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ARM CEO downplays rumors of Apple acquisition

post #1 of 104
Thread Starter 
Following a rumor that Apple is looking to buy chipmaker ARM Holdings, the CEO of the Cambridge, England firm said he doesn't see what the benefit would be.

Warren East, chief executive of ARM, told The Guardian that he doesn't see a reason for Apple -- or anyone -- to pay a large sum of money to acquire ARM when they can continue to license the company's processor reference designs for much cheaper.

"Exciting though it is to have the share price pushed up by these rumours, common sense tells us that our standard business model is an excellent way for technology companies to gain access to our technology," East reportedly said. "Nobody has to buy the company."

Shares of ARM went up 3.4 percent following the rumors of an Apple acquisition. The company traded at its highest value since April 2002.

Though East's comments didn't specifically deny the rumors of an Apple acquisition, The Guardian took them as the executive's attempt to "pour cold water" on a potential purchase.

The rumor surfaced on Wednesday that Apple is interested in purchasing ARM Holdings, the company that licenses a majority of the world's mobile chip designs. Processors in Apple's iPhone, iPod touch and iPad are all based on reference designs licensed from ARM.

Apple has been a licensee of the ARM architecture for years. In 2008, the Cupertino, Calif., company purchased fabless chip designer P.A. Semi for $278 million.

And this year, Apple's first custom-built ARM processor surfaced in the iPad, in the form of the 1GHz A4 chip. Apple is also rumored to have purchased chip designer Intrinsity to help design and speed up the A4 processor, based on the Cortex A8 reference design.
post #2 of 104
This was exactly my question in the prior thread: what would be the synergies here for Apple to want to pay a hefty premium? It has to be far more than license fees. The CEO of ARM is exactly right when he says that there is no need "....to pay a large sum of money to acquire ARM when they can continue to license the company's processor reference designs for much cheaper."

I am still not convinced it makes sense for Apple, and have not seen any good arguments so far.
post #3 of 104
Well, not only would purchasing Arm make Apple the top dog in the mobile space, but it would give them the option to move their Mac line computers off intel processors. apple also making their own desktop class chips would position them as a very powerful entity in the personal computer world.
post #4 of 104
Quote:
Warren East, chief executive of ARM, told The Guardian that he doesn't see a reason for Apple -- or anyone -- to pay a large sum of money to acquire ARM when they can continue to license the company's processor reference designs for much cheaper.

Well, obviously Apple -- or anyone -- has a lot more options than just 'licensing reference designs' if they own the whole company. Like giving a direction for the future that fits their strategy for example. Or putting the competition at a disadvantage by keeping the latest tech under blankets for anyone but themselves. Or jacking up licensing costs. Or use the leverage they'd have as the owner of ARM to 'get something' from other big players in the industry. Samsung, for example, is one of the major suppliers of ARM-based chips, but they have many, many more products Apple might be interested in. Or be interested in their competitors not having them.

Mr. East knows exactly how Apple would benefit from taking over ARM, and his reaction is probably naive and easy for a reason: fueling the speculation even more by not denying flat-out that there are talks between them and Apple (which I don't actually believe anyway), thereby cranking up the value of their shares even more.
post #5 of 104
I would think it would be a pretty big antitrust issue for Apple to acquire ARM and potentially cut off (or make prohibitively expensive) licensing to all others. If Google did the same, people would be screaming bloody murder.
post #6 of 104
Quote:
Originally Posted by stonefree View Post

I would think it would be a pretty big antitrust issue for Apple to acquire ARM and potentially cut off (or make prohibitively expensive) licensing to all others. If Google did the same, people would be screaming bloody murder.

Hell, ARM was started by Apple anyway. Why NOT bring them back into the fold?
post #7 of 104
Quote:
Originally Posted by anantksundaram View Post

This was exactly my question in the prior thread: what would be the synergies here for Apple to want to pay a hefty premium? It has to be far more than license fees. The CEO of ARM is exactly right when he says that there is no need "....to pay a large sum of money to acquire ARM when they can continue to license the company's processor reference designs for much cheaper."

