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Intel Is Taking Mobileye Unit Public
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Intel Is Taking Mobileye Unit Public

The Wall Street Journal reported on December 7 that Intel Corporation (INTC) is planning to take its self-driving car unit Mobileye public by the middle of the next year, and Intel’s stock jumped 8% when the news was released.

Mobileye’s IPO aims to raise the company’s profile in the automotive industry and gain new customers. Mobileye has grown faster than Intel since its acquisition in 2017, however, the business has been overlooked as one of Intel’s subsidiaries.

Intel will keep a majority share in Mobileye following the IPO and collect most of the proceeds from the IPO. I am neutral on the stock. (See Analysts’ Top Stocks on TipRanks)

Strategic Move to Unlock Value

Mobileye is an Israel-based supplier of self-driving cars and advanced driver-assistance systems. Mobileye was the first company to put cameras in cars, helping to develop features such as adaptive cruise control and lane-keeping assistance for self-driving cars.

Mobileye, which was founded in 1999, is one of the most successful businesses in the autonomous vehicle market and leading vehicle manufacturers including BMW, Audi, Volkswagen AG (VWAGY), Nissan Motor Co. (NSANY), Honda Motor Co. (HMC), and General Motors Company (GM) are some of its top customers.

Ford Motor Company (F) and Mobileye announced a partnership in July 2020 to provide Ford with next-generation advanced driving and safety features, which include increased camera-based detection capabilities for driver-assist systems.

As part of the agreement, Mobileye will provide its EyeQ sensing technology to support Ford Co-Pilot360 Technology driver-assist features like pre-collision assist with automatic emergency braking, and vehicle, pedestrian, and cyclist identification.

Tesla (TSLA) was also a notable customer of Mobileye until July 2016, when the partnership ended following a deadly accident in May 2016, in which Tesla criticized Mobileye’s technology for the collision. Now, Tesla is one of the primary competitors of Mobileye.

The company also announced a partnership with Zeekr, a Chinese EV company owned by Geely Automobile Holdings Limited (GELYF), on August 27. Under this partnership, Mobileye will develop enhanced ADAS systems including Mobileye SuperVision, powered by two EyeQ5 system-on-chip devices processing data from 11 cameras for ZEEKR models.

The two companies also intend to work together on a next-generation system that will be powered by six EyeQ5 SoCs which is scheduled to make its global debut in 2023.

Intel, one of the leading chip manufacturers in the world, acquired Mobileye in 2017 for $15.3 billion to expand its business into self-driving technology. Other investments by Intel in the automotive area include the $900 million acquisition of Moovit, a mobility-as-a-service solutions company.

The IPO of Mobileye is Intel’s attempt to expand into new markets, and to develop chip facilities with the money raised from the IPO. Intel revealed its IDM 2.0 plan earlier this year, with investment in Intel’s worldwide factory network for at-scale manufacturing being a crucial component of the new approach.

The company aims to invest $44 billion to build in Arizona, New Mexico, Oregon, Costa Rica, Israel, and Ireland. The company is likely to deploy the funds raised through Mobileye’s IPO to fund these projects.

Wall Street’s Take

Based on the ratings of 23 Wall Street analysts offering 12-month price targets for Intel Corporation stock, the average price target comes to $53.80, which implies upside of 6.6% from the current market price.

Many analysts are yet to account for Mobileye’s IPO, which should result in a boost to their price targets.

Takeaway

Patrick Gelsinger joined Intel as its new CEO last February, and since then, the company has unveiled many new initiatives to regain its dominance in the semiconductor industry.

One of these decisions is to take the Mobileye business public as a separate business, which seems a good strategic move to unlock hidden value for Intel shareholders.

Intel still has a long way to go to catch up with its closest rivals such as Advanced Micro Devices (AMD), but the company seems to be moving in the right direction to close the gap.

Disclosure: At the time of publication, Dilantha De Silva did not own any shares mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates  Read full disclaimer >

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