back to article Arm still jewel in crown as parent SoftBank nurses record $23.5b hit

Chip designer Arm booked record revenues for the Q1 ended June 30 and was one of the bright spots in an otherwise loss-heavy start to fiscal 2023 for Japanese parent SoftBank's Vision Fund. For the three months, Arm said today it generated $719 million in revenue, up 6 percent year-on-year, including $453 million in chip …

  1. pimppetgaeghsr

    So they're looking at around a P/S ratio of around 25-30?

    $60bil market cap vs $2.5bil revenue

    With the chip shortages, licensing hikes affecting those revenues and chaos after major layoffs from what I'm hearing it would take some serious managment changes for me to invest at that valuation.

    1. 3arn0wl

      What's Arm Ltd. worth?

      That's a question a lot of people will be asking leading up to the flotation.

      In 2016 a lot of commentators thought Softbank had paid more for Arm than it was worth. That the value of Arm rose to $60Billiion in 2021 was due to the fact that Nvidia's purchase price included some Nvidia shares (which rose because of the audacious monopoly buyout proposal), but for obvious reasons Arm/Softbank would like everyone to think that that is Arm's value.

      The ARM ISA has a number of things in its favour:

      - Arm is a profitable company.

      - The ARM ISA has been successful across the spectrum of processing, and is poised to take X86's last bastions of high end consumer computing, and data centres.

      - The world has a greater appetite for processors now than ever : and particularly the type of processors that the ARM ISA produces.

      - ARM has a number of OSs running on it, each with a mature app ecosystem, which users are locked into to some extent.

      - The world was disabused of the myth that X86 is needed for serious computing by Tim Cook's announcement of Apple Silicon in 2020. He anointed ARM as the ISA of the future.

      However, Arm is also facing a number of issues:

      - The pandemic spike aside, the desktop market has collapsed, laptop sales are plateauing, and the smartphone market is saturated. And with many of the world's economies looking fragile, this is perhaps the worst possible moment to break into high end consumer computing.

      - Arm is being floated, in part, because it is seeking funding to enable the development it needs to do in new sectors of processing: AI, ML, Edge, Auto, etc.. It won't be attractive to investors looking for a quick profit.

      - Arm Ltd finds itself a pawn in the US-China tech trade dispute, with some Chinese ARM-using companies significantly reduced in their market share. Floating Arm Ltd on a US stock exchange further exacerbates this : the perception being that Arm becomes an American company. China has vowed to be US-IP-free by 2035. That potentially puts ARM (& X86) out of China, which is 20% of the world's tech market. How successful the Chinese government will be in weaning its population off US intellectual property remains to be seen, though. (The indisciplined practice of the China-Arm subsidiary has also been causing significant problems for Arm Ltd., and threatens to mar the listing.) ARM is no longer the "Switzerland of ISAs" that it once claimed to be, which is a serious dent. That epithet now goes to:

      - the open-standard, RISC-V ISA. It gained much attention at the start of the tech trade dispute, which continued through the potential Nvidia acquisition of Arm. Its momentum seems undampened during the flotation uncertainty. It has already caused Arm to have to alter its business model for lower end processors, and threatens to compete with ARM at all levels in the near future. China in particular is working tirelessly to advance RISC-V designs, and to rebase open source software for RISC-V. RISC-V represents an irreparable slow puncture of Arm's bubble. The longer Softbank waits to float Arm; the more powerful RISC-V processors get, and the bigger the app ecosystem running on the ISA becomes : Arm diminishes in value as RISC-V becomes more viable.

  2. John Smith 19 Gold badge
    Unhappy

    Note *none* of that money will go to ARM of course.

    Just as none of the money HMG got for selling Inmos went to them either.

    But then the only company whose ownership generations of UK government have ever given a s**t about is BAe.

  3. Lordrobot

    Potter isn't buying... He's selling! [Jimmy Stewart Screaming]

    The idea of paying ARM $15 for technology used in a coffee maker makes no sense at all. Aside from the fact ARM is a bit shaky at this point Mr SON can't sell it. It was SON that approached Nvidia. Then every bureaucrat in the world blocked it. Why? NVIDIA is a US company so ARM would soon be sanctioned by the Brain Trust of Tom Cotton and the Biden Admin. That is all the lunatic fringes can ever agree on. Sanctions. At present the US has sanctions on 40% of the global population, leaving 6.6 Billion people buying Chinese with NO COMPETITION and no ARM chips inside.

