver badge

      Re: I don't understand capitalism

      It's a startup and if these new-fangled portable computer things ever catch on they could grow tremendously, they could be the next Mullard

      1. Tom 7

        Re: I don't understand capitalism

        I enjoyed his early TV work!

    2. DS999 Silver badge

      Re: I don't understand capitalism

      There are only two possibilities. One, the greater fool theory (the reason Bitcoin is priced as it is) or two, that they see ARM as seriously underpricing its offerings currently and plan to install management who will "fix" that.

      Of course for option two, since ARM doesn't have the lock-in of x86 if licensing costs massively increased, then over the rest of the decade the bulk of their customer base would flee to RISC-V or create new ISAs.

      Neither is a roadblock to a $60 billion IPO, but option one leads to the valuation coming back to earth when the euphoria wears off and the market cap falls to under $10 billion, and option two leads to ARM probably declaring bankruptcy in the early 2030s.

      1. Yet Another Anonymous coward Silver badge

        Re: I don't understand capitalism

        The problem is normally you IPO when your startup first begins to make money, and needs money to expand to make more money.

        So paying 100x annual sales at IPO for Tesla /Apple /Microsoft would have you made you $$$$$.

        Paying 100x annual sales for a 30year old company in a mature market that was public, now private and wants to go public again and whose message is 'we are culling staff to save money to make a profit" - doesn't sound quite as convincing

      2. 3arn0wl

        Open Source competition

        The more RISC-V grows : the more ARM (and therefore Arm Ltd.) is diminished. The tech-tonic plates are shifting rapidly.

    3. Anonymous Coward
      Paris Hilton

      Re: I don't understand capitalism

      The same way GitLab's IPO valued the company at about $11b despite never having made a profit at all.

      New investors in IPOs seem to look only at revenue and potential.

      IPOs are not the greatest investment.

      1. Tom 7

        Re: I don't understand capitalism

        It could be they dont wont them to succeed. Perhaps they buy them to stop them reaching their potential and putting the investors other businesses... out of business. A bit like having the two world best centre forwards on your books. Whatever a centre forward is.

    4. oiseau

      Re: I don't understand capitalism

      ... a company with revenues of $2.6bn and pre-tax profits of $300k (projected) be worth $60bn?

      Well ...

      Remember HP's Autonomy thing?

      Nobody seems to talk about that these days, not even Priti Patel.

      HP paid, very enthusiastically and in a big hurry, a whooping US$11.0 billion for Lynch's Autonomy only to make an about-face and end up writing down a huge slice of it (US$8.8 billion) because they were misled.

      To put things into perpective:

      HP paid US$8.8B for something a short while later decided was worth only US$2.2B.

      A nice round 80% less.

      In anyone's ledger, 80% is a lot of percent.

      Lynch deserves a prize: just look at the list of all all the head-hochos he took for a walk.

      Yes, sure ...

      We live in a very strange world these days thanks to Ronald Reagan, Margaret Thatcher et all and the new financial world economics system they helped to create.

      So it is so strange that there are people today who think that a company with a US$2.6B revenue and a projected pre-tax profit of only US$300K can actually be worth US$60B?

      Not really but those numbers read awfully funny.

      I don't think Lynch took anyone for a walk, I argue that HP knew what they were doing.

      No idea why or just who/what was behind the whole thing, be sure it is not good.

      And then, just where is all the moolah?

      In that same light, ARM is most surely/probably not worth US$60B.

      And I'm quite sure something is afoot behind the whole thing.

      As ordinary mortals, we'll just have to wait and see.


    5. Heya

      Re: I don't understand capitalism

      If you look at the actual filing, on page 26 (which is about page 29 in the PDF), you'll see the ARM division reported pre tax profits of 31,088 million yen, not 31.088 million yen.

      El Reg is off by a factor of 1,000 because someone misunderstood the meaning of the humble comma.

      Profits are in the region of 260 million, not 260 thousand.

    6. Binraider Silver badge

      Re: I don't understand capitalism

      Everything that is going to have an ARM in it already does, and will likely be replaced by another. Captive market, or even monopoly status.

      But yeah, these shares as dividend generators are not going to work. They are a unit of speculation only. See also, Ponzi scheme.

      I expect the IPO to tank along similar lines; just a question of when.

    7. pimppetgaeghsr

      Re: I don't understand capitalism

      Pump and dump.

  2. Is it turned on?

    More to the point how can a company that doesn't physically manufacture anything (except the odd prototype), and has a revenue of $2.6bn only make a profit of $300k ? The worldwide staff count is only 6,500 so even if they were paying everyone including the cleaners 100 grand a year that's only $650m. What do they spend the money on? CEO yachts?

    1. Doctor Syntax Silver badge

      "What do they spend the money on?"

      Services/IP from SoftBank?

    2. DS999 Silver badge


      I didn't read the whole article, and I assumed the reference to $300K profit above was a typo of $300M. CPU architects are paid a LOT more than $100K so the average for them would be a lot higher, but I don't know how many of them ARM has versus lower paid types like tech support, tech writers, project managers, etc.

      There were some big layoffs announced recently, presumably that's to insure they will show a healthy profit in time for the IPO. But still ridiculous to talk about a $60 billion IPO with their revenue no matter how much they can up the profit side.

      1. Yet Another Anonymous coward Silver badge

        Re: Yikes

        > assumed the reference to $300K profit above was a typo of $300M.

        Probably not, they lost $400M last year

        Although these days profit is whatever you tell the accountants you want it to be.

        ARM are in a tricky market, the low end stuff they can only charge 0.00000000001 % royalty on.

        The high end customers all have architecture licenses where the customer does all the innovation, but doesn't pay ARM anything.

        In the middle ARM has to pay lots of clever buggers to do all the clever stuff but the customer will switch to another architecture if ARM try and charge 1c more the switch would cost.

        1. mattaw2001

          Re: Yikes

          Personally I believe the big players are big enough to not need them, or have architecture licenses (as you said), and that there are just not that many SME players anymore to license to as the chip design market has become increasingly small.

          1. BlokeInTejas

            Re: Yikes

            Opens up a host of fun opportunities, then, eh?

            As long as you avoid designing yer own chips for 7nm and below.... That's expensive.

            But hot damn, 28nm let quite a lot of neat stuff get built.

          2. pimppetgaeghsr

            Re: Yikes

            Apple/AMD/Microsoft/Nvidia/Quallcomm already have their own Arch licenses. After Apple embarassed ARM implementations yet again everyone knows what they have to do to keep up.

            Microsoft is likely the only one capable of keeping up with those M1 chips alongside Qualcomm.

    3. pimppetgaeghsr

      EDA licenses

      2500 contractors

      lighting/electric bills

      And who knows what else since Softbank and their Deutsche morons are in charge of it.

  3. This post has been deleted by its author

  4. BOFH in Training

    How about ARM China?

    Isn't that issue still yet to be resolved?

    Does the IPO include ARM's China sub? If so, isn't that being run by a guy who doesn't seem to care what ARM wants to do?

    1. fxkeh

      Re: How about ARM China?

      afaik ARM China is a joint venture, where ARM UK own a bit less than 50%. So after the IPO ARM UK would still own slightly less than 50% of the ARM China. (Though they don't seem have much control over it)

  5. captain veg Silver badge

    why don't we...

    All the el reg readers chip in a bit and buy this great British company back for, er, Great Britain? I mean, it's not as if we'd need that many crowdfunders to raise sixty billion. Is it?

    Buy RISC-V now!


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