Enterprise

Arm insisted the pressures of going public would 'suffocate' it. Without Nvidia, it has little choice.

Amid regulatory pressure, Nvidia has abandoned its bid for Arm. Here’s what Arm plans to do next.

SoftBank's Masayoshi Son announcing Arm plans on stage

SoftBank's Masayoshi Son announced plans to take Arm public under new CEO Rene Haas, now that the $40 billion Nvidia deal is dead.

Photo: SoftBank

What might have been the largest chip acquisition in history is officially dead. Now Arm, one of the most important companies in the industry, must chart a new path forward.

Late Monday, amid regulatory pressure on three continents, SoftBank and Nvidia said they have abandoned Nvidia’s troubled $40 billion bid for Arm.

The deal was always a long shot for Nvidia: The potential Arm acquisition encountered resistance from U.K. regulators and officials in its native country, but also ran into problems in the EU, and was the target of a Federal Trade Commission antitrust lawsuit in the U.S. China’s approval wasn’t a sure bet either. The deal would have added Arm’s chip designs, which power most of the world’s smartphones, to Nvidia’s assets and potentially given Nvidia a way to even further challenge AMD and Intel in the data center.

But for Arm, the stakes were considerably higher. SoftBank said Monday night that it now plans to take Arm public once again, and will complete the process by the end of March next year. It also said that CEO Simon Segars had resigned, and would be replaced by Rene Haas, who was head of the company’s IP group.

The new direction on which Arm is set to embark was one it insisted it didn’t want to take up until Monday evening. In the year and a half since Nvidia announced the deal, Arm has said in blog posts and regulatory filings that a combination with Nvidia is a better outcome for the company than an initial public offering. The argument advanced by executives was that without Nvidia’s vast resources and ongoing support of developing Arm’s designs, Arm will fall behind and fail to grow into new markets, such as the data center.

Last year, Segars took the argument a step further, and wrote that an IPO would, in fact, damage Arm’s ability to grow and innovate.

“We contemplated an IPO but determined that the pressure to deliver short-term revenue growth and profitability would suffocate our ability to invest, expand, move fast and innovate,” Segars wrote in a blog post last year. “Combining with NVIDIA will give us the scale, resources and agility needed to maximize the opportunities ahead.”

But during a briefing with reporters early Tuesday, Arm executives said the company is enjoying the fruits of a strategy put in place roughly four years ago that involved focusing on more profitable markets and shedding units that operated at a loss. Going public, Haas said, would give Arm more access to cash should it be necessary to fund innovation.

“As I think about the next five to seven years or so, being a public company actually gives us access to capital should we need it,” Haas said. SoftBank disclosed Monday that it expects Arm’s fiscal 2021 adjusted profit to rise to $900 million, on revenue of $2.5 billion, but didn’t disclose the factors it took into account making those adjustments.

Despite Haas’ optimism about Arm’s chances, industry watchers are skeptical about Arm’s ability to fund a big push into the data center without help from Nvidia or by other means. If Arm is banking so much profit this year, it’s unclear why it would also need to raise more cash through an initial public offering, according to Dylan Patel, who founded SemiAnalysis. “Why are you talking about raising capital to fund development if you’re profitable?” Patel said.

What’s clear is that competing with the x86 server chips produced by AMD and Intel has proven costly and difficult. Leading edge node chips are expensive to design, with estimates ranging from $80 million to more than $500 million for a single chip generation. Arm designs made by the likes of AWS and others have made inroads into the data center market but haven’t significantly disrupted AMD and Intel’s duopoly to date.

“If they don’t have a cash infusion, they’re going to find it very hard to compete, in particular, in the data center, the big, big money-maker,” Creative Strategies CEO and tech analyst Ben Bajarin told Protocol. “Anything outside of the [Nvidia] deal will not yield results. An IPO will not yield them a massive amount of cash they can then go and spend on R&D.”

On Nvidia’s part, if it had managed against the odds to close the Arm acquisition, it would have boosted an already successful company through deeper integration of Arm’s tech. But Nvidia can still work closely with Arm’s designers as an architectural licensee.

Without Arm, Nvidia will undoubtedly continue its growing success in data center chips. It already enjoyed a strong partnership with Arm and its data center product strategy — including its Grace server chip and its data processing unit products — is in no danger of being hurt. Baird chips analyst Tristan Gerra wrote in a research note Tuesday that there was no change to his outlook on Nvidia or its tech roadmap.

“We expect Nvidia to continue leveraging its Arm-based architectures, notably with its Bluefield DPU product roadmap, with programmable Arm cores complementing GPU and smart [networking card] architectures, offloading from traditional x86-based configurations and notably serving AI cloud native applications,” he wrote.

Aside from losing out on the possibilities of a deeper collaboration with Arm, the main downside for Nvidia is the additional $1.25 billion breakup fee it now must pay to SoftBank. But Wall Street expects Nvidia to book a $11 billion profit in its current year, according to analyst data from Sentieo.

