Japan's Softbank to buy ARM for £23.4bn [Financial Times][NYT][Bloomberg]

[senseamp]

If the only thing stopping ARM from greatness was money, couldn't they have raised it in the private markets themselves? Why would being owned by an already indebted and soon to be cash poor SoftBank make ARM more competitive?

 

[Roland00Address]

Holy crap. I knew that must have been somewhat large based on the fact they keep airing those stupid commercials, but that's an insane valuation for one game. Unless Tencent also uses that to data mine for the Chinese government, I can't imagine that Softbank didn't get the best end of that deal.

They have 2.3 billion a year of revenue as of 3/2016, with over a 100 million daily users. This means of the daily users they make roughly 20 dollars or so from each. Now spending 4 times the yearly revenue of a company means the goal is a long term play where they think Supercell / Clash of Clans will be a worthwhile long term gaming company unlike other mobile gaming companies which have plateaued or shranked.

http://www.ibtimes.com/clash-clans-...revenue-930m-profit-2015-growth-slows-2333237

The link I gave has a news story but also a video inside of it to help you understand the scale of a 100 million daily users.

No remember I talked about roughly 20 dollars from each daily user, it is not that each person contributes 20 dollars but instead a small percent spend a whole lot more each year on these types of games. Effectively they play them like older people play casino slots, but unlike casino slots there is no way to walk away with winnings. South park did a wonderful episode on this Season 18, Episode 6, Freeminum isn't free.

 

[jpiniero]

If the only thing stopping ARM from greatness was money, couldn't they have raised it in the private markets themselves? Why would being owned by an already indebted and soon to be cash poor SoftBank make ARM more competitive?

They don't care, dat 40% premium!

 

[escrow4]

I use cheap arse Androids and most of the time they are either ZTE or Alcatel/TCL. The usual ARM SOCs you get in cheaper Androids are usually Mediatek, Qualcomm, or Spreadtrum all but one is Chinese. I'm surprised a Chinese company didn't spring for ARM.

 

[jpiniero]

I use cheap arse Androids and most of the time they are either ZTE or Alcatel/TCL. The usual ARM SOCs you get in cheaper Androids are usually Mediatek, Qualcomm, or Spreadtrum all but one is Chinese. I'm surprised a Chinese company didn't spring for ARM.

I imagine most of those companies you mentioned don't have $32B in cash.

 

[Roland00Address]

I just want to give you guy's some ratios

ARM Holdings information from marketwatch

Numbers are for the 2014 to 2015 fiscal year which was January to December for this stock

Note I purposefully placed 0s as a placeholder infront of the number and underline the 1st digit to make it easier to see the sense of scale for the words million and billion does not register the sense of scale but this way of formating does a much bigger job of showing the sense of scale

http://www.marketwatch.com/investing/stock/armh/financials

All figures are GBP which stands for Great Britain Pound and use this symbol £ which stands for Pound Sterling

[b]The stock was bought for 					[u]2[/u]4300.0Million £[/b]

[b]Gross Sales / Revenue						00[u]9[/u]68.3Million £[/b]
Cost of Goods Sold						000[u]5[/u]8.3Million £
[b]Gross Income							00[u]9[/u]10.0Million £[/b]

Net Income is after expenses and taxes, expenses include R&D
[b]Net Income							00[u]3[/u]39.7Million £[/b]

[b]Total Assets							0[u]2[/u]140.0Million £[/b]

Current Assets
Total Current Assets						00[u]9[/u]48.3Million £
Cash & Short Term Investments					00[u]6[/u]88.3Million £
Total Accounts Receivable					00[u]2[/u]29.5Million £
Inventories							0000[u]1[/u].8Million £
Other Current Assets						000[u]2[/u]8.7Million £
 
Property and Investment Assets
Net Property, Plant & Equip					000[u]6[/u]1.6Million £
Total Investments and Advances					00[u]3[/u]12.2Million £	
Long-Term Note Receivable					0000[u]6[/u].0Million £
Intangible Assets						00[u]7[/u]42.7Million £
Other Assets							0000[u]1[/u].4Million £

Total Liabilities						00[u]3[/u]42.0Million £

[b]The stock was bought for 					[u]2[/u]4300.0Million £[/b]

So the stock was bought for over 25x the revenue of 2014 to 2015
So the stock was bought for over 71.5x the net income after taxes of 2014 to 2015
So the stock was bought for over 11.35x the total assets prior to liabilities of 2014 to 2015

Put another way ARM Holdings was not bought for what ARM Holdings is currently as of today in the world but instead what it would be in the future.

And ARM is already doing awesome, they have almost doubled their revenue compared to where it was 5 years ago, and have more than tripled their net incomes after taxes (aka profit) compared to it was 5 years ago. (The 5 year numbers of each category and even more categories I left out are in the marketwatch link above.)