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SoftBank's Tanaka to Take ARM by Hand, Not Boss It

Iain Morris
9/5/2016

SoftBank executive Ren Tanaka will not take charge of ARM, as previously reported, but rather "promote new business development" at the UK chip designer, says the Japanese operator.

SoftBank named Tanaka as general manager of the ARM Ltd. business in a press release last week, after agreeing to pay $32 billion for the UK firm in July. (See SoftBank Muscles In on ARM in $32B Deal.)

Following a Light Reading report that Tanaka would become ARM's new boss, SoftBank Corp. has issued a new press statement, "to clear up the confusion," in which he is named as general manager of not ARM but a department called "new business promotion."

SoftBank says Tanaka will promote development in a range of new businesses, one of which will be ARM.

It also denies that Tanaka will have ultimate responsibility for ARM and its future strategy, insisting that "it's not a reporting structure."

The issue of executive control at ARM is clearly a sensitive one: while SoftBank has just secured regulatory backing for its deal, it has encountered some hostility to its takeover move from within the UK technology community.

Opponents including Hermann Hauser, one of ARM's original founders, have expressed concern that one of the UK's few remaining technology champions will lose any independence as part of the SoftBank empire.

While SoftBank founder and CEO Masayoshi Son will be wary of interfering too much with ARM's successful business model, he evidently has grand ambitions for the chip designer, believing it could be a major force in the much-hyped market for the Internet of Things.

ARM has flourished as a designer of the processors that power many of the world's most popular smartphones, reporting a 22% increase in revenues in its last financial year, to around £968 million (£1.3 billion).

The company does not do any manufacturing itself, instead selling its blueprints to the likes of San Diego-based Qualcomm Inc. (Nasdaq: QCOM).

However, it is highly regarded for its technology prowess and has remained a dominant force in its market despite the efforts of US chip giant Intel Corp. (Nasdaq: INTC) to break into the mobile communications sector.

Concern that Intel might also have been a potential suitor for ARM could partly explain the size of SoftBank's offer, which -- at £24.3 billion ($32.3 billion) -- is more than 25 times what ARM generated in revenues last year.

But that alone does not explain the eye-watering fee. Son obviously reckons ARM's designs could be introduced into a range of devices besides smartphones amid forecasts that billions of objects will have Internet connectivity in the next few years.

New software and virtualization technologies could present a further opportunity for ARM as operators look to reduce hardware costs. France's Orange Business Services is one operator that reckons ARM technology could provide a cheaper alternative to Intel's x86 platform during an NFV rollout. (See Orange Plots Mass Network-as-a-Service Rollout.)


For more NFV-related coverage and insights, check out our dedicated NFV content channel here on Light Reading.


In any case, SoftBank is highly unlikely to be a hands-off owner of ARM given its recent track record when big investments have been on the line.

After spending a similar amount on a takeover of US mobile operator Sprint Corp. (NYSE: S) in 2013, SoftBank moved fairly quickly to exert control, replacing Dan Hesse with Marcelo Claure as CEO in 2014.

The challenge for Tanaka will be to guide ARM into new business areas without disrupting its current modus operandi.

The executive has this month rejoined SoftBank from Amazon Japan, where he spent five years as business development director. Prior to that he had worked in a variety of strategy roles at SoftBank since 1999.

Given his recent web background, Tanaka is likely to have an influence across a range of businesses that count SoftBank as an investor, although the company would not provide details.

"We can't go into more specifics at this stage, but the department will look at various future business possibilities with a view to future growth for the SoftBank Group," a spokesperson told Light Reading.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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danielcawrey
danielcawrey
9/7/2016 | 8:55:55 AM
Re: Regulatory green light
I have watched ARM for many years and I do think there's a ton of potential. 

That being said, 25 times revenue is a lot! Yet ARM can grow and still have pretty high margins given it doesn't have a lot of infrastructure investments. It's a research and development company, something I'm sure others will now want to replicate. 
iainmorris
iainmorris
9/5/2016 | 9:26:34 AM
Regulatory green light
This story has been updated since it was first published to note that SoftBank has now secured reguatory approval for its takeover, which was granted late last week. 
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