ARM President Tudor Brown  (Source: ARM Holdings Plc.)
ARM Holdings will surely miss its strong leader, who is departing after 21 eventful years

Cambridge, UK-based ARM Holdings Plc. (LON:ARM) has travelled a strange and winding road over the past  two decades.  From humble beginnings it became the world's only major licenser of a reduced instruction set computer (RISC) processor architecture.  

And while its x86 detractors continue to detract, today ARM rules the tablet and smartphone market, and is closing on expansions into the server and laptop spaces.  After seeing the company off to that odds-defying success, ARM Holdings president and co-founder Tudor Brown is preparing to bid his firm goodbye, according to a report in The Wall Street Journal.

After 21 years with the company, Mr. Brown will depart in May.  He will join the minority of the corporate business world of executives who depart while their firm is on top of its game.

I. ARM was Once But a Humble R&D Project at a Computer-Maker

ARM Holdings was born out Acorn RISC Machine project, which the company sunk £7M (~$25.8M USD in today's money; source) into the development of the new architecture.  The ARM1 chip was born in 1985 as a coprocessor and it actually helped design its successor architecture ARM2 by serving as an accelerator chip for computer aided drafting (CAD) circuit design tools.

Mr. Brown was the principal research engineer on the promising ARM project.

ARM eval.
Before there was ARM Holdings, ARM was an R&D project at Acorn Computers.
[Image Source: Joel Rowbottom; Flickr]

Acorn's Electron computer sold well in 1984 prompting a successful public offering.  But due to suppliers refusing to reduce volumes in short order a dismayed Acorn saw unsold Electron stocks piling up, even as it was plunging deeper into debt in the R&D front.  Under pressure from Apple, Inc. (AAPL) whose Newton it was crafting an ARM CPU design for, Acorn spun off ARM in 1990.  The name ARM changed from meaning "Acorn RISC Machine" to "Advanced RISC Machine".

Apple Newton: The Simpsons
The Apple Newton project spurred Apple to push for the spinoff of ARM.
[Image Source: 20th Century Fox]

Apple and Acorn each took a 43 percent stake in the new company ARM, Ltd. by 1996 [source].

II. A Star is Born

At his new company, Mr. Brown ascended in 1993 to the dual-position of Engineering Director and Chief Technical Officer, a position he held until 2000.  Under his new leadership ARM turned a profit in 1993.  That year the Newton launched, and despite poor sales ARM Ltd. turned a profit between Apple's ongoing development investment in  the company's processors and new ventures.  In 1997 ARM Ltd. diversified via an investment in one of the first system-in-a-chip companies -- Palmchip.  Within the year ARM SoCs were creeping into the hard drive market, gaining revenue.

By 1996 ARM, Ltd. was performing well but Apple and Acorn Computers were both in bad trouble financially on separate sides of the pond.  Following Apple co-founder Steven P. Jobs return to CEO, Apple in Dec. 1996 began to formulate plans to liquidate its ARM stake.  Acorn Computers was forming similar plans as well.

And liquidate they did.  In 1998 an initial public offering was had, forming the new ARM Holdings, Plc.

Apple had put in $1.5M USD in 1990 ($2.47M USD in inflation adjusted dollars) for the stake, and got a $800M USD [source] payday from the liquidation process that began with a public offering of stock in 1998 ($1.32B USD).  The windfall proved vital for Apple, reportedly saving it from bankruptcy.  (Note: Apple slowly cashed in its ARM stake over a few years -- in 1999 it still had 7.2 million shares [source]; 14.8 percent of the company.)

Steve Jobs (1996)
Steve Jobs, upon returning to Apple liquidate his company's shareholding in ARM, giving the company the cash it needed to continue development and avoid bankruptcy.
[Image Source: Risen Sources]

Acorn also liquidated, but a smaller rate -- it sold 20 percent of its stake [source] (8.6 percent of the total value) for £28.1M ($62.5M USD).  Again this was a significant loss from the original value ($286M USD).  By 1999 the pupil had become the master -- Acorn's 24 percent stake in ARM Holdings was worth more than the rest of Acorn's capital combined.

