SoftBank’s CEO stresses that ARM will become central to the company's core biz, and that hardware is key to platform definition.
Only history will be able to judge, perhaps 10 or 20 years from now, whether SoftBank CEO Masayoshi Son is the Don Quixote of our time — an impractical dreamer driven by his huge ego — or a prescient investor in the future of a connected world enhanced by artificial intelligence.
Figure 1: SoftBank CEO Masayoshi Son
Forty-eight hours after SoftBank’s announcement of its ARM acquisition, the jury is barely empaneled. Expert opinions in financial and electronics communities remain deeply divided over the meaning of Son’s $32 billion gamble for the market and the future of the high-tech industry.
Figure 2: Shares of SoftBank tumbled 10 percent after ARM acquisition announcement (Source: Thomson-Reuters)
Skeptical views reflect the lack of perceived “synergy” between the two companies’ core businesses.
Double down Doggedly pursued by such “synergy” questions during the press conference held separately for the Japanese media. Son doubled down: “In the Japanese chess game [called ‘Go’], I always try to move my stones by visualising what the whole board would look like seven moves later.”
In other words, in Son’s mind, the ARM acquisition is akin to his ‘Go’ tactics, as he foresees the potential impact of moves not just on this one match but on the game itself.
Son said, “Well, those who get it, get it… others will probably never understand.”
These condescending comments from Son and his prophet-like attitude render him a less than sympathetic figure.
But Son isn’t fazed. He boasted Trumpishly about his record of making big bets at the right time on every “paradigm shift.” He claims to have not only predicted but acted upon every huge change in the market that has transformed the industry.
Included in the paradigm shifts he cited are the rise of the PC, the Internet, broadband and the mobile Internet. In his mind, the next big shift is the Internet of Things. By his account, SoftBank has recorded a 44% return on investment over the last 18 years.
Son stressed that every time SoftBank made such big bets as the acquisition of Vodafone Japan (which was at that time considered a “sinking ship”) or investing in Alibaba, “Most people expressed their doubts, talked about the lack of synergy, and they opposed to the deals.” But he added, “The real value of our investment usually didn’t become clear until five or 10 years later.”
Tom Hackenberg, principal analyst for embedded processors, IHS Markit, defended SoftBank’s ARM acquisition, pointing out a “strong overlap in markets.”
He explained, “It may seem unusual for SoftBank to invest in a semiconductor IP supplier but the market overlap and vision for future growth represent substantial symmetry.”
Figure 3: SoftBank and ARM overlap in markets (Source: IHS Markit)
A session is that he sees ARM not necessarily as another property of SoftBank’s sprawling investment portfolio. “ARM will become central to SoftBank’s core business in three, five and 10 years’ time,” he said.
Noting that ARM is a well-respected, well-managed, tightly-run company, Son said he sees no need to get involved in running the day-to-day business at ARM.
Although he left open the possibility of becoming chairman of ARM, Son emphasised, “As a member of the management board at ARM, I will definitely get involved in deeper discussions with ARM’ team — in architecting ARM’s medium and long-term strategies.”
He added, “I will assist them, I will excite them, I will back them up in making aggressive investments in their technology development, and their business expansion.”
Son’s example of this positive intervention was his encouragement of Alibaba to expand its business by starting up Taobao.
Taobao is a Chinese website for online shopping similar to eBay and Amazon, operated in China by Alibaba. “I worked with Jack Ma — Alibaba’s founder and executive chairman — and his excellent management team very closely. I personally helped finance the new operation, and was deeply involved in Alibaba’s medium to long-term business strategy.”
Son hinted that similar opportunities might arise for SoftBank to help ARM expand, but without specific details