Masayoshi Son says AWS and Microsoft will buy more chipsets from the SoftBank Vision Fund-backed Arm, and not Intel
SoftBankreported a loss of $17.7 billion in its investments under the Vision Fund 1, exceeding its own warnings of a $16.6 billion loss.
- Out of 88 investments, SoftBank said it had marked down the valuations of 47 of them, pointing at a much wider decline in the industry.
- However, Arm has retained its valuation during this bloodbath – Son says that the chipset maker is valued at $25 billion.
- An early Arm IPO could end up saving the sinking Vision Fund, but Son had gone on record saying that the IPO would happen in 2023.
Out of the 88 companies that the SoftBank Vision Fund 1 has invested in, Son assumes that as many as 15 companies could go bankrupt, while 60 others could post average performance. That leaves 13 companies, which Son believes could end up being successful.
British chipmaker Arm Holdings could be one among those 13 companies. In fact, Son considers Arm to be one of the important assets of his fund. And why won’t he – Arm’s shipments have been growing exponentially.
“Going forward, Arm chips are going to be used more and more by Amazon. In fact, not only Amazon's AWS, but
After dominating the smartphone industry, Arm has its sights set on the cloud and data centre sectors, expanding its scope exponentially.
Amazon Web Services, the current market leader in public cloud services, has announced Graviton2 chipset based on Arm’s designs for its cloud infrastructure. According to SoftBank, Graviton2 is believed to be 65% faster than
An early Arm IPO could save the sinking SoftBank Vision Fund
Arm is reportedly looking at an IPO in the next 5 years. However, that may make it difficult for SoftBank, which needs at least $3 billion every year in just equity dividends.
SoftBank reported its first annual loss in 15 years, posting a net loss of $894 million in FY2019. During the same period last year, it posted a net profit of $19.6 billion.
This suggests SoftBank’s troubles go beyond just the COVID-19 crisis – it had to write down its investments in WeWork and Uber, resulting in a loss of $17.7 billion.
To meet its requirements, the company is monetising its assets but that might only work out in the short term. Over the mid and the long-term, listing companies like Arm could be the answer to SoftBank’s troubles.
SoftBank acquired Arm in 2016 for $32 billion. In 2018, it sold 25% of the stake for $8 billion. In its latest earnings, the Japanese group revealed that its stake in Arm is valued at $25 billion, which implies an appreciation of $1 billion in the chipmaker’s value.
With a healthy stake of 75% in his hands, Son has enough opportunity to retain control of Arm while monetising a part of his stake to save his flagship Vision Fund.
Arm shipped 100 billion chipsets in the first 27 years – the next 60 billion came in 3 years
Established in 1991, Arm has shipped more than 160 billion chipsets till date. The first 100 billion shipments took 27 years, while the next 60 billion came in just 3 years.
According to the Q3 2019 earnings posted by Arm, its shipments rose to 6.4 billion, which it says is a new record.
No wonder Son believes Arm is an important asset for SoftBank Vision Fund.
Top 10 scary quotes from Masayoshi Son during the SoftBank earnings call
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