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Intel to Buy Mobileye, Maker of Sensors for Self-Driving Cars, for $15.3 Billion Intel Buys Mobileye for $15.3 Billion in Bid to Lead Autonomous Car Market
(about 5 hours later)
Intel agreed on Monday to pay $15.3 billion for Mobileye, an Israeli technology company that specializes in making sensors and cameras for autonomous cars, as the global microchip giant tries to expand its reach in the fast-growing sector. In the world of driverless cars, household names like Google and Uber have raced ahead of rivals, building test vehicles and starting trials on city streets.
The deal follows a growing partnership between Intel and Mobileye. In January, the companies announced plans to have up to 40 autonomous cars on American and European roads by the end of this year as part of trials with BMW, the German automaker. But when it comes to what is under the hood, a wide array of lesser-known companies are looking to supply the technology required to bring such driverless cars to the masses. And in a $15.3 billion deal announced on Monday, Intel made a play to corner the market on how much of that technology is developed.
Companies from the technology sector, like Google and Uber, and automakers like General Motors and Tesla have invested heavily in driverless cars. Intel is trying to keep pace to ensure that its computer chips are used in such vehicles when they eventually become commercially available, which is expected by the end of the decade at the earliest. The acquisition of Mobileye, an Israeli company that makes sensors and cameras for driverless vehicles, is one of the largest ever in the fast-growing sector and sets the stage for a growing competition between Silicon Valley giants as well as traditional automakers over who will dominate the world of autonomous cars.
As part of the deal, Intel said it would buy Mobileye’s outstanding shares at $63.54 a share, a 34 percent premium to Mobileye’s closing price on Friday. The likes of Google and Uber already have invested billions of dollars in their own technology, signing partnerships with automakers like Chrysler and Volvo and sending test vehicles onto the road in a bid to cement their place in the industry, which is estimated to be worth $25 billion annually by 2025, according to Bain & Company, the consultancy firm.
“This acquisition is a great step forward for our shareholders, the automotive industry and consumers,” Brian Krzanich, Intel’s chief executive, said in a statement. “Together, we can accelerate the future of autonomous driving.” But by acquiring Mobileye, whose digital vision technology allows autonomous vehicles to safely navigate city streets, Intel aims to provide a complete package of digital services, looking to supply to automakers that want to offer autonomous driving, but which do not want to rely on the likes of Google for such services.
Intel’s deal for Mobileye seems to be a recognition that chip-making rivals like Nvidia and Qualcomm have moved slightly ahead in the race to provide the computing power needed for autonomous cars. “Scale is going to win in this market,” Brian Krzanich, Intel’s chief executive, told investors on Monday. “I don’t believe that every carmaker can invest to do independent development into autonomous cars.”
Last year, Intel said it would invest $250 million in start-ups working on driverless car technologies, and it signed deals with BMW and Delphi Automotive, an auto parts supplier, to expand its presence in the field. Intel has a history with such strategic moves. It cornered the personal computer market, supplying hundreds of millions of desktop computers with much of their internal architecture, after dominating which microchips were used in the industry. But in recent years, Intel has struggled to find its feet as people’s habits have increasingly turned to the mobile world, where the company’s chips have lost out to rivals.
Announcing the Mobileye deal, which would be one of the largest ever acquisitions of an Israeli tech company, Intel said it would continue investing in the autonomous-driving industry, a sector that it said would be worth about $70 billion by 2030. Last year, for instance, the company announced that it was laying off 12,000 people, or 11 percent of its global work force, as demand for personal computers continued to decline worldwide.
Intel added that it would combine its automated-driving division with Mobileye’s operations, with the aim of helping automakers and suppliers bring driverless vehicles to the market. Mobileye already provides the vision systems used in some of the autonomous-driving systems made by Tesla, though that relationship is expected to end in the near future. Faced with this existential threat to its legacy computer business, Intel — alongside competitors like Qualcomm — has focused on autonomous cars as a new and potentially lucrative market. Many of these driverless vehicles, experts say, will require immense computing power, including the latest microchips able to crunch reams of data in seconds to keep them on the road and safe.
