Arm's decision to spin-off its “internet of things” (IoT) services business and focus on its core chip design business are signals a float is “now more likely”, analysts say.
The SoftBank-owned chip designer announced it would hive off its IoT services division late on Tuesday. The Cambridge firm, which was bought by SoftBank in 2016 for £24bn, said it would transfer two businesses to the Japanese conglomerate, which would then oversee them directly.
Arm has built up the business under four years of ownership by the Japanese firm.
SoftBank has the experience to make the most of the potential of the IoT sector, said Arm's chief executive Simon Segars.
Mr Segars said: “SoftBank’s experience in managing fast-growing, early-stage businesses would enable ISG to maximize its value in capturing the data opportunity.
“Arm would be in a stronger position to innovate in our core IP roadmap and provide our partners with greater support to capture the expanding opportunities for compute solutions across a range of markets.”
The move is subject to board members' approval and is expected to be confirmed by the end of September. It comes after Arm invested hundreds of millions of dollars in expanding its IoT wing, including buying a US start-up, Treasure Data, for $600m (£479m) two years ago.
SoftBank, led by chief executive Masayoshi Son, had seen the so-called “internet of things” as triggering a surge in connectivity with up to one trillion new devices. Mr Son believed this could create significant value for a silicon design company such as Arm.
As well as providing chip technology, it would also be able to provide online data services and software. However, the sector has proved slow to materialise, according to analysts.
The Japanese technology firm is thought to be considering re-listing Arm on the Nasdaq in New York, the Telegraph reported earlier this week, in a blow to the UK technology industry. It has discussed plans to take the chip firm public in 2023, but has not said where it wants to do this.
Analysts said the move signalled Arm was concentrating more on its core business of designing underlying technology for semiconductor chips and its own profitability.
Richard Windsor, an independent analyst at Radio Free Mobile, said the move could signal a “rapid return to the stock market”.
He said it signals plans to “tidy-up and IPO” and added SoftBank would need to look for a valuation of $50bn or more to make a strong return for investors.
Patrick Moorhead, an analyst at Moor Insights & Strategy, told trade publication SiliconAngle the move showed the “desire to show the right level of profitability” ahead of a possible float.
Arm was previously listed on the London Stock Exchange and had a secondary listing on Nasdaq. It is one of SoftBank's more successful investments.
The Japanese firm recorded a $13bn annual loss last year after its Vision Fund made a series of disastrous bets on companies including WeWork, which collapsed in value following a failed attempt to go public last year.
The British company dominates the global chip design market for smartphones and has also expanded to servers and laptops.