ARM CEO downplays rumors of Apple acquisition

Posted:
in General Discussion edited January 2014
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.
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Comments

  • Reply 1 of 103
    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.
  • Reply 2 of 103
    zindakozindako Posts: 468member
    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.
  • Reply 3 of 103
    d-ranged-range Posts: 396member
    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.
  • Reply 4 of 103
    stonefreestonefree Posts: 242member
    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.
  • Reply 5 of 103
    sessamoidsessamoid Posts: 182member
    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?
  • Reply 6 of 103
    boogabooga Posts: 1,081member
    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.
  • Reply 7 of 103
    melgrossmelgross Posts: 33,299member
    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.
  • Reply 7 of 103
    blastdoorblastdoor Posts: 2,727member
    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.
  • Reply 9 of 103
    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.
  • Reply 10 of 103
    mark2005mark2005 Posts: 1,158member
    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.
  • Reply 11 of 103
    mactelmactel Posts: 1,275member
    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.
  • Reply 12 of 103
    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.
  • Reply 13 of 103
    stonefreestonefree Posts: 242member
    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.
  • Reply 14 of 103
    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. \
  • Reply 15 of 103
    It could be a very interesting purchase for Apple...
  • Reply 16 of 103
    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.
  • Reply 17 of 103
    You know the old saying... Why buy the cow, when you can license the milk for less?
  • Reply 18 of 103
    replicantreplicant Posts: 121member
    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.
  • Reply 19 of 103
    zc456zc456 Posts: 96member
    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
  • Reply 20 of 103
    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.
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