Chip giant Intel Corp.’s hefty price for automotive-vision-tech company Mobileye could lead to some higher valuations of the growing batch of startups and private companies in the still-nascent self-driving-car space.
On Monday, Intel
said it was buying Mobileye N.V.
for a whopping $15.3 billion in cash, in a deal aimed at giving it a major partner and technology to offer an end-to-end system for self-driving cars. The deal is quite frothy, valuing Mobileye at a 34% premium on its Friday closing price. Intel is also paying about 30 times Mobileye’s projected revenue over the next 12 months, noted Stacy Rasgon, a Bernstein Research analyst.
So far the deal is the biggest one yet in an arena that is heating up with a lot of hope and hype for a technology still in development. Much of the technology in the deal, such as Mobileye’s advanced vision systems, are in use in the advanced driver assistance systems (ADAS) of newer cars today. In 2016, Mobileye reported $358.2 million in total revenue, up 48.7% year-over-year.
It is worth noting, though, that Intel probably has more incentive to pay such a high premium for Mobileye, as it hopes to avoid repeating the mistakes it made in the mobile market, where chips based on rival ARM Holdings Plc. designs became the standard for smartphones and tablets. So far, its main rival in the core chip technology for self-driving cars is Nvidia Corp.
Intel Buys Self-Driving Tech Firm Mobileye for $15 Billion
Intel has struck deal to acquire Mobileye for about $15.3 billion, the latest technology company to invest in the expanding autonomous cars business. WSJ’s Lee Hawkins explains. Photo: Reuters
“This is really what customers are looking for, single points that bring together all of these hardware and software technologies from top to bottom that really allows you to build a system,” Intel Chief Executive Brian Krzanich told analysts on a call. He added that autonomous cars should be seen as becoming more like a system-level component. “We like to talk about it is a server, a rack scale system on wheels,” he said. Self-driving cars are a key market for Intel because of the enormous computing power they require, accessing hordes of stored data learned in test drives, and also dealing with new conditions the car’s system sees while processing 3D maps created in real-time.
Nvidia, which is increasingly competing with Intel in the data-center and server arena, is also becoming its main foe in autonomous cars. Nvidia’s GPUs (graphics processing units) have been adopted by Google’s
Waymo unit and by Tesla Inc.
for their cars’ self-driving or autonomous-vehicle functions. While Google’s self-driving car business is the furthest ahead, fully autonomous cars are still seen as many years away.
IHS Markit forecasts as many as 21 million autonomous vehicles will be sold in the year 2035. In the interim, it predicts driver-assistance and automated-driving technologies will continue to proliferate across all vehicle segments. The total market for the core elements of self driving cars — such as the sensors, sensor-fusion technology and front-view cameras — should reach $10 billion by 2022, up from $2 billion today, according to Akhilesh Kona, a senior analyst at IHS Markit.
Still, the hefty price Intel is paying for one company could affect the prices of future deals in an already hot but still unproven market. “Auto tech is already a hot commodity in private markets after the blockbuster exits that have already happened to date, like GM-Cruise, Uber-Otto, Ford-Argo and so on,” said Kerry Wu, a senior analyst at CB Insights in New York. He said those deals, plus the general hype surrounding the arena of self-driving cars has vaulted companies like autonomous-driving startup Zoox and Quanergy, a Lidar sensor and device maker, into the unicorn club of startups valued at $1 billion or more.
He said it would not be surprising to see more startups pitching themselves to players outside of the core auto makers. “Startups looking to supply some of this next-generation auto hardware (e.g. sensing and computer vision equipment) may actually be a more natural fit for a supplier,” he added. That could include a variety of companies, like sensor makers, software companies and others.
Intel plans to use the bulk of its overseas cash pile to buy Mobileye, which is based in Jerusalem. Investors are hoping that this deal fares better than some of its other acquisitions in the past, and that with Mobileye, it has everything it needs for a complete driverless-car system. Otherwise, if it has any more shopping to do, it may have a tough time getting any good deals.
Intel shares were flat premarket Tuesday, but have gained 12% in the last 12 months, while the S&P 500
has gained 17.5%.