Arming signals push for deals and more staff with IPO proceeds

Arm wants to use proceeds from its upcoming initial public offering to consider making deals and hiring more staff, setting out an ambitious expansion plan for the British chip designer.

Chief executive Rene Haas told the Financial Times that the company will seek to intensify its push beyond mobile phones and deeper into the cars, data centers and hardware that underpin the metaverse. The cash generated from an IPO “can help you with mergers and acquisitions or you can hire faster – we’ll be looking at both of those areas,” he said.

The expansive vision comes after a period of retrenchment within the group, distracted by a battle for control of its lucrative Chinese unit, job cuts and the collapse of its $66 billion sale to US rival Nvidia.

But ambitions for further growth could still be met as a slowdown in tech stocks threatens hopes of blockbuster returns from the float offered by Japanese Arm owner SoftBank, which is targeting a $50 billion valuation.

Those headwinds won’t deter Arm from pursuing its IPO, said Haas, who added that Arm executives are “pretty confident” that the company can “stand on its own two legs.” He said, “The time is right for us.”

SoftBank is now closing in on pursuing a dual listing of Arm in New York and London after months of intense lobbying by the UK government which panicked at the prospect of being dropped by one of its latest technological achievements.

But the move still faces resistance from many SoftBank executives who feel the move makes little business sense because the U.S. market is by far the most liquid and is where most of the potential investors. Haas declined to be drawn on the location of Arm’s listing, saying SoftBank needed to answer those questions.

Some analysts have also questioned whether the IPO will raise enough capital for Arm to continue its research and development efforts.

“When SoftBank first acquired Arm, the price was too high and SoftBank obviously wants its money back. How much will this IPO leave for Arm – anyone can guess,” said Richard Wawrzyniak , analyst at Semico Research.

After several years of stagnant revenue growth under SoftBank ownership, Arm signaled a sharp turnaround last year. The chip designer posted a 35% increase in revenue to $2.7 billion and a 68% increase in adjusted earnings to $1 billion.

Haas attributed the performance to years of focused investment in growth areas including data centers, networking equipment and automotive.

“People were like ‘where are they from? You have to do CEO math and massage the numbers,’ Haas said of the company’s annual results. we’re on…and the SoftBank years helped us invest in that.

Arm’s workforce has fluctuated over the past six years since SoftBank bought the British chip designer for £24.3 billion in 2016. Staff initially nearly doubled from 4,400 to 7,300 in 2021, but Arm is cutting up to 15% of jobs after SoftBank. revealed plans to list the company earlier this year.

Haas said one of the biggest obstacles to pursuing an IPO next year — a two-year standoff 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 that ended the stalemate – to transfer Arm’s shares in the Chinese joint venture to a SoftBank vehicle – is complete.

As the value of public listings plummets in Europe and the United States last month, SoftBank founder and chief executive Masayoshi Son said he plans to retain a majority stake in Arm in the upcoming IPO. stock Exchange.

Haas said SoftBank had not invested any of its own capital in the chip designer for the past six years, but rather the Japanese conglomerate had “tolerated us to operate at a certain level of profit that allowed us to invest “.

“Masa is definitely a long-playing guy,” Haas said. “If you’re talking 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 later years,” he said, adding that Arm can open up to public markets because “the revenue growth will be able to support the investments we need while achieving profitability objectives”.

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