Intel Is Playing Catch Up With Nvidia And Qualcomm In $15 Billion Mobileye Acquisition
Mobileye- $15B acquisition for 2016 revenue of only $358M – 2.4% rev$ / acq $ or 41.9X rev
NXP- $47B acquisition for 2016 revenue of $9,498B- 20.2% rev $/ acq $ or 4.9X rev
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+ $15 Billion Mobileye Acquisition
+ Intel's acquisition price shows how desperate the company is to not miss out on any of that action. The company is paying $63.54 per share, a 34% premium to the company's already lofting valuation price. Mobileye 2016 revenue was $358.2 million
+ "We view this deal as evidence that Intel sees current internal efforts in the space as insufficient to adequately stimulate growth, and that worries over deterioration of other core businesses are climbing," wrote Bernstein Research senior analyst Stacy Rasgon in a note.
+ With the Movidius deal, Intel immediately gets a relationship with the auto industry. Mobileye's technology, on the other hand, isn't as advanced as other systems provided by rival chipmakers Nvidia and Qualcomm, said Jim McGregor, principal analyst at Tirias Research.
+ McGregor points at that the automotive market used to be one of Intel's biggest business segments back in the 1990s, but abandoned it to focus on PCs and servers. Now Intel needs to look beyond those two markets. "Intel abandoned automotive and now they're paying through the teeth to get back into it," McGregor said
Intel Is Playing Catch Up With Nvidia And Qualcomm In $15 Billion Mobileye Acquisition
Aaron Tilley
Intel started making lots of noise about the autonomous car market last year. But it's a long slog getting into a market like automotive, where it can take years to get designed into a vehicle. On Monday, the chip giant announced it would just buy its way into the market with a $15.3 billion acquisition of Mobileye, a leading provider of advanced driver assistant systems based in Israel.
A massive consolidation spree is sweeping the semiconductor industry. Previously booming markets for chips like PCs (where Intel dominates) and smartphones aren't growing anymore. As a result, every chipmaker is scrambling to find the next big thing and buying to move into new markets. Increasingly, it looks like autonomous vehicles are where the action is at. While the number of cars people are buying isn't increasing much, the amount of technology getting packed into them is booming.
Intel's acquisition price shows how desperate the company is to not miss out on any of that action. The company is paying $63.54 per share, a 34% premium to the company's already lofting valuation price. Mobileye 2016 revenue was $358.2 million.
"We view this deal as evidence that Intel sees current internal efforts in the space as insufficient to adequately stimulate growth, and that worries over deterioration of other core businesses are climbing," wrote Bernstein Research senior analyst Stacy Rasgon in a note.
Intel's core business in the PC is deteriorating and its market dominance in the data center is finally coming under pressure. It's having to spend more and more capital to plan for what's coming next.
Besides Mobileye, Intel has made a flurry of other pricey acquisitions recently related future areas of computing: Movidius for computer vision in low-power devices like drones, Nervana for deep learning systems, Altera for accelerated deep learning applications.
There appears to be quite a bit of overlap with these acquisitions. For example, it was discussed that Movidius, the maker of a low-power chip for computer vision, was potentially going to be integrated into Intel's future autonomous vehicle systems. Does that mean some of Movidius and Mobileye efforts will be combined, or will Intel simply cut Movidius out of that market? It's not clear how all these companies and products will coexist within Intel.
Intel certainly isn't the first chipmaker to pay such an outsized price to get into the automative market. Last year, mobile chipmaker Qualcomm announced it was acquiring NXP in a $47 billion deal. Qualcomm had been trying to adapt its mobile chipsets for the auto market for years, and 40% of NXP's revenue comes from the automotive market. And Samsung, the second-largest chip vendor behind Intel, last year announced it would acquire Harman, an audio expert who has pushed hard into the auto market, for $8 billion.
With the Movidius deal, Intel immediately gets a relationship with the auto industry. Mobileye's technology, on the other hand, isn't as advanced as other systems provided by rival chipmakers Nvidia and Qualcomm, said Jim McGregor, principal analyst at Tirias Research.
Mobileye's system focuses on computer vision, while many autonomous vehicle experts predict multiple sensors -- including radar and Lidar -- will be needed for a comprehensive autonomous driving system. Nvidia and Qualcomm (through the NXP acquisition) have autonomous driving systems necessary for that more complete system. But while those two rival chipmakers may have the more advanced technology, it's important to note that there are no actual products out in the market with this superior technology. It's going to take a while before we start seeing these more advanced capabilities out on the road. For now, Mobileye is still the leader.
McGregor points at that the automotive market used to be one of Intel's biggest business segments back in the 1990s, but abandoned it to focus on PCs and servers. Now Intel needs to look beyond those two markets.
"Intel abandoned automotive and now they're paying through the teeth to get back into it," McGregor said.
Follow me on Twitter @aatilley or send me an email: atilley@forbes.com
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