    "The biggest Global Buyer CHINER, ain't gett'in our chips," Said Red Neckerson at the Feed Store. Dental work not included.

    That's right, they will only be used in US and UK-made Coffee and teapots... Boiling water never became so convenient! Made by Vets. Sold only at Right-wing political gatherings. The right to bear ARMs.

    ARM earnings don't come close to a $60 billion valuation. [Try $10 Billion] But but but this is an IPO, a sucker sale. And where is the sale? The US and LONDON EXCHANGES... So that means ARM can be sanctioned or face delisting in the US. That is the only reason to IPO on London these days. BREXIT has pretty much ended British Clout even if ARM was essentially a British firm.

    Meanwhile, Hong Kong sets a record with $58 Billion in new IPOs. How come Son didn't go to Hong Kong?

    The future is RISC-V not ARM. RISC-V has fewer instructions and the Coffee Pot license fee is ZERO.

    ARM will be moving from Cambridge and Manchester to OHIO... Mr Son's 60 Billion Barf-o-Rama sucker's REVENGE...

    1. Anonymous Coward
      Anonymous Coward

      Re: Potter isn't buying... He's selling! [Jimmy Stewart Screaming]

      Fewer instructions no longer = better.

      Most architecture, ARM or x86/x64 went hybrid a decade (or more) ago.

      Instructions that support specific workloads, ML and the ilk, are (still) the way forwards.

    2. Anonymous Coward
      Anonymous Coward

      Re: Potter isn't buying... He's selling! [Jimmy Stewart Screaming]

      Apple went with ARM and is doing something really great with it. The fact that Apple could do that is because of their own, and ARMs, excellent engineering. That effort managed to bring out the best of the both sides of the general-purpose-custom CPU hybrid model that ARM offers. Another effort with different players could have brought out the worst of both sides of that hybrid model. The people and the engineering culture matter.

      That success story is DESPITE Softbank managements vision of ARM expanding x10 exclusively with IoT (your coffeepots) - which of course never panned out. That was a plan based on fuzzy buzz words promoted by tech shallow financial geniuses who probably make > x10 more than ARMs engineers. Unfortunately, those financial geniuses may yet get their revenge for being shown up.

      Bubbles breed incompetence.

    3. Smeagolberg

      Re: Potter isn't buying... He's selling! [Jimmy Stewart Screaming]

      >The idea of paying ARM $15 for technology used in a coffee maker

      Never bought a 'smart' phone?

      Not that I blame you, but, still, they, and tablets, seem to have been missed out of your, doubtless thorough, research.

      1. Youngone Silver badge

        Re: Potter isn't buying... He's selling! [Jimmy Stewart Screaming]

        You're replying to Lordrobot, our new resident Angry of Mayfair.

        You can get him to start CAPITALIZING words if you play your cards right, but don't expect to see much thoughtfullness.

        Note the "Z". I'm pretty sure he's American.

        Yes, I know.

        1. Anonymous Coward
          Anonymous Coward

          Re: Potter isn't buying... He's selling! [Jimmy Stewart Screaming]

          Most workers in troll farms have been taught American English.

  4. This post has been deleted by its author

  5. EricB123 Silver badge

    Oh Really?

    So a "solution" to slow business and poor results is to repurchase their stock? When I was a child I took the Wall St Stock Exchange tour. They said the purpose of stock was to provide capital for business. We seem to be losing our way a bit.

    1. Charlie Clark Silver badge

      Re: Oh Really?

      Buying back shares is popular with cash rich companies. There's some logic to reducing market capitalisation by buying shares when they're cheap as this makes it easier to issue stock when money is needed. However, the markets have been bullying companies into buying back shares when prices are high so that they can cash in. Softbank isn't cash rich so any buy backs are just a sop to keep investors from dumping things entirely.

      It was known at the start that the Vision Fund was a big risk with little or no governance, particularly it is not isolated from Softbank. It has largely served as an off-balance sheet vehicle for big bets. This is great when share prices are rising but a disaster when they fall, with Softbank stepping in to cover losses that should, by rights, be borne by fund investors.

      Of course, the sale to nVidia or the IPO were supposed to bring in the cash to show what a guru Son is.

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