Why Intel Corporation (NASDAQ: INTC) is investing in self-driving Car business

Intel Corporation (NASDAQ: INTC) has agreed to buy Israeli car-camera pioneer Mobileye NV for $15.3 billion. The deal for Mobileye is the second largest in INTC’s 48-year history, after its $16.7 billion acquisition of Altera Corp. in 2015, and its size reflects the INTC’s strong desire to stake out a significant position in the market after the chip maker largely missed out on the smartphone boom. Further, the acquisition of programmable chipmaker Altera has so far failed to meet its objective of helping to offset the continued decline in INTC’s larger PC business. After this news, Intel stock fell over 2.1% on March 13th, 2017 while the Mobileye stock surged over 28.2% on March 13th, 2017 (Source: Google finance).

INTC has also spun out its cyber security division, formerly known as McAfee, last year in a deal valuing it at $4.2 billion, that includes the debt, about five years after having bought the antivirus software maker for $7.7 billion. The analysts have viewed that Intel has spent over $30 billion in the last few years, while only adding about $2 to $3 billion in revenue. Therefore, it considered that Mobileye deal is uniquely structured to combat further mistakes. INTC’s Automated Driving Group (ADG) will combine with Mobileye.

Mobileye was in the limelight last year after it said it would not renew its contract with Tesla after a fatal crash in a Model S soured their relationship, though Mobileye was the component behind Tesla’s successful and lauded Autopilot 1. Amid safety concerns about Tesla’s Autopilot technology, the two companies got engaged in public finger-pointing. At the time, Mobileye insisted that it had more going for other corporates than its relationship with Tesla.

INTC has estimated that the market for autonomous-driving systems, services and data will reach $70 billion by 2030. That included the navigation, in-car communications and advertising and keeping a car’s perception and decision-making capabilities finely tuned to avoid mishaps as road conditions change. Mobileye’s technology provides functions such as automatically keeping a car in its lane and includes 36-degree vision and mapping, as well as integrates various sensor elements such as cameras, radar, sonar and the laser-sensing technology known as LiDAR. The company’s chips are already installed in more than 300 car models. In addition, Intel and Mobileye are no strangers to each other’s technology as last summer, they had announced a partnership with BMW to create an open platform for self-driving cars.

INTC stock has risen 10.71% in the last one year (source: Google Finance). According to tipranks.com, 28 analysts has covered the stock while recommending a “Moderate Buy”. INTC has an average price target of $41.50, which is a further upside of 18.03%.

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