I am still not convinced it makes sense for Apple, and have not seen any good arguments so far.

What if someone else bought ARM? Is $8B really that much to pay to undermine Apple's entire iPhone and iPad, as well as their most profitable iPod model? Google has a net $30B in the bank and Microsoft has $25B. The latter company, according to the rumor mill, just posted jobs for an ARM expert.

I don't know the expected return on the risk/cost calculation, but when you're making $10+B profit a year, owning the core technology outright is something that can't be dismissed out of hand.
post #8 of 104
Bad, bad idea for Apple to buy them. If they want some influence, they can just buy back a chunk of the stock and sit on the board.
post #9 of 104
Quote:
Originally Posted by Booga View Post

What if someone else bought ARM? Is $8B really that much to pay to undermine Apple's entire iPhone and iPad, as well as their most profitable iPod model? Google has a net $30B in the bank and Microsoft has $25B. The latter company, according to the rumor mill, just posted jobs for an ARM expert.

I don't know the expected return on the risk/cost calculation, but when you're making $10+B profit a year, owning the core technology outright is something that can't be dismissed out of hand.

And it's not like that $40 billion is earning very much interest.

But still... this really does sound like the ARM CEO is pretty much saying that this isn't going to happen.
post #10 of 104
Quote:
Originally Posted by Booga View Post

What if someone else bought ARM? Is $8B really that much to pay to undermine Apple's entire iPhone and iPad, as well as their most profitable iPod model? Google has a net $30B in the bank and Microsoft has $25B. The latter company, according to the rumor mill, just posted jobs for an ARM expert.

I don't know the expected return on the risk/cost calculation, but when you're making $10+B profit a year, owning the core technology outright is something that can't be dismissed out of hand.

Those are all wrong reasons, and the typical ones advanced by companies that throw gazillions of dollars down the hole in value-destroying acquisitions.

So what if Google or MSFT gets the company? If they refuse to sell to Apple -- as has been pointed out above -- that would be considered anti-competitive behavior, and they'd be swatted down in no time. Moreover, why would they want to? Who else would they sell to? (Indeed, it may not be a bad strategy for Apple to get its competitors to overpay for an acquisition).

And, in the event that they do manage to successfully drop Apple out of spite, do you seriously think that alternatives will not emerge? (It cannot, after all, happen overnight).

'Owning the core' is tired old CEO-speak. I have not seen one iota of evidence that partnering for one's core technologies instead is more or less valuable in the long run. All kinds of technologies are regularly and profitably licensed.
post #11 of 104
Quote:
Originally Posted by Blastdoor View Post

And it's not like that $40 billion is earning very much interest.

But still... this really does sound like the ARM CEO is pretty much saying that this isn't going to happen.

Agree, it would be pretty tricky for CEO East to say he doesn't know what Apple would gain if on the day before Apple was talking to him about exactly why it wants to buy the company. He'd be better off saying that Apple is just one of 100s of IP licensees and that ARM has talks with most of them about lots of things over the course of a year.
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post #12 of 104
Quote:
Originally Posted by anantksundaram View Post

This was exactly my question in the prior thread: what would be the synergies here for Apple to want to pay a hefty premium? It has to be far more than license fees. The CEO of ARM is exactly right when he says that there is no need "....to pay a large sum of money to acquire ARM when they can continue to license the company's processor reference designs for much cheaper."

I am still not convinced it makes sense for Apple, and have not seen any good arguments so far.

How about not paying Intel for their processors.

Apple's intent is to place their own custom chips in Macbooks and future devices. If they control the reference design house then they can control ARM's direction. Maybe that direction is scaling up for desktop and workstation class processors. Eventually maybe server class processors.
post #13 of 104
Quote:
Originally Posted by MacTel View Post

How about not paying Intel for their processors.

