Mobileye Purchase Is A Critical Step In Intel's Transformation Beyond Just A PC Company

Betsy Van Hees of Loop Capital says Intel Corporation INTC’s deal to buy Mobileye NV MBLY is a critical step in the transformation of the chip maker beyond being just a PC company.

Intel agreed to buy Israel-based Mobileye for about $15.3 billion, as part of its move to expand in the fast-growing market for fully autonomous vehicles.

Van Hees, who reiterated Buy rating and $42 price target on Intel, noted that the deal puts Intel in a leading position in an end market that is more predictable and steady with considerable long-term growth opportunities.

“We weren't surprised by the pending acquisition given INTC’s already strong partnership with MBLY and view it as a considerable positive as this leap frogs INTC’s position within the nascent autonomous car market and opens INTC up to $70B system, data, and services TAM by 2030,” Van Hees wrote in a note.

From the deal, Intel gets a strong base business with deep design-win pipeline and enhanced MSS and revenue opportunities through superior AD platforms. Intel also sees considerable recurring revenue streams in mapping and data services and expects to achieve cost synergies rising to $175 million per year by 2019.

Lessons Learned From Past

The combined global autonomous driving organization, which will consist of Mobileye and Intel's Automated Driving Group, will be headquartered in Israel and led by Prof. Amnon Shashua, Mobileye's Co-Founder, Chairman and CTO.

Van Hees says Intel might have learned some lessons from the unsuccessful track record with its prior acquisitions and may have opted for the reverse integration.

Shares of Intel closed Monday at $35.16, while Mobileye ended at $60.62.

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