TOKYO -- With his 3.3 trillion yen ($31 billion) acquisition of British chip designer ARM Holdings, SoftBank Group CEO Masayoshi Son has taken a step toward securing his company's position in the "internet of things" era.
Son recently sat down with The Nikkei to talk about the recent deal, his business philosophy and why he is not ready to retire just yet.
Q: You've been interested in ARM for the past decade. Why?
A: That's a bit of a long story. It was when we'd decided to buy Vodafone K.K. (the Japanese unit of Britain's Vodafone Group). That came about because I felt the internet's axis was going to shift from personal computers to mobile, or, to put it another way, that the mobile internet age would surely arrive.
Almost no one around me understood -- they said NTT Docomo was sure to dominate in cellphones. But I sensed that a paradigm shift was coming and the era of having internet access at your fingertips, 24 hours a day, was about to begin.
So who makes the best handsets? When I thought about it, I knew it wasn't Nokia [then the world's largest cellphone manufacturer], much less a Japanese mobile phone maker. It had to be that crazy guy, the one and only Steve Jobs.
Having made up my mind, I went to see Steve. I brought a hand-drawn sketch with me, and I said, "Please make something like this."
He said, "Don't show me such an ugly design sketch." But he also said, "You've got the right idea. I totally agree that the time has come when we can make the ultimate mobile machine."
I said, "Then team up with me. If you don't, I'll compete against you." That exchange led to [SoftBank's initial] exclusive rights to the iPhone in Japan.
The CPU (central processing unit) for Steve's "ultimate mobile machine" would have to come from ARM, I figured. Intel chips are a platform for the PC age. They'd eat up too much battery. Smartphone CPUs by their nature require very high computing power, which uses up the battery. While I had to go with an ugly design that looked like a toad with the way the battery stuck out, I thought there was no way that Steve, given how much he cared about aesthetics, would make such a choice.
Q: So your conversation with Jobs was what led you to foresee the rise of ARM?
A: Yes. I thought ARM would definitely become the de facto standard in the smartphone era, like Intel was the de facto standard in the PC world. When that happened, ARM's value would rise immeasurably. ARM's market capitalization was about 200 billion yen at the time. That's a tenth of what it is now. And its share price didn't change even when Google picked ARM for the Android. The world didn't understand ARM's worth. That's why I'd been champing at the bit ever since to buy it.
But SoftBank had taken on a massive amount of debt in buying Vodafone. Once, when I said I wanted to buy ARM, some board members said, "You can't be serious. Have you lost your mind?" (laughs)
Five years later, the mobile phone business had really improved, and we'd repaid our debt. Then I was on the fence over whether to go for ARM or to go for Sprint. ARM was a bargain back then. But in the end, it was hard to see any synergy with SoftBank, and we were just starting to do well with mobile.
I vacillated right up to the end, but if we could buy Sprint as a package with T-Mobile US [then the country's fourth-largest carrier], we could make a big splash in the U.S., the world's biggest market. I thought that was worth getting excited about, so that's what I chose. That's why I've harbored an unrequited love for ARM for the past 10 years. It's a selfish, one-sided love. (laughs)
Q: At 1.8 trillion yen, Sprint was also a big acquisition. That didn't dampen your feelings for ARM?
A: During this period, I met many times with Warren East, who was ARM's CEO back then. As I spoke with him, my opinion of ARM went up -- my mind never wavered. Its price rose tenfold, but I still wanted to buy it. And I was convinced there would be another paradigm shift. The internet's axis was shifting from PCs to smartphones, and from there it would shift to the internet of things. Now that we're on the threshold of that, I thought I'd try again.
I haven't invented anything earth-shattering. If I could be said to have one noteworthy ability compared with the average person, it's that I have a keen interest in reading the direction and timing of paradigm shifts. I don't care about the sort of things that will bring in chump change over the next two or three years. I think I'm better than others at sniffing out things that will bear fruit in 10 or 20 years while they're still at the seed stage, and I'm more willing to take the risks that entails.
Q: You've said you spend 90% of your time on ARM and rebuilding Sprint. Is the Japanese mobile business -- SoftBank's core business -- doing all right?
A: Even before now, we poured all of SoftBank's business resources into [responding to] each new paradigm shift. I'd spend all my time on them, too. We initially did PC software wholesaling and publishing and ran trade fairs, but when we shifted to the internet, that's where I spent 99% of my time. I'd run off to go on an adventure. With broadband, when we took on NTT [Nippon Telegraph & Telephone] with Yahoo! BB, I canceled all my appointments and left our headquarters. But it was fine. I went, "I'm going to work on broadband, so I'll leave the rest to you, Miyaucchan [SoftBank Group President Ken Miyauchi]." (laughs)
Q: In other words, you leave everything to Miyauchi?
A: Right. Even with mobile internet, I'm like the wandering Tora-san [from the "Otoko wa Tsurai yo" film series]. I find a new object of affection, I fall head over heels, and I go off after her. And I leave the rest to Miyauchi. It's the same pattern this time, too. Tora-san leaves home once every five years or so. Miyauchi is eight years older than me, but he looks young with that full head of hair he has, right? (laughs) So it's fine.
