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Intel Buying Mobileye for $15 Billion

Scott Ferguson
3/13/2017
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Intel is making a $15 billion bet on the autonomous vehicle market with a deal to acquire Israel-based Mobileye, which has spent the last two decades developing software and silicon technologies for self-driving cars, including machine learning, data analytics and mapping.

The deal, which the two companies announced March 13, is a significant and risky bet for Intel, which has moved away from its traditional role as a supplier of x86 processors for PCs, to a company focused on cloud computing, data center, Internet of Things, artificial intelligence and, now, autonomous vehicles. (See Intel to Buy a 15% Stake in HERE.)

Intel will pay $15.3 billion in cash for Mobileye, which equates to $63.54 per share for the company. That is about a 33% premium over Mobileye's stock price at the close of business on Friday, March 10.

In a statement announcing the deal, Intel claims that the market for various vehicle systems could be worth about $70 billion by the year 2030, and the deal with Mobileye puts the chip maker in competition with new-era car companies such as Tesla, as well as old rival such as Qualcomm, which recently acquired chip maker NXP. (See Qualcomm Makes $39B Bet on NXP.)

In a call announcing the deal on Monday, Intel CEO Brian Krzanich told financial analysts that the two companies would function separately for nine months until regulators sign off on the acquisition. After that time, Krzanich said the two companies would work side by side to develop a range of technologies for connected cars, including precision mapping, analytics and AI to make these vehicles safer and more responsive.

(Source: Intel)
(Source: Intel)

"We want to bring all these technologies together in one package," said Krzanich. "We want to accelerate innovation, as well as edge-to-edge solutions. We believe this deal can lower costs, and offer faster time to market."

Mobileye has a history of working with Intel. In August, the two companies, along with BMW, signed an agreement to develop technology for autonomous vehicles and self-driving cars. Mobileye also has deals with other car companies including Audi. (See BMW, Intel, Mobileye Team on Driverless Cars .)

The company has also had its share of controversy, and Mobileye dissolved its partnership with Tesla in 2016, following a fatal crash involving self-driving technology used in Tesla's car called Autopilot.

On Monday's call, Amnon Shashua, a co-founder of Mobileye and its current CTO, said that his company would work with Intel to take advantage of the chip maker's capabilities in the data center, and through that relationship develop better middleware and software for the autonomous car market. When the deal is done, Shashua will lead Intel's new driving division from Israel, reporting directly to Krzanich.

At the same time, Intel gains access to Mobileye's EyeQ system-on-a-chip (SoC) technology, which helps collect the data from a variety of sensors and cameras installed in the vehicle. The collection of all this data is the key to the deal, as Intel's Krzanich explained to employees on Monday.

"Many of you have asked why we think autonomous cars and vehicles are so important to Intel's future. The answer is DATA," Krzanich said in a statement. "Our strategy is to make Intel the driving force of the data revolution across every technology and every industry. We are a data company. The businesses we focus on, and deliver solutions to, create, use and analyze massive amounts of data."

— Scott Ferguson, Editor, Enterprise Cloud. Follow him on Twitter @sferguson_LR.


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James_B_Crawshaw
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James_B_Crawshaw,
User Rank: Blogger
3/14/2017 | 5:41:01 AM
Re: Not a bad bad acquisition
One deal that comes to mind is Intel's purchase of Infineon's mobile chip business. Shortly after that closed Apple stopped using the Infineon chips in its iPhone. Design cycles are a bit longer in automotive than smartphones so it may not be till 2025 before Mobileye gets designed out. However, I don't think that is enough time to breakeven on the $15bn investment. Consensus estimates were for Mobileye to reach $1.8bn of revenue by 2021, up from $358m last year. 
brooks7
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brooks7,
User Rank: Light Sabre
3/13/2017 | 9:15:15 PM
Re: Not a bad bad acquisition
"Considering Intel's track record, this is not a bad buy"

 

I would argue that Intel's purchases have been horrific in general.

seven

 
bosco_pcs
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bosco_pcs,
User Rank: Light Sabre
3/13/2017 | 5:52:33 PM
Re: Not a bad bad acquisition
Scott, you brought up an interesting point. IMHO, data ownership is a huge can of worms. I mean, why should car manufacturers own the data? It depends on whether you are Google or Apple, to say the least. Remember, we sell our soul to the devil by getting a free gmail account but Apple respects your privacy after selling that gorgeous iPhone. So, what is the car business model in the future. Perhaps another schism between the Uber type, the leased GPS tracking type and I-pay-cash-for-that-car type.

Then there is the environmental data the car collects. Who are going to get a piece of action when the car is hooked up with Waze or other navigation systems? 

The capitalists will have to duke it out with the creative common type.

It will be a free-for all :)
Scott_Ferguson
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Scott_Ferguson,
User Rank: Light Beer
3/13/2017 | 4:59:02 PM
Re: Not a bad bad acquisition
@bosco_pcs: I think you have it right there. I would also say Intel is behind the car companies themselves in trying to develop this. Those companies do own the data, so it's a matter of trying to wedge its way in. This is a very big bet on CEO Brian Krzanich's strategy to shift the company away from just chips. We'll see if it works.

 
Scott_Ferguson
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Scott_Ferguson,
User Rank: Light Beer
3/13/2017 | 4:56:31 PM
Re: Intel Inside
Dude, you are getting an autonomous car. Wait, wrong company...

 
bosco_pcs
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bosco_pcs,
User Rank: Light Sabre
3/13/2017 | 3:52:01 PM
Not a bad bad acquisition
Considering Intel's track record, this is not a bad buy and its intention to leave Mobileye to operate as an independent subsidiary, a deviation from past practice, may redeem its pricy outlay. To be clear, this is no bargain but it is a price to pay for Intel is late - as usual - to the game. It is even behind Apple in the auto car effort. However, the real problem with Intel is its inability to monetize its acquisitions, especially those outside of its core conpetency. So CEO is addressing the issue. 

This is not just about autominous car, not even just data center, unless IoT is included. It is a big piece of the connected world
msilbey
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msilbey,
User Rank: Blogger
3/13/2017 | 2:46:03 PM
Intel Inside
So, I should expect my future electric vehicle to power up with that distintive "ding-ding-ding-ding" Intel jingle? 
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