Arm wants to use the proceeds raised from its upcoming initial public offering to look at pursuing deals and hiring more staff, setting out an ambitious course of expansion for the UK chip designer.
Chief executive Rene Haas told the Financial Times that the company would seek to step up its push beyond mobile phones and deeper into cars, data centres and hardware underpinning the metaverse. Cash generated through an IPO “can help you with M&A or you can hire faster — we’ll look at both of those areas”, he said.
The expansive vision comes after a period of retrenchment at the group, distracted by a battle over control of its lucrative China unit, job cuts and the collapse of its $66bn sale to US rival Nvidia.
But ambitions for further growth could yet be hit, as a downturn in tech stocks threatens hopes of blockbuster returns from the proposed float by Arm’s Japanese owner SoftBank, which is targeting a $50bn valuation.
Those headwinds will not deter Arm from pushing ahead with its IPO, said Haas, who added Arm executives are “pretty confident” the company can “stand on its own two legs”. He said: “The timing is good for us.”
SoftBank is now inching closer to pursuing a dual listing of Arm in both New York and London after months of intense lobbying by the UK government which was thrown into a panic about being abandoned by one of its last remaining tech success stories.
But that move still faces resistance from many SoftBank executives who feel the move makes little business sense because the US market is by far the most liquid and is where most prospective investors are based. Haas refused to be drawn on the location for Arm’s listing, saying those questions were for SoftBank to answer.
Some analysts have also questioned whether the IPO will raise enough capital to enable Arm to continue research and development efforts.
“When SoftBank first acquired Arm, the price was too high and SoftBank obviously wants to get its money back. How much is this IPO going to leave for Arm — that’s anyone’s guess,” said Richard Wawrzyniak, an analyst at Semico Research.
After several years of stagnant revenue growth under SoftBank’s ownership, Arm reported a sharp turnround last year. The chip designer posted a 35 per cent rise in revenues to $2.7bn, and a 68 per cent increase in adjusted earnings to $1bn.
Haas attributed this performance to years of targeted investment in growth areas, including data centres, networking equipment and automotives.
“People were like ‘where did these come from? You must be doing some CEO math and massaging the numbers’,” Haas said of the company’s full-year results. “We actually feel really good about the trajectory we’re on . . . and the SoftBank years helped us invest in that.”
Arm’s headcount has fluctuated over the past six years since SoftBank purchased the UK chip designer for £24.3bn in 2016. Staff initially almost doubled from 4,400 to 7,300 in 2021 but Arm is in the process of slashing up to 15 per cent of jobs after SoftBank revealed plans to list the company earlier this year.
Haas said one of the biggest obstacles to pursuing an IPO in the next year — a two-year stand-off with the chief executive of the company’s China joint venture — has now been resolved.
Arm China has successfully transitioned to its new leadership and the plan which ended the deadlock — to transfer Arm’s shares in the Chinese joint venture to a SoftBank vehicle — has completed.
With the value of public listings plummeting across Europe and the US, SoftBank’s founder and chief executive Masayoshi Son last month said he was planning to hold on to a majority stake in Arm in the forthcoming IPO.
Haas said SoftBank did not invest any of its own capital into the chip designer over the past six years but that the Japanese conglomerate had instead “tolerated us to run at a certain profit level that allowed us to invest”.
“Masa is very much a long game kind of guy,” Haas said. “If you talk about what’s going on inside the current quarter he’s not really interested.”
“In the SoftBank world, they’re able to tolerate an investment phase with a growth phase in the outer years,” he said, adding that Arm can open itself up to public markets, because “the revenue growth is going to be able to support the investment that we need and still hit profitability targets”.