Apple's intent is to place their own custom chips in Macbooks and future devices. If they control the reference design house then they can control ARM's direction. Maybe that direction is scaling up for desktop and workstation class processors. Eventually maybe server class processors.

But that would have to be premised on the argument that Apple can produce better, cheaper, faster than Intel in the long-run. I am not an expert, but chipmaking is an extremely scale-intensive businesses and yield (production efficiency) is a function of manufacturing experience.

Apple does little or no manufacturing.
post #14 of 104
What if Adobe bought ARM and licensed it to everyone except Apple. Would that be anticompetitive? Not likely to happen of course, but that would be kind of funny.
post #15 of 104
Quote:
Originally Posted by stonefree View Post

What if Adobe bought ARM and licensed it to everyone except Apple. Would that be anticompetitive? Not likely to happen of course, but that would be kind of funny.

It wouldn't be that funny if I was an Adobe shareholder. \
post #16 of 104
It could be a very interesting purchase for Apple...

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post #17 of 104
Quote:
Originally Posted by Blastdoor View Post

... this really does sound like the ARM CEO is pretty much saying that this isn't going to happen.

The CEO and the board often don't really have a say in whether the company is bought or not. ARM has purposely structured itself to make a take-over bid unlikely (essentially what the CEO is saying), so I'm sure the idea has caught them by surprise. That doesn't mean it might not still happen though.
post #18 of 104
You know the old saying... Why buy the cow, when you can license the milk for less?
post #19 of 104
Probably, the CEO does not see the reason for this too. This acquisition is a nonsense IMO.
We are talking about Apple, not Oracle

In today's market, a takeover is useful when one is looking to acquire market share or IP.
In Apple's case, I don't see them looking to acquire ARM's market because they are a consumer electronics company not a chip design company. In terms of acquiring IP, they can simply license it from ARM as they do so right now at a lower TCO.

Apple can differentiate itself from the competition through small acquisitions like PA Semi by customizing and improving the standard ARM design. It's cheaper than a big acquisition and less risky.

If you want a game changing acquisition, think about the only thing that is lacking right now in Apple's offering: CONTENT.
Aside from Disney, Apple has a tough time negotiating deals with major networks and labels. Offering exclusive content will definitely help Apple sell more devices and ensure customer loyalty of its iTunes media distribution platform.
post #20 of 104
Quote:
Originally Posted by sessamoid View Post

Hell, ARM was started by Apple anyway. Why NOT bring them back into the fold?

Actually, according to Wiki, it was more of a join venture between Apple, Acorn, and VLSI that started ARM. However, it was Acorn that founded the company.

Quote:
Originally Posted by stonefree View Post

What if Adobe bought ARM and licensed it to everyone except Apple. Would that be anticompetitive? Not likely to happen of course, but that would be kind of funny.

It would be worse then when they first brought Macromedia, regardless of weather or not they exclude Apple. We all know how they treat companies when Flash isn't on every device in America. :P

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post #21 of 104
Quote:
Originally Posted by replicant View Post


If you want a game changing acquisition, think about the only thing that is lacking right now in Apple's offering: CONTENT.
Aside from Disney, Apple has a tough time negotiating deals with major networks and labels. Offering exclusive content will definitely help Apple sell more devices and ensure customer loyalty of its iTunes media distribution platform.

Ah.... the Sony, Comcast, AOL, etc logic.
post #22 of 104
Quote:
Originally Posted by anantksundaram View Post


I am still not convinced it makes sense for Apple, and have not seen any good arguments so far.



What if they were reluctant to license the newest technologies to competitors? Except at somewhat higher prices than ARM now charges?

For Apple, the license fees would be nothing more than a bookkeeping entry - taking it out of one pocket and putting it into another. For competitors, it is cash gone forever.

What if Apple kept the newest and best tech to themselves for a while, and then offered it to competitors only after Apple's new product got an early lead?
post #23 of 104
Quote:
Originally Posted by MacTel View Post

How about not paying Intel for their processors.

