Tuesday, August 11, 2020

"Nvidia Buying Arm Would be Reckless"

The Financial Times' Bryce Elder (soul of a poet, mind of an abnormal psychology professor) has some comments on chip designer Arm Holdings which reminded me that we had a couple links to the electrical engineering types at EE Times.
First up, the headliner:
Nvidia Corp. is reported to be in talks to purchase Arm Holdings Plc. If true, the move would be beyond stupid. It would be reckless and would ignite a firestorm of negative reactions from current and potential Arm licenses and be, on a long-term basis, counter productive for Nvidia and its shareholders.

Why Nvidia could be considering such a move is obvious. The company’s market value has rocketed to its highest level since it went public in January 1999, climbing above the capitalization of Intel Corp., the global No. 1 semiconductor supplier by revenue. Leveraging the lofty stock price, low borrowing rates and strong cash position to make a major, market-defining acquisition, would seem to make sense.

Sky-high market valuation
Nvidia holds a commanding position in the graphics processing unit (GPU) segment and is a darling of OEMs in the gaming and visual computing market, artificial intelligence, automotive, cloud and data services, software developments, design engineering, autonomous machines and other intense applications. It has more than 1.6 million registered developers and is favorably viewed by many.
It may be about to gamble away that enormous goodwill. The acquisition of Arm from Softbank would add critical CPU intelligence and ownership to Nvidia’s product base but it is difficult imagining any other major benefits. Even the CPU technology is available under license from Arm without direction ownership and the negative pressure that would immediately follow such a deal.
Nvidia succeeded as brilliantly as it has by flying under the radar of many competitors. It grew rapidly from a low sales base and clocked $11 billion in sales for the fiscal year ended January 26, 2020. Sales are forecast to surge to $14.7 billion in fiscal 2021, up an industry-leading 35 percent, from the preceding year, justifying the massive increase in the company’s market capitalization. The company’s strong cash position — about $15.5 billion at the end of the last quarter — combined with a low long-term debt of approximately $2 billion has also made it a darling of the investment community and endeared it to suppliers and OEM partners.

Why would anyone want to mess up that recipe? I personally hope whoever is leading the campaign for Nvidia to purchase Arm — if true — would step back and reconsider the action. It will lead to major problems in future. Here is why:

It may not seem so but Nvidia has major competitors that have so far ignored its encroachment on their turf, contented with the multiple other technology segments where they have commanding positions and don’t feel threatened by the GPU champion. Many of these, including Intel, Advanced Micro Devices and Xilinx, are already beginning to consider Nvidia a potentially bigger headache than they have so far assumed....
....MUCH MORE

Okay, we'll take that "beyond stupid" to be a no vote.
And:
Nvidia-Arm Deal Would Be a Technology ‘Disaster’
That Nvidia intends to buy Arm from Softbank now appears to be more than just idle speculation.  Nvidia initially approached SoftBank with a proposal to purchase Arm for more than $32 billion in a cash-and-stock deal, according to two news sources.

Bloomberg and the Financial Times independently confirmed the courtship.

There’s no guarantee that the discussions will result in a sale, but just raising the possibility spurred sources in the tech sector to reach out to EE Times to tell us how little sense the deal makes.
Put simply, the Nvidia-Arm deal is a tough sell. Even tougher is coming up with any semblance of positive narratives for this M&A. Forget about “synergy” or “win, win.”

The merger would be a disaster....
....MUCH MORE

Hmmm...I'm sensing a trend here.