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Softbank buys mobile chip designer ARM for $32 billion

Engadget Engadget 18/07/2016 Steve Dent
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Japan's Softbank, which owns US carrier Sprint and many other firms, is set to buy mobile chip company ARM in a blockbuster $31 billion deal. The UK company designs the processors used in virtually every mobile device, including all models from Apple, Samsung and HTC. It doesn't build them itself, but rather licenses its tech to Qualcomm, MediaTek, Samsung and others. If the deal goes through, it would be one of the largest acquisition of a European tech firm ever, and a big vote of confidence by Softbank in post-Brexit UK.

Softbank has been freeing up cash lately through a variety of deals. It recently soldClash of Clans maker Supercell to Tencent for a reported $8.6 billion, and sold $10 billion worth of shares in the Chinese retail giant Alibaba. The company owns US carrier Sprint, a 28 percent share of China's Alibaba and the Japanese arms of Yahoo and Vodafone.

ARM is far and away the biggest and most important UK tech company, as over 15 million chips using its technology shipped last year. It became a tempting acquisition target following the UK "Brexit" vote to separate from Europe. That caused the UK pound to plummet by 15 percent against the Japanese yen, effectively making the company cheaper. ARM is considered to be shielded from any potential Brexit fallout in the UK market, since it has customers around the world. However, there's some concern that top UK engineers may flee to Europe and elsewhere once Britain's EU divorce is finalized.

Intel has often been seen as a suitor for ARM, but it's now clear the purchase price may have been too rich for it to stomach. While ARM designs most of the chips used in mobile devices, it only had revenue of around $1 billion in 2015, and the purchased price is reportedly 70 times its net income. Even with the discount in the UK pound, that still makes the deal a pretty big risk for Softbank.

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