“Listen to the Force”

Some info about the hottest topic today

 

SoftBank’s Son Makes Biggest Wager in Career Built on Tech Bets

http://www.bloomberg.com/news/articles/2016-07-18/softbank-s-son-makes-biggest-wager-in-career-built-on-tech-bets
http://www.bloomberg.com/news/articles/2016-07-18/softbank-to-buy-britain-s-arm-for-32-billion-in-record-deal

 

SoftBank agreed to buy ARM for 24.3 billion pounds ($32 billion)

– a 43 percent premium to Friday’s close
– Son said all due diligence for the deal has been done in the past two weeks
– SoftBank will fund the acquisition partly through cash and loans

 

What will Son get:

– gain control of a cash-generating mobile industry leader that gets royalties every time makers of 95 percent of the world’s smartphones (Apple and Samsung accounting for an estimated total of 45 percent of ARM’s sales) adopt its chip designs, which are considered power-saving and efficient.

–  The great opportunity of  ‘Internet of Things’

– prediction that succeeding generations will come to depend on smart appliances, gadgets and office gear that talk to each other and function free of much human intervention.
– for that to work, each of them must come with a microchip, and Son’s betting it’ll be an ARM design.

(“most of today’s tablets and phones run on Qualcomm chips: they did $26B in sales last year. These chips re-package ARMH designs. The Internet of Things (IOT) uses ARMH technology.” Qualcomm vs ARM ?????? )

The strength of ARM:

– ARM’s model is based on the idea of spreading risk and profits. It does the underlying work and makes more money when its customers sell more things.
(The key is CHEAP, £406 million turnover in 2015 with 85% mobile market share)

– unlike Intel, ARM doesn’t actually manufacture semiconductors. Instead, it licenses its designs to companies such as Samsung Electronics Co., which own the fabrication plants required to manufacture the parts.

– lucrative, freeing the company of the costly job of building such plants
– brands like Apple and Samsung can focus on higher-level innovations instead of grunt work, while custom chipmakers like Taiwan Semiconductor Manufacturing Co. deal with actual fabrication.

 

Problems for Softbank:

– Debt: the Tokyo-based company remains mired in $106 billion of total debt on its balance sheet at the end of March, but less than $23 billion in cash and marketable securities, and will have to borrow more to get the deal done.
– ARM acquisition is unusual for a company that’s preferred to take control through hefty stakes in smaller companies, or those with high-growth potential. And heir apparent, Nikesh Arora, who was brought on board to spearhead a search for the next Alibaba, just quit the company.
– its investment in Sprint Corp., the U.S. carrier that’s whittling away at its losses but remains an enormous drain on capital. While it just cashed out of cash-generating game developer Supercell.

 

History:

– SoftBank’s progenitor has been at the forefront of technology for 35 years:
– he founded his company to capitalize on the early PC boom,
– invested $20 million in a then-scrappy e-commerce startup Alibaba Group Holding Ltd
– pay 1.8 trillion yen ($17 billion) for Vodafone Group Plc’s Japanese operations even as the economy stalled and larger rivals held sway,challenged older wireless operators in Japan with innovative pricing plans.

 

Here is the interesting part of the story:

“Yoda said in Star Wars, listen to the Force,” Son said on a call with analysts Monday, adding that now is the best time to buy his company’s debt. “If you listen to the Force, this is the best company to invest in the debt.”

The yield on SoftBank’s 5.375 percent U.S. dollar bonds jumped 30 basis points Monday.

Son dismissed concerns, saying that SoftBank is effectively “net debt zero” because of the value of stakes it holds in other companies.

 

 

The next is a Japanese review

ソフトバンクは、なぜARM社を3.2兆円もの大金で買収するのか?

https://note.mu/shibataism/n/n613483c10499

金額、タイミング、買収先全てに驚くばかりですが、Brexitの影響で、為替を上手く利用したタイミングと言えるでしょう。

世界の借金王へと突き進む決意を感じさせられます。

ビジネスが「ライセンス」ビジネスなので、非常に長い期間に渡るR&Dと回収が必要なビジネスで、同社の決算資料によると、通常、

・R&D(基礎研究)に2-3年
・製品化に3-4年
・その後25年以上に渡って販売

という具合に、ソフトウェアのビジネスと比べると圧倒的に長いサイクルでのビジネスになっています。

 

2015年の営業利益の70x、EBITDAの50x、「高すぎるのでは?」、でも皆さんご存知の通り、ソフトバンクは一件「高すぎる!」という値段で買収しても、後から振り返ってみると実はそんなに高く無かった(=皆が価値に気づかなかった)というケースも多々あります

PCであれスマホであれ、コンピューターにはCPUが必要です。CPUには大きく以下の2系統があります。

・PC・サーバーなどに主に用いられるx86/64系
– 主にIntel/AMDの2社が知財から製造・販売まで行っている「垂直統合型」
・スマホ・IoTなどに主に用いられるARM系
– 「オープン戦略」、ARM社が知財を有し、その知財を製造メーカーにライセンスし、製造メーカーが実際にCPUチップを製造するという形が取られています
– スマホやIoTデバイスなど「スペックはそこそこでいいけどバッテリー重要」というケースで主に利用されています

市場シェア見込み

・スマホでは独占に近いレベルでシェアを獲得済
・サーバーではほぼゼロ
・車載用途は10%と伸びしろあり
・家電は40%のシェアがあるが、市場が伸びる見込み無し

ARM系の部品(ARMからライセンスを受けて製造されている部品)は主に、CPU、センサーの2つがあるとのことです。現代のスマホは、ARM系の部品がないと製造できない、というレベルと言ってもいいかもしれません。
「高スペック」化していくからで、CPUコア数やGPUなどより高度なチップが必要になるから。
組込み型(IoT)系でも、消費電力が少ないチップの販売が見込まれているとのこと。

picture_pc_05f728a7a3b71607df27507947f6c1c1

 

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