Nothing Sofbank’s CEO does Surprises Me

By now, you have heard SoftBank has purchased ARM Holdings for close to $32 billion. Masayoshi Son, Chairman and CEO of SoftBank, said in a statement:

We have long admired ARM as a world-renowned and highly respected technology company that is by some distance the market-leader in its field. ARM will be an excellent strategic fit within the SoftBank group as we invest to capture the very significant opportunities provided by the “Internet of Things”.

This investment also marks our strong commitment to the U.K. and the competitive advantage provided by the deep pool of science and technology talent in Cambridge. As an integral part of the transaction, we intend to at least double the number of employees employed by ARM in the UK over the next five years.

SoftBank intends to invest in ARM, support its management team, accelerate its strategy and allow it to fully realise its potential beyond what is possible as a publicly listed company. It is also intended that ARM will remain an independent business within SoftBank, and continue to be headquartered in Cambridge, U.K.

This is one of the most important acquisitions we have ever made, and I expect ARM to be a key pillar of SoftBank’s growth strategy going forward.

Some years ago, I interviewed Mr. Son at the Phoenix Technologies conference at Spanish Bay near Pebble Beach. He had made noise some years earlier by buying Comdex and announced his 300-year plan for SoftBank. I found out during this interview just how driven and how much of a maverick he really is.

At the time, SoftBank wanted to become a major player in the telecom sector in Japan. They wanted to own a network and become a pipeline to deliver broadband services. However, the Japanese telecom industry is highly regulated and was part of a “old boys club” and the higher ups wanted to keep it that way.

But, for two years, Masayoshi Son would seek meetings with a top government telecom official and explained that, in this new world, there needed to be more competition to keep prices down. He pleaded with him and other government officials to allow new entrants into Japan’s telecom industry. Although he met with them on a somewhat regular basis, he was always rebuffed and was not getting anywhere.

One day, he barged into the office of this telecom official with a can of gasoline. In very blunt terms, he told this government official that, unless he got a promise the official would start pushing for a better environment for telecom competition, he would light the can on fire (As he was telling this story, the audience was dying with laughter).

The official became quite alarmed and assured Mr. Son he would act on his request. Within six months, Japan opened up the telecom regulations enough for SoftBank to become a telecom provider and today, they are one of the largest providers of cellular networks and broadband services in Japan and have helped Japan deliver competitive services at reasonable prices.

That day I learned that, if Mr. Son has a vision for something, he will stop at nothing to make it part of a Sofbank solution. He is not only visionary but tenacious when it comes to making things happen that will help him grow Softbank and help achieve his 300-year plan.

So, when I heard he had bought ARM, I was not surprised. In fact, I am no longer surprised by anything he does. Clearly, he sees how ARM fits into Softbank’s vision and he says it will now “be a key pillar of Softbank’s growth strategy going forward.”

His main interest is in ARM’s role that could make it the central CPU for billions of IoT devices in the future. SoftBank already owns a telecom network in Japan and one in the US (Sprint) and Son understands that these networks and others will become a major conduit for interacting with and delivering data to and from these billions of IoT devices in the future.

Softbank also owns major content sites and key applications that, if tuned properly based on the needs or roles of any IoT device, these too could help give Softbank an edge over competitors in the future.

I see this move by SoftBank as having a serious impact in the tech industry in a couple of interesting ways.

1) Sofbank-backed ARM will only become more aggressive in going after customers that Intel and others also want in the world of IoT. Although Intel is the most direct competitor for IoT core CPU’s, Softbank’s and Masayoshi Son’s goal will be to own as much of the IoT CPU space he can.

2) Softbank is a very profitable company. Much of ARM’s current per CPU prices are pretty low and, in most cases, very aggressive. I have to believe that, in the future, ARM’s per CPU prices could go up to help Softbank’s bottom line. If so, any upward pricing changes from ARM would have various ramifications for users of ARM chips as their own profitability could be challenged over time.

An interesting side note: Masayoshi Son was very close to Steve Jobs and still has a very close relationship with Apple execs. His stance on Apple has been very bullish. He likes their branding and positioning. It will be interesting to see if an ARM acquisition by SoftBank will give Apple early access to new tech from ARM or any other preferential treatment. I know enough about his Apple relationship that I would not be surprised if Son could do something interesting with Apple in the near future.

ARM’s founder, Herman Houser, was very disappointed in the SoftBank acquisition and called it a “sad day” for UK tech. I am very close to the UK tech scene and ARM is the crowning jewel in UK tech circles. Indeed, the UK Government, the Queen and UK tech execs are extremely proud of this homegrown company and its impact on the world of semiconductors. Keep in mind, ARM sold 15 billion chips alone last year, making this UK company the #1 semiconductor vendor (in terms of units) shipped in the world. I know SoftBank will allow them to keep the same management and its headquarters in the UK and SoftBank says they will double the UK staff in the future. But this is now a Japanese owned company and Mr. Son and his execs will transform it in their own image and culture over time. I have no doubt that, if profits sag for any reason, it will become more and more influenced by Softbank’s management and the current leadership positions could be in jeopardy. I also think some of their top talent will eventually jump ship to new ventures and present a challenge to ARM’s engineering prowess in the future.

Published by

Tim Bajarin

Tim Bajarin is the President of Creative Strategies, Inc. He is recognized as one of the leading industry consultants, analysts and futurists covering the field of personal computers and consumer technology. Mr. Bajarin has been with Creative Strategies since 1981 and has served as a consultant to most of the leading hardware and software vendors in the industry including IBM, Apple, Xerox, Compaq, Dell, AT&T, Microsoft, Polaroid, Lotus, Epson, Toshiba and numerous others.

One thought on “Nothing Sofbank’s CEO does Surprises Me”

Leave a Reply

Your email address will not be published. Required fields are marked *