Newspaper article The Journal (Newcastle, England)

Softbank's Takeover of Chip Firm ARM Is Gamble on Future; SHARE WATCH

Newspaper article The Journal (Newcastle, England)

Softbank's Takeover of Chip Firm ARM Is Gamble on Future; SHARE WATCH

Article excerpt

Byline: Tom Solly

LAST Monday, Britain's largest technology company, ARM, announced it is to be bought for PS24bn by Japanese firm Softbank.

The news pushed ARM's share price over 40% higher. The price offered by Softbank makes it the largest ever acquisition of a technology business in Europe.

ARM is not a household name in the way Barclays, Shell and Tesco are but, while you may not have heard of it, you have almost certainly used one of its products.

So who is ARM and why does a Japanese firm want to pay such a large sum and premium for it? ARM designs microchips that are used in nearly all smartphones, iPads, Kindles and many other products. Last year, over 15bn chips based on ARM's designs were made.

ARM does not manufacture the chips but licenses its designs to others such as Apple and Samsung and, in return, receives a royalty for every chip made. ARM's chips are now being used in a variety of products, from drones to kitchen appliances and farm machinery.

It is this market, known as the "Internet of Things", rather than the smartphone market, that has caught the attention of Softbank.

The Internet of Things is the concept of connecting any device or machine to another device or the internet.

Everything from mobile phones, cars, washing machines and almost anything else you can think of can be connected to other devices or provide the user with data. The connection would enable the machines to "talk" to each other, and this could be as simple as a situation in which your alarm goes off at 6.30am and notifies your coffee machine to start brewing once you have stopped pushing the snooze button.

You might already have a smart meter in your house that automatically gives the electricity company a meter reading and allows you to control your thermostat from an app.

The devices could also communicate with us, the users. …

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