
Nvidia reportedly to acquire ARM Holdings from SoftBank for $40B - dtparr
https://arstechnica.com/gadgets/2020/09/nvidia-reportedly-to-acquire-arm-holdings-from-softbank-for-40-billion/
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Symmetry
Given that NVidia can already license designs from ARM and given that
companies will trust ARM less in rival NVidia's hands then in a neutral party
it looks like the value of ARM is going to go way down after the sale,
effectively lighting a giant pile of millions of dollars of economic value on
fire. But the literature says that that's actually pretty typical of how
mergers and acquisitions end up playing out. In general they're tributes to
the CEO's ego that impoverish shareholders, though there are exceptions. I
can't help but think that NVidia is paying $40B for a company that'll be worth
$15B to them but would be worth $30B on the open market.

~~~
aaronblohowiak
for the arm unit itself, i agree. but what about the threat that arm poses to
the rest of their business?

"acquisitions diminish value of thing being acquired" may generally be true
but "acquisitions can be a way to stave off a threat" i believe may also be
true, though to your larger point this may lead to less value in the market
overall.

~~~
fluffy87
Which threat? NVIDIA already licenses and sells arm cores. Arm is already part
of their products.

~~~
aaronblohowiak
If they start restricting arm licenses or attaching other requirements to the
license...

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kory
I’m curious if EU antitrust watchdogs will try to stop this.

The US will gladly accept it, since this is a massive plus for national
security. This deal would mean a US entity owns pretty much every important
chip architecture.

It’s already a huge strategic loss for the EU & UK that ARM doesn’t have
European owners.

~~~
dogma1138
There is about zero basis for an anti trust block here even with the EU very
loose definition of what anti trust is.

Also there is absolutely no way for the EU to take any action now with Brexit.

~~~
nabla9
The power to prevent mergers is based on access to markets. EU is the worlds
biggest single market, if they don't accept the merger it won't go trough.
Nvidia and Amd and their customers want to sell to EU.

Big single markets like EU or US can take action against any merger between
two international companies even if neither of them is based on the EU.

I don't think there is any reason for EU to take action in this case.

~~~
adventured
> EU is the worlds biggest single market

The US is the world's biggest single market, by a considerable margin over the
EU now. It was larger than the EU before Brexit, now it's that much bigger.

US GDP for 2019 was around $21.5 trillion.

EU GDP for 2019 minus the UK is $16 trillion ($18.7 trillion with the UK).

That giant $5.5 trillion gap is big enough to fit the world's #3 economy
(Japan) into. It's larger than France + Italy ($4.7t), or Germany + Spain
($5.2t).

Given the major economies of the EU haven't seen any net economic growth since
2006-2007, it's unlikely the EU will match up to the US economically in the
coming decades. Over the coming 10-20 years it will persistently fall away, an
increasing distant third behind the two superpowers of the US and China. And
that's the good scenario and assuming there are no more exits from the EU. The
US will become more aggressive about its trade imbalance with the EU, with the
EU heavily dependent on exports and in a position of weakness with the US
accordingly; and China will seek to compete with and replace the high value
manufacturing they import from the EU (with most of the focus in both cases on
Germany, their future is stagnation if they don't figure out how to move to a
modern tech economy and fast). Germany will go through a very painful
deindustrialization that they've largely been able to avoid thus far, as China
goes after their high-end manufacturing and then exports those competing goods
to the rest of the world far cheaper than Germany can.

France GDP: 2008, $2.9 trillion | 2019, $2.7 trillion

Germany GDP: 2008, $3.8 trillion | 2019, $3.8 trillion

Italy GDP: 2008, $2.4 trillion | 2019, $2 trillion

Spain GDP: 2008, $1.6 trillion | 2019, $1.4 trillion

Netherlands GDP: 2008, $948 billion | 2019, $902 billion

And that's of course pre-pandemic. Those are the five largest economies of the
EU, accounting for 73% of the EU economy. They're going to see a likely net
zero (or negative) economic growth for 20 years or more (inflation adjusted
it's going to be brutal).

~~~
matthewmacleod
Your point is valid of course, but it’s interesting that the US is in some
ways less of a single market than the EU is…

~~~
perardi
Sorry, going to need you to expand on that. Individual states in the States
have far less regulatory power than nation-states in the EU.

