Daily Management Review

Driver-less Car Sector Shaken Up By Intel's $15 Billion Purchase Of Mobileye


03/14/2017




Driver-less Car Sector Shaken Up By Intel's $15 Billion Purchase Of Mobileye
In a deal that could thrust the U.S. chipmaker into direct competition with rivals Nvidia Corp and Qualcomm Inc to develop driver-less systems for global automakers, Intel Corp agreed to buy Israeli autonomous vehicle technology firm Mobileye for $15.3 billion.
 
At a time when Intel has been reaching for market beyond its core computer semiconductor business, the pricey acquisition of Mobileye could propel the world's largest computer chipmaker into the front ranks of automotive suppliers.
 
It could fuel already-overheated valuations of self-driving start-ups and also promises to escalate the arms race among the world's carmakers and suppliers to acquire autonomous vehicle technology.
 
There are enormous stakes involved. From about $3 billion in 2015 to $96 billion in 2025 and $290 billion in 2035 would be the growth for the market for advanced driver assistance systems and autonomous vehicles, projected Goldman Sachs last year.
 
As several have promised, questions about whether auto companies and suppliers will be able to deploy fully self-driving cars safely in the next four years have been raised by sceptics. With regards to the potential synergies between Intel and Mobileye, as well as the acquisition's price concerns were raised by investment analysts.
 
Although it has invested in at least half a dozen start-up companies developing different components for self-driving systems, from robotics to sensors, Intel has not been a significant player in the sector.
 
Cloud software, data fusion and management, cameras, sensor chips, in-car networking, roadway mapping, machine learning are among the portfolio that Mobileye brings with it.
 
"This is a tremendous opportunity for them to get into a market that has significant growth opportunities," said Betsy Van Hees, an analyst at Loop Capital Markets. "Mobileye's technology is very critical... The price seems fair," she added.
 
Still Intel's acquisition of Mobileye indicates a strategic move "very far outside its core business franchise," wrote the industry newsletter Semiconductor Advisors.
 
B. Riley analyst Craig Ellis said that a price of more than six times more expensive than the semiconductor industry's three-year deal average was noted by the price which is about 21 times expected 2017 revenue. While leaving Nvidia the leader on the highest end, the "very expensive transaction" improved Intel's position in the automated driver assistance market, he said.
 
Apart from technology companies ranging from Alphabet Inc's Waymo to Chinese Internet giant Baidu Inc. companies like mapping company Here have made the market for self-driving technology crowded.
 
With regards to capitalizing on technology outside computer chips, Intel has a mixed record. Five years after having bought McAfee for $7.7 billion, in a deal valuing it at $4.2 billion including debt, it spun out its cyber security division, formerly known as McAfee, last year.
 
Under Mobileye Chairman Amnon Shashua, who will lead the unit from Israel, integrating its own automated driving group with Mobileye's operations, Intel will give Mobileye unusual autonomy.
 
The acquisition was akin to merging the "eyes of the autonomous car with the intelligent brain that actually drives the car," said Intel Chief Executive Brian Krzanich.
 
(Source:www.reuters.com) 






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