Apple's intent is to place their own custom chips in Macbooks and future devices. If they control the reference design house then they can control ARM's direction. Maybe that direction is scaling up for desktop and workstation class processors. Eventually maybe server class processors.

I doubt that apple has much interest in that. X86 compatibility is a big reason why people feel safe in switching to the Mac. Take away bootcamp and virtual machines and a lot of people would be out of the platform
post #24 of 104
Quote:
Originally Posted by melgross View Post

Bad, bad idea for Apple to buy them. If they want some influence, they can just buy back a chunk of the stock and sit on the board.

Sorry, but I completely disagree with you. Look at the history of Apple and the Mac and you'll see a lot of uncertainty and constraint placed upon Apple by being beholden to relying on companies like Motorola and IBM for processors. Remember the claims about how the G4 and G5 would eventually hit 3, then 4, even 5 GHz? Remember how that never materialized because IBM couldn't deliver on their promises?

Buying ARM would allow Apple to control its own destiny with respect to its hardware designs. Remember, Apple is a hardware company and Mac OS and other Apple software, even the stuff you have to buy, is only there as an attraction to get people to buy the hardware.

It would also allow them to keep a 6 - 12 mos. lead on advances to the standard for their products compared to what would be licensed to other companies, giving them a distinct competitive advantage on the hardware.

As others here have mentioned it would also keep other companies such as Gurgle and Monoposoft from snatching it away from Apple out of spite (read; competitive business practices). This goes along with what I said about controlling your own destiny.

And what's more, they'd make the purchase price back in a year, two at most. And then they'd have yet another cash cow to ride.

Buying ARM makes PERFECT sense for Apple.
post #25 of 104
Quote:
Originally Posted by Stevie View Post

What if they were reluctant to license the newest technologies to competitors? Except at somewhat higher prices than ARM now charges?

For Apple, the license fees would be nothing more than a bookkeeping entry - taking it out of one pocket and putting it into another. For competitors, it is cash gone forever.

What if Apple kept the newest and best tech to themselves for a while, and then offered it to competitors only after Apple's new product got an early lead?

Companies that do that generally don't tend to have good, trusting, high-paying customers that last very long.

Moreover, it will invite entry by new competitors, or the market will get competed away by substitutes that are seen as good enough.
post #26 of 104
Quote:
Originally Posted by replicant View Post


If you want a game changing acquisition, think about the only thing that is lacking right now in Apple's offering: CONTENT.


I disagree. Search is Apple's biggest downfall. And the inability to do it well hurts them all across the product lines, from the desktop to the iPod.
post #27 of 104
Quote:
Originally Posted by Prof. Peabody View Post

The CEO and the board often don't really have a say in whether the company is bought or not. ARM has purposely structured itself to make a take-over bid unlikely (essentially what the CEO is saying), so I'm sure the idea has caught them by surprise. That doesn't mean it might not still happen though.

Tell that to Steve balmer. The yahoo CEO and board had quite a bit of say in that merger attempt. The only way they wouldn't have a say is if there were a hostile takeover, and that almost never happens, particularly when a company's primary asset is it's employees.
post #28 of 104
Quote:
Originally Posted by anantksundaram View Post

Companies that do that generally don't tend to have good, trusting, high-paying customers that last very long.

Moreover, it will invite entry by new competitors, or the market will get competed away by substitutes that are seen as god enough.

You make good points. It is interesting that the stuff you point out would happen in the mid- or long-term.

Do you think that Apple could disadvantage competitors in the short run, while working on great stuff for themselves in the long run?

I'm thinking that ARM would eventually be the design arm (ha!) of Apple's chips, with licensing a smaller side business.

Apple doesn't seem big on licensing anyway.
post #29 of 104
Quote:
Originally Posted by Stevie View Post

I disagree. Search is Apple's biggest downfall. And the inability to do it well hurts them all across the product lines, from the desktop to the iPod.

