Analysts Wonder if ARM Will Remain Independent as a Softbank Unit

By Todd R. Weiss  |  Posted 2016-07-18 Print this article Print
ARM holdings

Another analyst, Charles King, of Pund-IT, told eWEEK that he sees the benefits and risks equally for both companies. "ARM shareholders get a significant mark-up on their investments—which is great news for a company whose shares have traded in a fairly narrow range for three-plus years and that pays low dividends."

Now, the real question will be "whether the company can work as well under foreign ownership as it has in the past," King said of ARM. "The deal is a large financial risk for Softbank, especially for a company whose annual revenues [while growing] have never topped $1 billion. Then again, with ARM well-positioned to reap significant rewards from IoT adoption, the deal could pay off handsomely."

King said he wouldn't be surprised if Softbank begins looking for a buyer for Sprint to help pay down some of its debt now that it is going after ARM. Sprint has been losing money each quarter for about a decade.

"The big problem there is who, or if anyone, really wants to buy the No. 4 wireless player in the U.S.," he said.

King said he's not quite convinced that Softbank is making the right move by buying ARM.

"While I understand Softbank's interest in ARM, I believe the likely risks outweigh the potential rewards."

The issue, he said, is that "the purchase will effectively turn a company whose agnostic approach to IP development has helped fuel the revolution in mobile technology into a division of a mainstream wireless carrier," because of Softbank's ownership of Sprint. "Selling Sprint could help blunt that perception, and the traditional divisions between IT vendors aren't what they used to be. If I were an ARM shareholder, I'd be very happy about the deal Softbank is offering. Otherwise, not so much."

Rob Enderle, principal analyst at Enderle Group, said he thinks the deal "introduces a lot of risk for ARM, which could play well for Intel if they can capitalize on it."


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