Intel to wheel out Mobileye IPO next year

Intel's share price jumped on pre-market trading by as much as 8.45% after news broke that it plans to list Israel-based Mobileye sometime next year.

The US chip giant bought the self-driving car business for $15.3 billion in 2017. It's proven to be a shrewd investment.

"Since that time, the company's revenues have trebled, and it has cemented an 80% market share in machine vision systems for advanced driving assisted systems [ADAS]," Richard Windsor, an analyst at Radio Free Mobile, said in a research note.

During Q3 FY21, Mobileye revenue was up 39% year-on-year, to $326 million. Operating income more than doubled to $105 million over the same period.

"Intel's acquisition of Mobileye has been a great success," said Intel CEO Pat Gelsinger, not without some justification.

"[It] has achieved record revenue year-over-year with 2021 gains expected to be more than 40% higher than 2020."

Market expectations, as reported by various news outlets, are that an IPO may well value Mobileye at $50 billion. The listed company will include Intel's recently acquired Moovit, as well as Intel teams working on lidar and radar development and other Mobileye projects.

"In the face of nonsensical valuations for the EV [electric vehicle] sector, and Mobileye no longer being a core part of Intel, it makes complete sense to relist the company," added Windsor.

Intel said it will be majority owner of Mobileye post-IPO and retain Amnon Shashua as CEO.

"The two companies will continue as strategic partners, collaborating on projects as they pursue the growth of computing in the automotive sector," added the official statement.

Intel pointedly noted that the share of semiconductors is expected to be 20% of a premium vehicle's total bill-of-materials by 2030.

More money for fabs

Back in March, with Gelsinger barely a few weeks in charge, Intel said it planned to spend roughly $20 billion on building two new chipmaking factories in Arizona. The plants are scheduled to come online in 2024, which, as Windsor puts it, are part of Intel's "quest to reclaim its semiconductor crown."

Money raised from the IPO should go a long way in helping to fund the fabs.

"The one mistake that Intel is making is that it intends to maintain a majority holding in the company," reckoned Windsor.

"Given that Mobileye is non-core and will almost certainly be overvalued when it lists [just like the rest of the sector], I think Intel should get rid of as much of Mobileye as it can without hurting the valuation."

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— Ken Wieland, contributing editor, special to Light Reading