Really? That must surely be the reason why their products, and hence their profits and market value, are not doing so well......
post #30 of 104
Quote:
Originally Posted by Stevie View Post

Do you think that Apple could disadvantage competitors in the short run, while working on great stuff for themselves in the long run?

I'm thinking that ARM would eventually be the design arm (ha!) of Apple's chips, with licensing a smaller side business.

It's not clear to me that Apple is too focused on disadvantaging their competition, and even more important, that they need to. They are doing well across-the-board (except perhaps for @TV, which, I believe, will be developed into a blockbuster some day in the future), are an incredibly profitable company, and now the third most valuable company in the US.

Why would they want to take the eyes off the ball? As Cook and Oppenheimer let slip yesterday, they seem to be working on all sorts of exciting new products (although they didn't say what). They seem very disciplined and focused about what they want to do and execute it, rather than what their competitors are up to.

That said, given that ARM is a $2B company (than the $8B mentioned in the AI report previously), it is perhaps less of a big deal than it might have been. Even if it were to happen, it would probably be seen as being closer to a PAS acquisition in size (and market reaction). But that is speculation on my part.
post #31 of 104
Quote:
Originally Posted by Johnny Mozzarella View Post

You know the old saying... Why buy the cow, when you can license the milk for less?

Because you go through a *lot* of milk and it won't take that much time to pay back the purchase price of the cow, with the savings from the milk licensing fees.

Also, because you can take all the fresh milk for yourself as long as you make sure you give the day old stuff to the other milk licensees.
post #32 of 104
Quote:
Originally Posted by zindako View Post

Well, not only would purchasing Arm make Apple the top dog in the mobile space, but it would give them the option to move their Mac line computers off intel processors. apple also making their own desktop class chips would position them as a very powerful entity in the personal computer world.

If Apple lost their mind and wanted to make their own chips then they would be far better off buying Amd. Then they would maintain x86 compatibility and get some pretty serious graphics juice.

If Apple does buy Arm then imho it is for other purposes then to move their desktops to another processor family. My understanding is that with the way the Arm chips work they are great for their intended uses but do not scale or perform well in use as a desktop processor. At that point they run hotter and slower then x86. So they use them in ipods, iphones and ipods what does that leave? Apple tv? That could be a good use but thats about it. Awfully expensive way to upgrade that puppy.
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post #33 of 104
Quote:
Originally Posted by MacTel View Post

How about not paying Intel for their processors.

Apple's intent is to place their own custom chips in Macbooks and future devices. If they control the reference design house then they can control ARM's direction. Maybe that direction is scaling up for desktop and workstation class processors. Eventually maybe server class processors.

What does this have to do with Intel? ARM's chips have no more than a tiny fraction of the processing power of Intel's laptop or desktop chips. And you really expect Apple to tell their developers that they have to change again?

Forget it!
post #34 of 104
Quote:
Originally Posted by Stevie View Post

What if they were reluctant to license the newest technologies to competitors? Except at somewhat higher prices than ARM now charges?

For Apple, the license fees would be nothing more than a bookkeeping entry - taking it out of one pocket and putting it into another. For competitors, it is cash gone forever.

What if Apple kept the newest and best tech to themselves for a while, and then offered it to competitors only after Apple's new product got an early lead?

At the very least, they would be sued. Then they would have problems with the US government and the EU. Then things would begin to get tough.
post #35 of 104
Quote:
Originally Posted by Bowser View Post

Sorry, but I completely disagree with you. Look at the history of Apple and the Mac and you'll see a lot of uncertainty and constraint placed upon Apple by being beholden to relying on companies like Motorola and IBM for processors. Remember the claims about how the G4 and G5 would eventually hit 3, then 4, even 5 GHz? Remember how that never materialized because IBM couldn't deliver on their promises?

Buying ARM would allow Apple to control its own destiny with respect to its hardware designs. Remember, Apple is a hardware company and Mac OS and other Apple software, even the stuff you have to buy, is only there as an attraction to get people to buy the hardware.

