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.

A 'Soho house for techies': VCs place a bet on community

Contrary is the latest venture firm to experiment with building community spaces instead of offices.

Contrary NYC is meant to re-create being part of a members-only club where engineers and entrepreneurs can hang out together, have a space to work, and host events for people in tech.

Photo: Courtesy of Contrary

In the pre-pandemic times, Contrary’s network of venture scouts, founders, and top technologists reflected the magnetic pull Silicon Valley had on the tech industry. About 80% were based in the Bay Area, with a smattering living elsewhere. Today, when Contrary asked where people in its network were living, the split had changed with 40% in the Bay Area and another 40% living in or planning to move to New York.

It’s totally bifurcated now, said Contrary’s founder Eric Tarczynski.

Keep Reading Show less
Biz Carson

Biz Carson ( @bizcarson) is a San Francisco-based reporter at Protocol, covering Silicon Valley with a focus on startups and venture capital. Previously, she reported for Forbes and was co-editor of Forbes Next Billion-Dollar Startups list. Before that, she worked for Business Insider, Gigaom, and Wired and started her career as a newspaper designer for Gannett.

Sponsored Content

Great products are built on strong patents

Experts say robust intellectual property protection is essential to ensure the long-term R&D required to innovate and maintain America's technology leadership.

Every great tech product that you rely on each day, from the smartphone in your pocket to your music streaming service and navigational system in the car, shares one important thing: part of its innovative design is protected by intellectual property (IP) laws.

From 5G to artificial intelligence, IP protection offers a powerful incentive for researchers to create ground-breaking products, and governmental leaders say its protection is an essential part of maintaining US technology leadership. To quote Secretary of Commerce Gina Raimondo: "intellectual property protection is vital for American innovation and entrepreneurship.”

Keep Reading Show less
James Daly
James Daly has a deep knowledge of creating brand voice identity, including understanding various audiences and targeting messaging accordingly. He enjoys commissioning, editing, writing, and business development, particularly in launching new ventures and building passionate audiences. Daly has led teams large and small to multiple awards and quantifiable success through a strategy built on teamwork, passion, fact-checking, intelligence, analytics, and audience growth while meeting budget goals and production deadlines in fast-paced environments. Daly is the Editorial Director of 2030 Media and a contributor at Wired.
Fintech

Binance CEO wrestles with the 'Chinese company' label

Changpeng "CZ" Zhao, who leads crypto’s largest marketplace, is pushing back on attempts to link Binance to Beijing.

Despite Binance having to abandon its country of origin shortly after its founding, critics have portrayed the exchange as a tool of the Chinese government.

Photo: Akio Kon/Bloomberg via Getty Images

In crypto, he is known simply as CZ, head of one of the industry’s most dominant players.

It took only five years for Binance CEO and co-founder Changpeng Zhao to build his company, which launched in 2017, into the world’s biggest crypto exchange, with 90 million customers and roughly $76 billion in daily trading volume, outpacing the U.S. crypto powerhouse Coinbase.

Keep Reading Show less
Benjamin Pimentel

Benjamin Pimentel ( @benpimentel) covers crypto and fintech from San Francisco. He has reported on many of the biggest tech stories over the past 20 years for the San Francisco Chronicle, Dow Jones MarketWatch and Business Insider, from the dot-com crash, the rise of cloud computing, social networking and AI to the impact of the Great Recession and the COVID crisis on Silicon Valley and beyond. He can be reached at bpimentel@protocol.com or via Google Voice at (925) 307-9342.

Enterprise

How I decided to leave the US and pursue a tech career in Europe

Melissa Di Donato moved to Europe to broaden her technology experience with a different market perspective. She planned to stay two years. Seventeen years later, she remains in London as CEO of Suse.

“It was a hard go for me in the beginning. I was entering inside of a company that had been very traditional in a sense.”

Photo: Suse

Click banner image for more How I decided seriesA native New Yorker, Melissa Di Donato made a life-changing decision back in 2005 when she packed up for Europe to further her career in technology. Then with IBM, she made London her new home base.

Today, Di Donato is CEO of Germany’s Suse, now a 30-year-old, open-source enterprise software company that specializes in Linux operating systems, container management, storage, and edge computing. As the company’s first female leader, she has led Suse through the coronavirus pandemic, a 2021 IPO on the Frankfurt Stock Exchange, and the acquisitions of Kubernetes management startup Rancher Labs and container security company NeuVector.

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.

Enterprise

UiPath had a rocky few years. Rob Enslin wants to turn it around.

Protocol caught up with Enslin, named earlier this year as UiPath’s co-CEO, to discuss why he left Google Cloud, the untapped potential of robotic-process automation, and how he plans to lead alongside founder Daniel Dines.

Rob Enslin, UiPath's co-CEO, chats with Protocol about the company's future.

Photo: UiPath

UiPath has had a shaky history.

The company, which helps companies automate business processes, went public in 2021 at a valuation of more than $30 billion, but now the company’s market capitalization is only around $7 billion. To add insult to injury, UiPath laid off 5% of its staff in June and then lowered its full-year guidance for fiscal year 2023 just months later, tanking its stock by 15%.

Keep Reading Show less
Aisha Counts

Aisha Counts (@aishacounts) is a reporter at Protocol covering enterprise software. Formerly, she was a management consultant for EY. She's based in Los Angeles and can be reached at acounts@protocol.com.

Latest Stories
Bulletins