To prevent the weak Acorn from sinking the rising ARM, the Morgan Stanley Dean Witter Group (MS) in May 1999 successfully proposed a deal to give Acorn stockholders 2 ARM Holdings shares for ever 5 Acorn Group shares.  At the time there was approximately 48.6m ARM shares worth £2.91 each -- Acorn held 24 percent, worth an estimated £33.94M at the currency of the time.  Acorn's share price was £1.16 and there were 92.6m shares.

At the end of the day, Acorn shareholders became ARM Holdings shareholders, receiving ~37.0m shares of ARM worth £107.7M -- a slight premium (a valuation that combined Acorn Group's ARM stake, with Morgan Stanley's approximation of the worth of what was left of Acorn Group).  Morgan Stanley gained control over the remaining Acorn Group assets, which it valued at £269.7M [source].

With Acorn Computer in the rear view, ARM still maintained a close relationship with Apple.  In 2001 it made the CPU chip for a device that would foreshadow its future mobile offerings -- the iPod.  That device featured not one, but two ARMv7 (seventh generation) CPU chips.

In Oct. 2001 -- just as the iPod launched -- Mr. Brown switched to the roles of Chief Operating Officer and Executive Vice President for Global Development at ARM Holdings.  He also joined the company's board of directors.

iPod Gen. 1
The original iPod, launched in 2001, packed not one but two ARM licensed CPU designs, clocked at a blazing fast 90 MHz. [Image Source: Tom's Hardware]

ARM would go on to plant itself in almost every mobile computing device, including the Palm handhelds and early smartphones.  For a while Intel Corp. (INTC) even licensed its architecture for mobile offerings, before selling the ARM division (XScale) to Marvell Technology Group Ltd. (MRVL).

In July 2008, with the smartphone market exploding and the tablet market on the horizon, Mr. Brown moved to what will be his final role at ARM Holdings -- President.  As President of the company, he was tasked "with responsibility for developing high-level relationships with industry partners and governmental agencies and for regional development in AsiaPac."

III. A Bright Future Even Awaits ARM, Even as its Founders Depart

During his tenure sales of ARM-equipped mobile devices have exploded.  ARM has positioned itself as a vendor agnostic "arms dealer" of sorts, supply the CPU architecture -- and more recently GPU architecture -- for various chipmakers to use in deployments.  

In Q3 2011 ARM just announced that it had doubled its revenue, as expected.  The sky's the limit, it appears for ARM.

And that's good news for the 52-year-old Mr. Brown, who accrued 542,617 shares -- or a small minority stake -- in ARM over his 21 year career.  Those shares make the tech pioneer worth $5.56M USD.

Tudor Brown
Tudor Brown has always guided ARM Holdings, but the company will now have to make due without his veteran leadership. [Image Source: ANT/Ranier PR]

ARM had 12 individuals from the Acorn R&D team who it counted as "co-founders", including Mr. Brown.  With his departure all but four of those individuals will be gone.  Three of the remaining co-founders are "still driving the technology forward" as executives and senior research fellows on the R&D team at ARM.  The fourth is current Chief Technology Officer and board member Mike Muller.

The company says it has no plans to replace Mr. Brown's current position.  Board Chairman Doug Dunn commended Mr. Brown, remarking, "[He] played an important role in the creation and successful development of ARM over the past 21 years and has made an immense contribution in a wide range of positions."

Thanks to Mr. Brown and others' hard work, ARM chips are now the world's most used CPUs.  While not on PCs yet, their multitude of embedded and mobile applications mean they dominate just about every type of processor space besides the traditional PC.

The report quotes Mr. Brown as saying that he is "very proud to have been so closely involved in building ARM to be the highly successful and respected company that it is today."

It adds that he says ARM is in a "very strong position and I look forward to watching it grow further in the future."

ARM has enjoyed steady leadership at the CEO position, with Warren East serving the role for the past decade.

Source: WSJ

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