SoftBank’s Arm is seeking the largest Nasdaq IPO in almost two years, targeting a valuation of $60-70bn despite flat revenue and declining net profit.
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Specialist
C-level Executive at leading RISC-V company
Agenda
- Feasibility of and assumptions behind Arm's rumoured USD 30bn-70bn valuation
- Deployment strategy options for mooted USD 8bn capital raised from IPO
- Licensing fee and royalty rate trends
- Impact of RISC-V adoption on Arm and competitive landscape across key end markets
Questions
1.
Arm is looking to IPO in New York as opposed to London. What are your thoughts on the company’s IPO prospects and its valuation of USD 30bn-70bn? It’s quite a big disparity there. Obviously, SoftBank initially bought it for USD 32bn in 2016, and there are lots of sources saying that USD 50bn might be the sweet spot. What are your thoughts on where the valuation could fall?
2.
We discussed Arm’s valuation within the range of USD 30bn-70bn. For Arm’s valuation to be above what SoftBank bought it for and close to what the Nvidia deal valuation was, at USD 40bn, would it need to be able to charge royalties on devices rather than chips?
3.
If Arm couldn’t start charging royalties on the basis of the device’s value as opposed to the chip’s value, is it possible that an IPO valuation might be less than the USD 32.4bn that SoftBank paid for Arm?
4.
Is there anything that could delay the IPO beyond 2023, or perhaps make some other agreement? There have been lots of announcements with Arm over the last couple of years and not everything has gone through, so what are your thoughts on a delay to the IPO?
5.
Can Arm’s new model work?
6.
What do you think is the likelihood that its new model could work for Arm, where it looks to charge based on the value of a smartphone at around USD 335 vs the value of the chips, which varies from anything from USD 40 for a Qualcomm chip to USD 6 for a Unisoc chip?
7.
Is it unlikely that its business model change will be a success for Arm?
8.
What does the more widespread adoption of RISC-V mean for Arm?
9.
Is the growth rate that we’ve seen since Arm was taken over by SoftBank possible over the same period in the future, now RISC-V is part of the equation?
10.
Arm quotes almost 100% market share in mobile, 63% in IoT, 24% in automotive and 5% in cloud. With the introduction or the adoption of RISC-V, do you see any particular market share shifts over the next 12-24 months as a direct result of substitutes being available through RISC-V?
11.
You mentioned 10% RISC-V market share, mostly in the embedded space, but obviously we’ve got Android support for RISC-V and other key clients of Arm adopting RISC-V as well. In five years, where do you think that 10% number could be? Could it be double?
12.
By how much do you think people will move away from Arm?
13.
Could you estimate a probability of whether RISC-V could take 50% market share, or if it will have be more modest growth and take 20% in seven years?
14.
Looking at the USD 8bn in capital the IPO could raise for Arm, what should the company look to spend that money on to make its future success more likely? Are there any particular areas you would say are more important than others?
15.
What acquisition targets would make sense for Arm?
16.
Other than acquisitions, are there any other areas Arm needs to improve its investments in? If the company is building an entire new business strategy, would it be prudent to look at how its client relationships function, given some of those might be a bit damaged? Where does it need investment in order for its new business model to be successful?
17.
Do you see any correction with Arm’s cost base after the escalation of costs we saw at the company since 2016? I know some of that was to do with a deal it struck with the then-UK Prime Minister Theresa May. To what extent will there be a correction there?
18.
Arm China’s revenue has increased, but profit has plummeted. What do you think drove this change?
19.
Do you have any concerns about the impact of Arm IPOing in the US? What does that mean for where the IP itself actually resides, and would that have any impact on where the company would licence out IP to, particularly China, with the quasi-trade war which is going on?