Q: You're spending quite a lot to buy ARM.
A: It's true that 3.3 trillion yen is a pretty big price tag. We sold shares in Alibaba Group Holding and [Finnish game developer] Supercell that we didn't want to sell in order to come up with the money.
Q: You seem to have thought carefully about your fundraising.
A: Actually, about a year earlier, I'd told a very small group of top officials that I thought we should go after ARM. But Sprint's restructuring still hadn't gotten off the ground then. Some officials argued against it -- they went, "What are you saying?"
I thought, well, that's a valid opinion. But we could picture [Sprint's rebuilding] starting to get on track around this summer. So it's about time for us to get in the game, I said. That's why we got the money together.
When we took on paradigm shifts before this, we sold every single thing we could to compete. This time, it's just part [of SoftBank's available resources]. So it's not a full swing. It's a controlled shot. It's like a light tap with a sand wedge. (laughs) That might be going too far. But it's comparable to laying up with a pitching wedge. We can handle this big a game with a pitching wedge. I wonder if it's all right for us to act like we have this much elbow room -- it's so much that I feel a little bad for my [past] self.
Q: You recently showed you were willing to part ways with former President Nikesh Arora, who you had regarded as your successor.
A: With a challenge like this, I want to captain the ship myself and be ready to chain myself to the mast. I'd feel bad making someone like him stick around as the first mate for a decade under those conditions.
I told him, "I want to keep going as the captain for the next 10 years." Nikesh said he couldn't wait that long. So what happened couldn't be helped.
Q: The announcement of Arora's departure came the night before a general shareholders meeting, which prompted a lot of talk.
A: Considering how I had come to feel, I thought it wouldn't be good for him to come back on and wait or to hide his feelings and keep going. Given that, we went with a clean break. It wasn't a falling out.
Q: Did you really want to retire in the first place?
A: I thought I might spend the rest of my time on golf. But thinking about it now, I'm happy playing whenever I have some downtime in my busy schedule, and even if I had all the time I wanted to play, my score probably wouldn't be very good. [If I had retired,] I think I would have kept in contact with venture capital investors and entrepreneurs. I'm sure staying involved as something like a coach would be fun. If I handed over the reins to a successor, I wouldn't stick around [to pull strings] like a retired emperor. But a big paradigm shift is staring us in the face. If I left things to someone else despite having my own thoughts on it, I wouldn't be true to myself.
Q: The ARM deal started off when you invited CEO Simon Segars to your home in Silicon Valley for a meal.
A: I'd met Simon for the first time in London a year earlier. He struck me as a quiet, natural-born engineer and an orthodox successor [to East]. He has a home in Silicon Valley, and he said it's just a few minutes' drive away from mine. He came by a few times. We talked for three hours in late June.
I told him, "If you understand the future of the internet of things that much, then you should add more engineers and go on the offensive." Simon had explained to analysts and others that he intended to do that sort of forward-looking investment, but he said it's tough for a listed company considering its share price falls if profits drop. That hardened my resolve [to get the deal done]. When I heard what he said, I said to myself, "We can do this."
Right after that, I said, "I want to meet the chairman, too -- come with me." He said Stuart Chambers was vacationing with his family on a yacht in the Mediterranean. So I called [Chambers] and told him, "I'm heading over there, so please meet with me." We ended up meeting in the port town of Marmaris in Turkey.
Q: That's where you broached the acquisition proposal.
A: At that moment, the two of them were so shocked that they almost fell out of their chairs. They said they never would have guessed they would get an offer like that. They'd apparently thought it would be a business partnership or something.
Our proposal had more than just money. We would increase their staff and keep their headquarters, their brand and their management in place. We made them a comprehensive offer they couldn't refuse. Shareholders simply receive cash, but with the staff and management, we had to show that we could share the same vision. Employees would probably resent us if money were all [we offered]. If something happened, like engineers starting to quit, things would go downhill fast.
Q: ARM has no direct synergies with SoftBank. Are you thinking about more big acquisitions to fill the gap?
A: We've just made a big purchase, so now we need to digest it. We won't know how long that'll take until we do it. At the very least, we won't do anything like that right after [the ARM deal]. We're focusing on ARM right now.
Q: Alibaba Executive Chairman Jack Ma Yun called you just after the deal was announced.
A: Jack's theory is that whoever controls data controls the world. Based on that, he said [the ARM deal] was just what he'd expect from me. He's also said he wants to meet with me soon with his chief technology officer in tow to deepen [Alibaba's] partnership with ARM.
It wasn't just Jack. Calls came pouring in from people like [Apple CEO] Tim Cook and [former Qualcomm CEO] Paul Jacobs. From here, we can build relationships of trust with global leaders as partners and talk about how technology will develop five or 10 years down the line. I'm incredibly excited.
Interviewed by Nikkei staff writer Takashi Sugimoto