“By pooling together our infrastructure and resources, we can enhance and accelerate our combined know-how,” Ziv Aviram, Mobileye’s chief executive, said in a statement. Over the last 18 months, Intel has signed partnership deals with BMW and Delphi Automotive, an auto parts supplier, to expand its presence in the field. It acquired a 15 percent stake in Here, a digital mapping business owned by a consortium of German automakers, and announced last year that it would invest $250 million in start-ups working on driverless car technologies.
Experts say that autonomous cars are unlikely to hit the roads in the short term because regulators are beginning to question which rules such vehicles should follow and because companies are struggling to make the technology work seamlessly. Intel also has longstanding ties with Mobileye. The Israeli company, founded in Jerusalem in 1999, has signed deals with several automakers, including Audi, for the use of its vision and camera technology, which utilizes machine-learning and complex neuroscience to help drivers — and increasingly cars themselves — avoid obstacles on the road.
Uber, the ride-booking service, halted its driverless car tests in California after local officials said the company did not have required permits. In Europe, regulators are divided on the issue of self-driving cars, causing the automotive industry to complain that the delays could hamper plans to take the technology to the Continent’s streets. The chip maker was a partner with Mobileye and BMW last year over efforts to bring autonomous cars to city streets by 2021. In January, the companies announced plans to have up to 40 autonomous cars on American and European roads by the end of this year as part of initial trials.
Intel’s acquisition of Mobileye is expected to close by the end of 2017. The deal has the approval of both companies’ boards but requires shareholder and regulatory approval. As that collaboration grew, Intel and Mobileye executives began talking about a potential takeover at the end of December, holding meetings, mostly in New York, to finalize a deal that will see Mobileye’s executives take the lead in Intel’s new expanded efforts.
Citigroup and Rothschild acted as financial advisers to Intel. Raymond James & Associates advised Mobileye. “This deal makes Intel a tier one partner for the automotive industry,” said Martin Birkner, an automotive analyst at Gartner, the technology research company, in Munich. “As the industry moves towards autonomous driving, new types of digital suppliers like Intel are developing quickly.”
Intel’s efforts to stamp a claim on driverless cars represents a recognition that chip-making rivals like Nvidia and Qualcomm had moved slightly ahead in the race to provide the computing power needed for autonomous vehicles.
As part of the deal, Intel said it would buy Mobileye’s outstanding shares at $63.54 a share, a 34 percent premium to Mobileye’s closing price on Friday. The acquisition requires shareholder and regulatory approval, and is expected to close by the end of 2017.
Much of Intel’s success will depend on Amnon Shashua, Mobileye’s co-founder and current chief technology officer, who earned his doctorate in brain and cognitive sciences at the Massachusetts Institute of Technology.
Part of Mr. Shashua’s plan is to have cars with Mobileye’s advanced driver assist systems collect imaging and location data that can be used to create what the company calls RoadBook — a vast digital map of roadways in the United States and Europe.
The goal, according to Mr. Shashua, is to provide carmakers with a complete product line of digital services that go beyond what they can do for themselves.
“The collaboration that we want to do can’t happen if we are two different organizations,” Mr. Shashua said on Monday. “The collaboration already runs deep.”
Despite Intel’s high hopes for autonomous cars, experts say that such vehicles are unlikely to hit the roads by the end of the decade, at the earliest, because regulators are beginning to question which rules such cars should follow and because companies are struggling to make the technology work seamlessly.
Uber, the ride-booking service, halted its driverless car tests in California after local officials said the company did not have the required permits. Google’s own efforts have run into difficulties after the company’s driverless cars were involved in a spate of collisions.
And in Europe, regulators are divided on the issue of self-driving cars, causing the automotive industry to complain that the delays could hamper plans to take the technology to the Continent’s streets.
Still, with technology companies and global automakers already making hefty — and costly — bets on autonomous cars, experts that say more deals like Intel’s acquisition of Mobileye are likely to follow as firms jostle for position.
More acquisitions, said Mr. Birkner of Gartner, “are an absolute necessity.”
“Carmakers and Silicon Valley companies are realizing that they both bring different skills to the table,” he added.