The Move is the Second Largest Acquisition in Intel Corp’s History and the Largest Purchase of a Company Solely Focused on the Self-Driving Vehicle Sector
California-based multinational corporation and technology company, Intel Corp announced that it will make a major step towards a driverless future by acquiring Jerusalem-based Mobileye NV for roughly $15.3 billion.
Mobileye is known for its chip-based camera systems behind the semi-automated driving features already integrated into today’s vehicles. The company is endeavoring to use such technology in the center of self-driving cars of the future.
The acquisition of Mobileye marks Intel Corp.’s second-biggest acquisition in history— second only to Altera Corp. in 2015 for $16.7 billion. For the Israeli tech scene, the acquisition is the largest technology deal to date.
Chief Executive Officer Brian Krzanich believes this latest deal will immediately add to Intel’s adjusted earnings and cash flow.
Despite this, the deal most likely won’t contribute to Intel Corp.’s revenue— Intel reported sales of $59 billion in 2016 versus Mobileye’s cool $358 million.
The companies are no strangers either. Intel, Mobileye, and BMW AG, have a partnership that aims to put 40 self-driving cars—in test mode—on roads.
Intel CEO Brian Krzanich (from left), Mobileye co-founder Amnon Shashua and Klaus Fröhlich of BMW Group discuss a BMW prototype at the BMW Group news conference. The BMW Group, Intel, and Mobileye announced that a fleet of about 40 autonomous test vehicles will be tested on the roads by the second half of 2017. The event was a lead-in to CES 2017. (CREDIT: Walden Kirsch/Intel Corporation)
Advanced Driver Assistance
Mobileye’s Advanced Driver Assistance Systems identifies vehicles, cyclists, and pedestrians in the vehicle’s path and alerts drivers of potential dangers.
The official website says, “It can even detect lane markings and speed limit signs. All of these capabilities work in concert to provide an Advanced Driver Assistance System that is undistracted, never fatigued, and 99 percent accurate.”
The all-in-one system is an advanced aftermarket product that proactively warns drivers of imminent collisions and monitors lane departures, safe following times, and speed. The company reports that fleets using Mobileye have not only seen major collision reductions, but also a reduction of up to 15 percent in fuel consumption thanks to improved driving.
Intel’s Strategy
The tech titan is positioning itself where many chip companies foresee more huge opportunities ahead, self-driving cars and their generated data.
Intel Corp. not only gains the ability to offer automakers a larger offering complete with every component automakers require for self-driving vehicles. Intel Corp. estimates that the market for these vehicle systems, data, and services will be valued at up to $70 billion by the year 2030.
Gartner Analyst Mike Ramsey told Bloomberg, “They’re paying a huge premium in order to catch up, to get into the front of the line, rather than attempt to build from scratch.”
In a letter to his employees, Krzanich wrote that the deal “merges the intelligent eyes of the autonomous car with the intelligent brain that actually drives the car.”
“The saying ‘what’s under the hood’ will increasingly refer to computing, not horsepower.”
The plan is for Intel Corp. to integrate its automated driving group with Mobileye’s operations with oversight from Mobileye Chairman Amnon Shashua.
Shashua is also the Co-Founder, Chief Technology Officer, and Chairman of Israel’s OrCam, which launched an assistive product for the visually impaired based on advanced computerized visual interpretation capabilities.
Intel announced it would buy a 15 percent stake in digital mapmaker Here International B.V., to join other core shareholders—BMW, Daimler AG, and Volkswagen AG’s Audi unit—in their effort to develop autonomous vehicle navigation technology.
Both companies proclaimed that the acquisition gives Intel closer relationships to suppliers and car makers.
The New Normal
While the historic deal will surely make massive waves for the two companies, this marks an ongoing spike in the development of autonomous technology. Intel joins the likes of Alphabet Inc., Uber Technologies Inc., and Tesla Inc. in the race to a self-driving future.
- General Motors Co. spent $1 billion in acquiring Cruise Automation in 2016 to boost their self-driving program.
- Uber bought self-driving truck maker Otto for $680 million in August.
- Google’s parent Alphabet sued Uber for allegedly stealing trade secrets related to that deal.
- Samsung Electronics Co. completed its $8 billion deal to buy Harman International Industries Inc. in its own move into the automotive space.
Other Key Highlights
This deal brings together Mobileye’s leading computer vision expertise with Intel’s high-performance computing and connectivity expertise to create automated driving solutions from cloud to car. Intel Corp. added that this “positions Intel to accelerate innovation for automakers and to capture fast-growing market opportunity, estimated to be up to $70 billion by 2030.”
Mobileye is currently valued at $63.54 a share—a 34 percent premium to last week’s closing price.
