Mobileye: a risky bet for Intel?
Intel (INTC) acquired Mobileye for $15.3 billion, which represents 42.7x its annual sales of $358 million. In 2015, Intel acquired Altera for $16.7 billion, which was less than 9x the latter’s price-to-sales ratio. Today, Altera is generating over $1.6 billion in annual revenue. But it will likely take Mobileye several years to reach this level, making it an expensive and risky acquisition for Intel.
Still, Intel is taking a very long-term perspective, from which $15.3 billion probably seems fair. Intel expects the vehicle systems, data, and services markets to present a $70-billion opportunity by 2030.
With the acquisition of Mobileye, Intel has created a new segment, ADG (Automated Driving Group), headed by one of the three Mobileye founders, Professor Amnon Shashua. The group will focus on developing cloud-to-car solutions for the automotive market segment.
Intel’s automotive partnerships
Intel is now working with Mobileye and BMW to develop an autonomous driving platform, and Fiat Chrysler Automobiles (FCA) has just joined the venture. Intel aims to start the commercial deployment of this platform by 2021.
Automotive and big data
According to Toyota’s estimates, autonomous driving will boost the volume of data exchanges between vehicles and the cloud by 10,000x to 10 exabytes per month by 2025. This will require a robust system for data collection and analysis. The consortium aims to develop new network architectures that can accommodate and facilitate a smooth transition of this big data using edge computing.
Intel has all the right ingredients
While Intel may not be able to enjoy the first wave of autonomous cars, it could still make it big in this market because it has all the right ingredients. The autonomous car market currently lacks a universal standard because everyone has different software, hardware, cloud, and computing solutions.
Intel could set a universal standard that car manufacturers can adopt. Nvidia (NVDA) currently leads the autonomous car market, but its technologies are still in the test phase and are not approved by governments for commercial deployment.
If Intel succeeds in its first test fleet of 100 self-driving cars, it could encourage other car makers to test its solutions, but all these are just rough possibilities that can be impacted positively or negatively by several factors.
Meanwhile, the Mobileye acquisition should have some positive impact on Intel’s earnings. We’ll discuss this further in the next part.