SoftBank retaining small ownership stake in Arm; NVIDIA paying in cash and stock
U.S.-based NVIDIA on Sunday announced it had struck a deal with Japanese conglomerate SoftBank group for the purchase of U.K.-based Arm, which specializes in semiconductor and software design. SoftBank purchased Arm in 2016 for $31 billion; at the time, SoftBank CEO Masayoshi Son said the goal was to enable a “Cambrian explosion” in internet of things devices.
SoftBank will retain Arm’s IoT Services Group, per details of the transaction. NVIDIA will pay SoftBank $12 billion in cash, including $2 billion at signing, along with $21.5 billion in NVIDIA common stock. There’s also an “earn-out construct” that could make SoftBank up to $5 billion in cash or stock “subject to satisfaction of specific financial performance targets by Arm.” Further, NVIDIA will issue $1.5 billion in equity to Arm employees. Regulators in the U.K., European Union, China and the U.S. need to sign-off on the terms; NVIDIA said that could take about 18 months.
NVIDIA said Arm will operate under its existing brand and Arm’s iP business will stay registered in the U.K.
NVIDIA’s GPU and SoCs have been a mainstay in the gaming and visualization segments and the company has dramatically stepped up efforts in providing compute power for artificial intelligence–this is core to the acquisition logic.
In a letter to employees, NVIDIA CEO Jensen Huang wrote: “We are joining arms with Arm to create the leading computing company for the age of AI. AI is the most powerful technology force of our time. Learning from data, AI supercomputers can write software no human can. Amazingly, AI software can perceive its environment, infer the best plan, and act intelligently. This new form of software will expand computing to every corner of the globe. Someday, trillions of computers running AI will create a new internet — the internet-of-things — thousands of times bigger than today’s internet-of-people.”
Writing in Forbes, Moor Insights & Strategy Founder and Principal Analyst Patrick Moorhead called the deal “an incredibly exciting one that has the combined entity operating in every conceivable market and compute unit. If you believe there will be trillions of IoT end points and AI is important to shepherd the power on the device, the edge, or the datacenter, then this deal should excite you too.”
One of the early joint activities will see NVIDIA and Arm stand up an AI laboratory at Arm’s headquarters in Cambridge, U.K. This will include an ARM/NVIDIA super computer, research fellowships and partnerships, AI training, a startup accelerator, and a “hub” for industry partners.
Arm has maintained an open licensing approach and counts Qualcomm, Intel and Samsung among its customers. Given that a NVIDIA-owned Arm could see Arm working directly with NVIDIA competitors, there are questions about how that will play out.
CCS Inishgts VP of Research for the Americas Geoff Blaber told Reuters, “Independence is critical to the ongoing success of Arm and once that is compromised, its value will will start to erode.”
