SoftBank Plans to Take Arm Public

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The IPO season appears to be gaining momentum. Recently, semiconductor provider Arm filed its F1 as it prepares to go public next month.

Arm’s Offerings

Founded in 1990, Arm was initially set up as a joint venture between Acorn Computers, Apple Computer, and VLSI Technology. It was initially set up to develop a processor that was high performance, power efficient, easy to program, and readily scalable. Today, UK-based Arm Holdings is a provider of silicon IP and custom system-on-Chips (SoCs) used in billions of devices. The company designs and licenses IPs instead of manufacturing and selling the chips, in addition to providing a range of tools, physical and systems IP to enable optimized system-on-chip designs.

Semiconductor technology is the backbone of all electronic devices today, and the CPU its most critical part. Arm’s CPU is known for its ability to architect, develop, and license high-performance, low-cost, and energy-efficient products and related technology. Its CPUs have enabled advanced computing in over 99% of the world’s smartphones and more than 250 billion chips that are used across products ranging from the tiny sensor to powerful supercomputers. It has also built a rich software ecosystem partnership with operating systems providers like Google Android, Microsoft?Windows,?and all major Linux distributions, as well as software tools, game engine vendors, and app developers.

As the adoption of AI- and ML-enabled computing increases, Arm has also expanded its CPU’s capability to run AI and ML workloads in billions of devices. Arm believes that in the emerging area of large language models, generative AI and autonomous driving, there will be bigger need for low power acceleration of algorithms. It has added new functionality to its solutions to address this while accelerating future AI and ML algorithms. Arm is also working with players like Alphabet, Mercedes-Benz,?Meta,?and NVIDIA to deploy Arm technology to run AI workloads.

Recently, Arm also announced a partnership with Intel Foundry Services (IFC) that will allow chip designers to develop low-power SoCs on the Intel 18A process. The partnership will focus on mobile SoC designs?first but?will allow for a potential expansion into the design of automotive, IoT, data center, aerospace, and government applications. Arm customers will have the ability to benefit from Intel 18A process technology, delivering new breakthrough transistor technologies for improved power and performance, as well as IFS’s robust manufacturing footprint, which includes the US and the EU.

Arm’s Financials

For the fiscal year ended March, Arm’s revenues were flat at $2.7 billion. It ended the year with a net income from continuing operations of $524 million, compared to $676 million a year ago.

Arm has had a tumultuous journey on the stock market so far. After remaining privately held for 8 years, Arm had listed on the London Stock Exchange and the Nasdaq in 1998 until 2016. In 2016, SoftBank Group?acquired Arm for $32 billion and was one of the biggest takeover of a European technology business . In 2017, SoftBank sold 25% of its stake in Arm to Vision Fund 1 for $8 billion. Last year, SoftBank tried to sell Arm to chipmaker Nvidia for an estimated $40 billion. But amid regulatory concerns, SoftBank called the deal off. Earlier this year, SoftBank announced plans to list Arm once again. Earlier this week, SoftBank announced that it?purchased the 25% stake back from Vision Fund in a transaction that valued Arm at $64 billion . SoftBank plans to retain 90% of its stake in Arm even after the listing. It is targeting to list at a valuation of $60-$70 billion. The IPO is expected to happen in September.

I am not fully convinced that Arm’s IPO will be successful. The company’s revenue has been flat over the year despite the growth in AI, ML, IoT and overall technology hardware products. Arm relies heavily on the smartphone industry, where the growth appears to have slowed down . Overall, the industry is also plagued with rising costs and supply chain headwinds. According to SoftBank’s own financial reports, Arm’s net sales for the second quarter of the year fell 5% over the year.

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Photo Credit: Reto Scheiwiller from Pixabay