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disown
This is the second major company in past few years where SoftBank pretty much
served as an intermediary for merging of companies. They bought Sprint a few
years ago and merged it with T-Mobile. Now they are selling ARM, which they
bought just 4 years ago, to NVDA. Wonder if this was their plan all along or
if they had to change plans due to financial issues or if they faced
regulatory/geopolitical issues.

~~~
Hongwei
Isn't this the standard private equity playbook? Buy, hold, and flip? Though
Softbank isn't a VC and I haven't heard of mass cost-cutting after they buy
something.

~~~
bluedevil2k
Private equity would take on a lot of debt, pay themselves bonuses, then flip
the company.

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candiddevmike
There is some hypothesis in the RISC community that this sale will be a boon
for RISC-V. With NVIDIA at the helm, ARM is no longer a neutral third party,
so we may see a bunch of investment into RISC as it replaces ARM's SoC
prevalence.

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yardstick
Reported earlier here with lots of comments:
[https://news.ycombinator.com/item?id=24454958](https://news.ycombinator.com/item?id=24454958)

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walterbell
If Softbank needs cash now (re:WeWork), can they sell a minority stake to
Nvidia, in preparation for future IPO? That would provide a path to Arm
regaining their role as neutral supplier of ISA & IP. Nvidia would get a
preferential driver's seat for a year or two, long enough to cut favorable
deals. If Softbank could get a valuation for Arm larger than $40B, from sale
of a partial stake now, that helps with their future return from an IPO. Why
sell 100%, if they can get enough from Nvidia to solve their near-term cash
needs? They have IoT assets, a market which has huge growth ahead.

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israrkhan
I wonder if this acquisition will accelerate the growth of RISC-V as an
alternative to ARM.

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aleppe7766
Wonder what Apple’s reaction will be. Their relationship with Nvidia has been
bumpy to say the least. Any ARM licensee now has a competitor as a supplier.
The smaller ones will have to swallow but the larger licensees? Do they have
options on the table - other than trying to throw a wrench into nvidia’s
presumed acquisition plans?

~~~
oaiey
Are not they already years independent of ARM? I thought they had one of these
universal licenses allowing them to design their own processors which they
seem to do very successfully?

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oliwarner
What's the play here? To make it more expensive for competitors to license ARM
chip designs? So that Nvidia just gets to make more chips, or to make non-
Nvidia, ARM chips less tempting over x86?

~~~
jayd16
I would certainly like to know the plan as well. If we're just guessing,
there's a lot of benign reasons, like nVidia expects lean into ARM and they
would rather buy the ARM than pay the license. I'm surprised there's not a lot
of info on the reasoning yet.

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partingshots
Repost -
[https://news.ycombinator.com/item?id=24454958](https://news.ycombinator.com/item?id=24454958)

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StaticChamp
I wish NVIDIA supported Linux.

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quattrofan
UK govt really must block this

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redis_mlc
Anybody know more about this:

"The announcement of the deal hinged on SoftBank ending a messy dispute
between Arm and the head of its China joint venture, Allen Wu, who earlier
rebuffed an attempt to remove him and claimed legal control of the unit.

Several people close to SoftBank said the matter was now “resolved,” though
one person close to Mr Wu said he “remains the chairman of Arm China.” A
spokesperson for Mr Wu declined to comment."

Yahoo shareholders got shafted when Alibaba spun out their multi-billion
dollar payments division, AliPay, "without informing other shareholders ...
because the CCP made us." lol.

[https://www.ft.com/content/40a66dd2-b9ec-11e0-8171-00144feab...](https://www.ft.com/content/40a66dd2-b9ec-11e0-8171-00144feabdc0)

[https://innovator.news/how-an-alibaba-spin-off-
became-a-150-...](https://innovator.news/how-an-alibaba-spin-off-
became-a-150-billion-company-cf7f76db95f)

