Intel Corp has announced that it will buy Israeli vehicle technology firm Mobileye.
Intel in $15.3bn Deal To Takeover Driverless Car Technology Firm Mobileye
In a $15.3 billion deal, Intel will take over Mobileye, a move that could pit the US chipmaker in direct competition with firms such as Nvidia Corp and Quantum Inc in the business of developing driverless systems for carmakers globally.
The acquisition of the independent driverless technology company could set Intel at the top of the ranks of suppliers in the automotive industry.
Intel, the largest manufacturer of computer chips has been looking to diversify into markets beyond its main business.
Analysts say that this costly acquisition also has the potential to fuel the heat among self-driving start-ups who are already demonstrating a lot of rivalry.
According to Goldman Sachs’ projections last year, the market for advanced driverless car systems would grow to $96 billion in 2025 and $290 billion in 2035.
However, some market observers continue to questions whether car companies will be able to put autonomous cars on the road safely in the next four years as has been promised by some of the companies.
Analysts have also raised concerns over the pricey acquisition of Mobileye and have questioned the synergy between the chipmaker and the driverless car technology firm.
While Intel has invested in more than six companies developing parts for autonomous vehicles, the chipmaker has not been a key player in the business.
Mobileye brings wide-ranging features including the manufacture of in car networking, machine learning systems, cameras, sensor chips and more.
According to Betsy Van Hees a Loop Capital Markets analyst, “This is a great opportunity for them to enter a market that has significant opportunities for growth.”
She added, “The technology offered by Mobileye is very important and the price seems fair.”
Industry newsletter Semiconductor Advisor wrote that by acquiring Mobileye, Intel was making a strategic move that is far removed from its core business.
The acquisition price is about 21 times Intel’s expected revenue for 2017, which is over five times more than the overall industry’s acquisition deals over an average of three years.
Craig Ellis, an analyst at B. Riley said the acquisition was a very costly transaction but that it would boost Intel’s position in the driverless car market even though Nnvidia remains a leader in the field.
The price paid by Intel is up to 60 times Mobileye's revenues and about four times the amount a close rival, Qualcomm, is paying for NXP based in Netherlands.
In essence, the deal translated to $63.54-per-share, which was about 33 percent of Mobileye's closing price of $47 in Friday trading.