What does Softbank stand to gain in ARM bid?

Article By : Junko Yoshida

EE Times' Junko Yoshida writes about what's in it for SoftBank in its recent plunking down of Rs.2.15 lakh crore ($32 billion) for ARM.

The charismatic CEO of SoftBank group, Masayoshi Son once again, plays the high-stakes game in his latest Rs.2.15 lakh crore ($32 billion) purchase of chip giant, ARM.

Yes, SoftBank is Japanese, but it’s a company that defies the stuffy stereotype. It doesn’t subscribe to such Japanese traditions as snail’d-pace decision-making, bureaucratic quagmires, endless “internal” discussions, insular thinking and the ultimate paralysis of indecision.

To outsiders, though, the most vexing question about SoftBank’s deal with ARM is SoftBank itself.

Who are these guys and what’s in it for them? Put more bluntly, why does plunking down Rs.2.15 lakh crore ($32 billion) for ARM really make sense for SoftBank?

Some industry analysts believe that the deal tells a story more about Son himself, rather than ARM’s market prospects or any realistic assessment of the Internet of Things in the future. (Read: SoftBank takes IoT a step further with ARM buy)

Mike Demler, a senior analyst at The Linley Group, told EE Times, “The deal looks more driven by Chairman/CEO Son’s personal desire to own a market leader than a sound financial analysis.”

Quoting Son, who remarked at the press conference that up ‘til now Softbank hasn’t owned a company that was number one in its segment, Demler said, “ARM has good growth potential, so it makes a nice trophy for his M&A portfolio. But the Rs.2.15 lakh crore ($32 billion) valuation makes absolutely no sense.”

Remember Comdex?
First, let’s look into where SoftBank is coming from.

SoftBank entered the consciousness of the U.S. tech community in 1995, when Son paid Rs.5,366.25 crore ($800 million) for the then monstrous computer show Comdex. That was a big deal, largely because SoftBank was virtually unknown outside Japan. Although already a legend in Japan, Son had little name recognition abroad, either.

Son was introduced as the “Bill Gates of Japan,” and SoftBank was described as a “Japanese software distributor and publishing company” at the time — more than 20 years ago.

Perhaps, one of the most remarkable things about SoftBank since then is that Son has remained atop SoftBank for all these years. Indeed, in many ways, SoftBank is Masayoshi Son, and Son is SoftBank.

Over the years, Son has proven himself extremely nimble in steering the company through different identities throughout the tech industry’s transformation.

No longer viewed as a computer software distributor, Softbank today is a telecommunications and Internet giant. Its businesses encompass broadband, fixed-line, e-commerce, Internet, technology services, finance and media.

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Figure 1: Humanoid Pepper and Masayoshi Son

Idea per minute guy
In an interview with Fortune, SoftBank’s former president Nikesh Arora, who recently resigned, described Son as “a person with amazing enthusiasm.”

Arora called Son “an extremely positive person. Once he gets optimistic, I think sometimes he gets carried away. Part of doing things together is tempering some of that enthusiasm sometimes.”

Arora explained Son’s passion for robots. He noted that Son “has an idea per minute. [Recently] he presented his views of the singularity to the SoftBank board. He’s building a robot with a heart. It has Watson in it—that’s supposed to be the rational part of brain, and he’s building the emotional part of it. That’s crazy enough for me. But he’s executing on it. He’s selling 1000 of them every month.”

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