It would also allow them to keep a 6 - 12 mos. lead on advances to the standard for their products compared to what would be licensed to other companies, giving them a distinct competitive advantage on the hardware.

As others here have mentioned it would also keep other companies such as Gurgle and Monoposoft from snatching it away from Apple out of spite (read; competitive business practices). This goes along with what I said about controlling your own destiny.

And what's more, they'd make the purchase price back in a year, two at most. And then they'd have yet another cash cow to ride.

Buying ARM makes PERFECT sense for Apple.

I don't see what those arguments have to do with this at all. PPC chips had so little sales that neither IBM or Motorola could afford to put much R&D into them. It costs billions.

ARM licenses out reference designs that other processor company modify in whatever ways they think required.

Using an ARM chip is like using an x86 chip in that it's got the majority of the relevant market sewed up. Apple can buy this from any of the ARM licensees it wants to. It now has two chip design companies to do that modding. Buying ARM won't improve that.

If Apple did do it, and companies felt, even wrongly, that Apple was holding back, over time, they would find a way to move on to non ARM chips. That would destroy all the value of ARM, and damage Apple's stock price as well.

If that happened, without all those license sales, ARM wouldn't be able to spend the R&D money it need to on its own. Then Apple wouldn't be ahead of the game.

It would be better if they don't even try.
post #36 of 104
This was most like a false rumor spread to drive up the shareprice so someone could make a quick buck.

Pump and Dump.
post #37 of 104
You do understand that Apple spent untold millions of dollars to port it's OS to Intel, right? The benefit to Apple was it didn't have to play the which chip is faster game and worry about it's processor supplier being slower then Intel based chips. The move was expensive for both Apple and it's developers.

There is zero chance Apple would use ARM CPU on't it's Macs.

I doubt Apple is buying ARM, but the benefit would be that Apple could dictate who would get a license. Since, most mobile platforms use ARM, that would be pretty powerful. Yet, the purchase would be expensive, and those providers probably would go to Intel.

Quote:
Originally Posted by zindako View Post

Well, not only would purchasing Arm make Apple the top dog in the mobile space, but it would give them the option to move their Mac line computers off intel processors. apple also making their own desktop class chips would position them as a very powerful entity in the personal computer world.
post #38 of 104
Quote:
Originally Posted by Blastdoor View Post

I doubt that apple has much interest in that. X86 compatibility is a big reason why people feel safe in switching to the Mac. Take away bootcamp and virtual machines and a lot of people would be out of the platform

But that won't matter much in the coming years. The iPad does not have bootcamp yet will still sell 10s of millions a year. If Apple made a Macbook that ran iPhone OS (probably wouldn't be called a Macbook) then that would be geared to consumers that are less likely to dual boot.
post #39 of 104
That would be an anti-competitive move the EU would take note of.

ARM chips are used in the majority of cell phones, and now with Quallcom's Snapdragon, some larger mobile devices.

Nokia is using the OMAP3 in its flagship device, the N900...

If Apple were to try to take over the company, i'm sure many previously unheard voices would cry foul.

Nokia is in Finland, ARM is in GB... so it's gonna be a bit tricky



Dan
post #40 of 104
Quote:
Originally Posted by melgross View Post

What does this have to do with Intel? ARM's chips have no more than a tiny fraction of the processing power of Intel's laptop or desktop chips. And you really expect Apple to tell their developers that they have to change again?

Forget it!

It has a lot to do with Intel. Apple isn't using Intel's Atom chipset in any of its products and those are used in many netbooks. ARM has focussed on mobile devices and Apple has created a new category that sits between a smart phone and a laptop with the iPad. They've bought a company that excellerates ARM processors. They definitely plan to use ARM and not Intel in future devices. ARM has multi-core proc designs and Apple apparently feels they are suitable for much larger devices - laptops includes.

Apple does not want to be dependant on any chip manufacturer anymore. Motorola, IBM, and Intel have all held-up Apple's progress (Atom failed for Apple's consumer device plans).
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