SoftBank chairman overoptimistic about benefits from acquiring ARM

Editor: Helan　　 Update Time :2016/07/21 15:59

For Japan-based SoftBank's plan to acquire a 100% stake in UK-based ARM at GBP24.3 billion (US$32.0 billion), SoftBank chairman and CEO Masayoshi Son indicated that the acquisition is motivated by the large business potential for IoT (Internet of Things). However, Son overestimated real benefits from the acquisition and underestimated difficulties in vertical and horizontal integration of industries for IoT application, according to Digitimes Research.

While Son emphasized future business opportunities for IoT, he did not mention what synergy the acquisition can generate, SoftBank's motivation of the acquisition is investment in "future" IoT business opportunities, Digitimes Research indicated. In fact, SoftBank's stock price on the Tokyo Stock Exchange fell 11.3% on July 19, the stock's largest single-day drop since October 12, 2012, and this reflected lack of investors' confidence in benefits from the acquisition.

Digitimes Research raises two questions concerning IoT business opportunities due to the acquisition as mentioned by Son:

1. ARM's clientele differs from SoftBank's

ARM's clients are mobile IC design houses and therefore ARM's influence is on users of mobile terminal devices around the world, whereas SoftBank's business operations consist of mobile telecom and Internet services in the Japan (including Yahoo Japan) and the US (its subsidiary Sprint ) markets only.

2. ARM's business operation differs from SoftBank's

ARM's revenues come from IP licensing of mobile chip architectures and SoftBank is a provider of mobile telecom and Internet services, respectively positioned at two ends of a supply chain. Specifically for development of IoT application, SoftBank lacks engagement in between the two ends, covering software development, chips design and production, device production, system integration and brand marketing.

As ARM will maintain completely independent operation after the acquisition, SoftBank is expected to hope that ARM can extend its global dominance from mobile terminal devices to IoT application.