Intel Inherits Mobileye's Problems

Trip Chowdhry of Global Equities Research was likely very surprised to learn of Intel Corporation INTC's $15 billion acquisition of Mobileye NV MBLY - a company he previously referred to as a "hyper-inflated" stock that shouldn't be worth more than $10 a share.

Intel disagrees with Chowdhry's assessment and is willing to pay north of $60 per share for the Israel-based company. Nevertheless, the analyst's conviction remains unchanged and now Intel has "inherited Mobileye's problems."

Chowdhry commented in a brief report he doubts Intel has the capacity to "fix" Mobileye's issues, some of which include:

• Non-sustainable pricing power which will erode revenue and margins
• Non-durable first mover advantage
• Heightened competitive environment from Autoliv, NextChip and Continental
• Mobileye's out-dated reliance on cameras in the auto space which has moved on to Sensor Fusion

Not Intel's First Mistake

Chowdhry further noted that Intel has a history of failed acquisitions:

• In 2009 Intel acquired Windriver systems which was supposed to revolutionize the transport industry but the transaction remains a "non-event" to this day.
• In 2010 Intel acquired Mcaffee which proved to be a "total disaster" and provided zero traction in the security software segment.
• In 2014 Intel acquired Basis to enter the wearable technology market but it has failed to take off.

Bottom line, Intel is "failing" against NVIDIA Corporation NVDA in categories such as machine learning, GPUs and deep learning and the acquisition could even support multiple expansion for Nvidia.

Related Link:

Intel Corporation, Mobileye May Be Star-Crossed Lovers, But Chowdhry Calls Veronian Tragedy

Intel Under Selling Pressure After Mobileye Deal