Arm to IPO after Nvidia bid fails

R.I.P. Nvidia-Arm, thank goodness. It always seemed a cheeky-chappie sort of bid – something the bidder saw as a bit of a flutter without serious expectations of success.

For Jen-Hsun Huang, however, who trousered $150 million by selling shares during the deal, the exercise can’t really be called a failure.

However the intellectual effort to justify the proposed deal was pitiful. Any schoolgirl could have produced better justifications for the merger than those put forward by Nvidia and Arm.

To suggest that Arm – an IP company for goodness’ sake – wouldn’t be able to afford its R&D budget without Nvidia was insulting.

To suggest that Nvidia, a long-time licensee of Arm, needed to buy Arm before Arm and Nvidia could co-design a chip to attack the datacentre market, is daft.

But the greatest barrier to Nvidia buying Arm – that Arm’s place in the industry depends on it treating licensees equally – was never properly addressed.

If licensees, who are in competition with eachother, were expected to license designs from an Arm which was owned by another licensee – how could they ever be sure that the proprietary information they gave to Arm wouldn’t find its way to Nvidia?

How could the licensees of an Nvidia-owned Arm be sure that Arm was giving their requirements the same priority and effort as Arm gave to Nvidia designs?

How could Arm’s licensees be sure that those licensees which broadly advanced Nvidia’s strategy did not get priority over those that didn’t?

How could Arm’s licensees be confident that Arm’s R&D budget would be spent to advance their interests and not, increasingly, Nvidia’s?

How could such issues have been addressed?

Assurances? Chinese walls? Separate management structures? Pull the other one.

Basically the whole Nvidia bid was an impossible sell. Huang was coming up to Becher’s Brook on a point-to-pointer – he never stood a chance.

Comments

2 comments

jamo spingal
10th February 2022 at 10:27 am

I would imagine there will be a decent profit for SoftBank, so Masayoshi San should be happy enough.

- David Manners
  10th February 2022 at 12:15 pm
  
  That’s rather the point Jamo, there could be a much reduced profit or no profit at all. Nvidia’s bid was backed by Nvidia shares which have shot up and could have given Masa an €80bn price tag for Arm. Analysts are now pointing out that, for a $2bn revenue conpany the IPO price tag is $20-30bn . So Masa, who bought Arm for $31bn, could be taking a haircut here.