One of the most well-known U.S. chipmakers, Intel (NASDAQ: INTC), is taking a whole different angle for the future of its business… it’s making the leap towards the autonomous-driving market.
Intel will be buying Israeli autonomous-driving company Mobileye (NYSE: MBLY) for about $15.3 billion — or $63.54 per share.
This acquisition is one of the biggest tech acquisitions in history. A lot of analysts are beyond shocked over the valuation, mainly because Mobileye only generated $358.2 million in revenue in 2016.
Intel missed the smartphone boom… and it doesn’t want to be left behind again. Right now is the perfect time to become indispensable in the world of driverless cars.
Everyone Wants In
The automotive and technology industries are coming on very strong when it comes to self-driving cars. Companies like Alphabet, Inc., Uber Technologies, Inc., and Tesla, Inc. have been investing time, energy, and money into autonomous driving technology.
An analyst at Loop Capital Markets, Betsy Van Hees, said:
It’s an area where (Intel) has had very little presence — the automotive market, and so this is a tremendous opportunity for them to get into a market that has significant growth opportunities… Mobileye’s technology is very critical… The price seems fair…
Intel Chief Executive Brian Krzanich said this about the acquisition:
[The deal] merges the intelligent eyes of the autonomous car with the intelligent brain that actually drives the car.
What Does Mobileye Have to Offer?
Mobileye supplies cameras, software, and chips for driver-assist systems that are already being used in cars today. The company is 70% of the global market for driver-assistance and anti-collision systems.
Mobileye was an early supplier of vision systems to Tesla. However, it ended up parting ways last summer when the driver of a Tesla Model S was killed while operating the vehicle while using Tesla’s autopilot system. Mobileye has experience with automakers and self-driving technology.
Not to mention that Mobileye and Intel are already working together with the German automaker BMW on a project that will put 40 self-driving test 7-Series sedans on the road by the second half of this year.
Additionally, they’ve also teamed up to create Intel’s fifth generation of chips, which will be used inside fully autonomous vehicles scheduled for delivery in 2021.
With Mobileye, Intel will be able to offer automakers a broader “package” deal because it will be selling them all of the components that are necessary to make vehicles autonomous.
Intel predicts that the market for vehicle systems and the required data and services will be worth $70 billion by 2030.
Mobileye’s Co-Founder, President, and CEO said:
We expect the growth towards autonomous driving to be transformative. It will provide consumers with safer, more flexible, and less costly transportation options…
By pooling together our infrastructure and resources, we can enhance and accelerate our combined know-how in the areas of mapping, virtual driving, simulators, development tool chains, hardware, data centers and high-performance computing platforms.
After the announcement, Mobileye saw its stock soar 28.24% to $60.62 a share, while Intel was down by 2.09% to close at $35.16 a share on Monday, March 13.
The announcement was especially great news for Mobileye’s shareholders, since Intel’s purchase price of $63.54 is up significantly from the closing price of $47.21 on Friday, March 10.
Intel’s shareholders really felt the shock over the $15.3 billion price of Mobileye and were probably a little confused about why it was such a huge price tag…
On the other hand, that price could be more than worth it, since Mobileye has the ability to take Intel to the next level with autonomous driving.
And while it’s still unclear how the industry will progress, it’s obvious that the next five years will be crucial to development of the technology and market.
And this acquisition has the potential to put Intel ahead of major chip companies that are also infiltrating the autonomous car space… companies like Qualcomm (NASDAQ: QCOM) and Nvidia Corp. (NASDAQ: NVDA).
Until next time,
Jennifer Clark
Pro Trader Today