Fintech

Judge Zia Faruqui is trying to teach you crypto, one ‘SNL’ reference at a time

His decisions on major cryptocurrency cases have quoted "The Big Lebowski," "SNL," and "Dr. Strangelove." That’s because he wants you — yes, you — to read them.

The ways Zia Faruqui (right) has weighed on cases that have come before him can give lawyers clues as to what legal frameworks will pass muster.

Photo: Carolyn Van Houten/The Washington Post via Getty Images

“Cryptocurrency and related software analytics tools are ‘The wave of the future, Dude. One hundred percent electronic.’”

That’s not a quote from "The Big Lebowski" — at least, not directly. It’s a quote from a Washington, D.C., district court memorandum opinion on the role cryptocurrency analytics tools can play in government investigations. The author is Magistrate Judge Zia Faruqui.

Keep Reading Show less
Veronica Irwin

Veronica Irwin (@vronirwin) is a San Francisco-based reporter at Protocol covering fintech. Previously she was at the San Francisco Examiner, covering tech from a hyper-local angle. Before that, her byline was featured in SF Weekly, The Nation, Techworker, Ms. Magazine and The Frisc.

The financial technology transformation is driving competition, creating consumer choice, and shaping the future of finance. Hear from seven fintech leaders who are reshaping the future of finance, and join the inaugural Financial Technology Association Fintech Summit to learn more.

Keep Reading Show less
FTA
The Financial Technology Association (FTA) represents industry leaders shaping the future of finance. We champion the power of technology-centered financial services and advocate for the modernization of financial regulation to support inclusion and responsible innovation.
Enterprise

AWS CEO: The cloud isn’t just about technology

As AWS preps for its annual re:Invent conference, Adam Selipsky talks product strategy, support for hybrid environments, and the value of the cloud in uncertain economic times.

Photo: Noah Berger/Getty Images for Amazon Web Services

AWS is gearing up for re:Invent, its annual cloud computing conference where announcements this year are expected to focus on its end-to-end data strategy and delivering new industry-specific services.

It will be the second re:Invent with CEO Adam Selipsky as leader of the industry’s largest cloud provider after his return last year to AWS from data visualization company Tableau Software.

Keep Reading Show less
Donna Goodison

Donna Goodison (@dgoodison) is Protocol's senior reporter focusing on enterprise infrastructure technology, from the 'Big 3' cloud computing providers to data centers. She previously covered the public cloud at CRN after 15 years as a business reporter for the Boston Herald. Based in Massachusetts, she also has worked as a Boston Globe freelancer, business reporter at the Boston Business Journal and real estate reporter at Banker & Tradesman after toiling at weekly newspapers.

Image: Protocol

We launched Protocol in February 2020 to cover the evolving power center of tech. It is with deep sadness that just under three years later, we are winding down the publication.

As of today, we will not publish any more stories. All of our newsletters, apart from our flagship, Source Code, will no longer be sent. Source Code will be published and sent for the next few weeks, but it will also close down in December.

Keep Reading Show less
Bennett Richardson

Bennett Richardson ( @bennettrich) is the president of Protocol. Prior to joining Protocol in 2019, Bennett was executive director of global strategic partnerships at POLITICO, where he led strategic growth efforts including POLITICO's European expansion in Brussels and POLITICO's creative agency POLITICO Focus during his six years with the company. Prior to POLITICO, Bennett was co-founder and CMO of Hinge, the mobile dating company recently acquired by Match Group. Bennett began his career in digital and social brand marketing working with major brands across tech, energy, and health care at leading marketing and communications agencies including Edelman and GMMB. Bennett is originally from Portland, Maine, and received his bachelor's degree from Colgate University.

Enterprise

Why large enterprises struggle to find suitable platforms for MLops

As companies expand their use of AI beyond running just a few machine learning models, and as larger enterprises go from deploying hundreds of models to thousands and even millions of models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

As companies expand their use of AI beyond running just a few machine learning models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

Photo: artpartner-images via Getty Images

On any given day, Lily AI runs hundreds of machine learning models using computer vision and natural language processing that are customized for its retail and ecommerce clients to make website product recommendations, forecast demand, and plan merchandising. But this spring when the company was in the market for a machine learning operations platform to manage its expanding model roster, it wasn’t easy to find a suitable off-the-shelf system that could handle such a large number of models in deployment while also meeting other criteria.

Some MLops platforms are not well-suited for maintaining even more than 10 machine learning models when it comes to keeping track of data, navigating their user interfaces, or reporting capabilities, Matthew Nokleby, machine learning manager for Lily AI’s product intelligence team, told Protocol earlier this year. “The duct tape starts to show,” he said.

Keep Reading Show less
Kate Kaye

Kate Kaye is an award-winning multimedia reporter digging deep and telling print, digital and audio stories. She covers AI and data for Protocol. Her reporting on AI and tech ethics issues has been published in OneZero, Fast Company, MIT Technology Review, CityLab, Ad Age and Digiday and heard on NPR. Kate is the creator of RedTailMedia.org and is the author of "Campaign '08: A Turning Point for Digital Media," a book about how the 2008 presidential campaigns used digital media and data.

Latest Stories
Bulletins