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Arm still jewel in crown as parent SoftBank nurses record $23.5b hit

Stock market losses lead to write-downs at Vision Fund, but chip designer IPO a ray of light

Chip designer Arm booked record revenues for the Q1 ended June 30 and was one of the bright spots in an otherwise loss-heavy start to fiscal 2023 for Japanese parent SoftBank's Vision Fund.

For the three months, Arm said today it generated $719 million in revenue, up 6 percent year-on-year, including $453 million in chip royalties, up 22 percent on the same quarter of 2021 and an all-time high.

According to the profit and loss accounts, Arm's customers shipped 7.4 billion Arm-based devices, making this the fourth quarter of more than 7 billion chips being shipped. Earnings before income tax, depreciation and amortization grew 31 percent to $414 million and margin was 58 percent.

Execs think the numbers show Arm's strategy to diversify beyond mobile in other sectors such as automotive and infrastructure is paying dividends.

"Arm continues to enable our ecosystem with compute performance and efficiency leadership through a transformed strategy," said CEO Rene Haas in a statement. "Together, we are meeting the insatiable demand for compute and defining the future of computing that will power the next great technology revolutions on Arm."

The plan is to float Arm later this year, potentially with a dual listing on the New York and London stock exchanges. An estimated valuation of $60 billion was proposed earlier this year. It looks like this injection of capital can't come soon enough for SoftBank, the world's largest tech fund.

SoftBank's Vision Fund today reported a loss of ¥3.16 trillion ($23.4 billion) for the three-month period, the biggest in SoftBank's history. It follows a ¥2.2 trillion loss last quarter and compares to a ¥235.6 billion profit in the same quarter of 2021.

The fund [PDF] has investments in hundreds of startups and some well-known brands including Uber Technologies, ByteDance (owner of TikTok) and Swedish bank Klarna.

The global stock markets continue to shrink, striking SoftBank investments and forcing a write-down of valuations, consequentially dampening its ability to convert portfolio bets into liquidity to invest in more companies. The biggest losses came from investments in Coupang, SenseTime, and DoorDash.

One solution leaned upon by SoftBank is to buy back shares, and it confirmed this morning it will repurchase ¥400 billion worth of stock.

In another defensive exercise, the group will need to "drastically cut costs," said founder and CEO Masayoshi Son. One of the actions is to explore selling the asset manager Fortress Investment Group, with talks already under way. ®

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