Intel accelerates into self-driving car business with $15.3 billion deal to buy Mobileye

SAN JOSE, Calif. – Intel is accelerating into the self-driving car business with a $15.3 billion deal to buy Mobileye, in one of the biggest deals so far for the autonomous-vehicle industry and the chipmaker.

The deal improves Intel’s competitive position against other tech leaders in the driverless-car business, such as Tesla, Uber and Google parent Alphabet. It also helps Intel advance against chipmaker Qualcomm, which owns automotive chip supplier NXP Semiconductors.

Mobileye develops computer vision and machine learning, data analysis, localization and mapping for advanced driver-assistance systems and autonomous driving.

“This acquisition essentially merges the intelligent eyes of the autonomous car with the intelligent brain that actually drives the car,” Intel CEO Brian Krzanich said in a message to employees. “I truly believe we are better together.”

The Santa Clara-based chip giant said Monday that it will pay $63.54 a share in cash for the Jerusalem-based maker of camera systems for autonomous vehicles. That’s a 34 percent premium on the closing price of Mobileye shares Friday.

Intel’s shares fell about 2 percent Monday to $35.16 after the company disclosed the deal. Mobileye’s shares shot up about 28 percent to $60.62.

“The transaction is unique in the sense that instead of Mobileye being integrated into Intel, Intel’s Automated Driving Group (ADG) will be integrated into Mobileye,” Mobileye CEO Ziv Averam said in a letter to employees. He also said he and Chief Technology Officer Amnon Shashua will be “running Mobileye just as we have done in the past.”

Mobileye was in the spotlight last year after it said it would not renew its contract with Tesla after a fatal crash in a Model S soured their relationship. Amid safety concerns about Tesla’s Autopilot technology, the two companies engaged in public finger-pointing. At the time, Mobileye insisted that it had more going for it than its relationship with Tesla. Intel’s purchase appears to prove the company’s point.

Intel and Mobileye are no strangers to each other’s technology. Last summer, they announced a partnership with BMW to create an open platform for self-driving cars.

“Intel’s acquisition of Mobileye is pivotal,” said Paul Cuatrecasas, CEO of Aquaa Partners, a London-based investment banking firm that advises companies on mergers and acquisitions, in a research note. “The largest deal ever for a company in the autonomous vehicle sector, it signals a step-change for the industry.”

Other high-profile deals in autonomous-vehicle technology include General Motors’ purchase of San Francisco-based Cruise Automation for more than $1 billion last year, and Ford Motor’s $1 billion investment in Argo AI, an artificial-intelligence startup in Pittsburgh founded by former Google and Uber self-driving leaders. That investment was announced last month.

Akhilesh Kona, an analyst who covers automotive electronics and semiconductors for IHS Markit, said the Mobileye purchase is a big deal for Intel beyond just the purchase price.

“In the competitive landscape, Intel will – as a result of this deal – be a one-stop-shop, offering hardware and software solutions for infotainment and automated driving applications,” Kona said in a research note Monday. In an email to The Mercury News he pointed out that Qualcomm’s purchase of supplier NXP Semiconductors last year, a $47 billion deal, involved more than just self-driving technology.

Another analyst suggested that Intel’s Mobileye purchase is playing catch-up. NXP is the biggest supplier of automotive chips.

“Intel is so far behind in this space the only way they could catch up was via an acquisition,” Neil Campling, head of technology research at Northern Trust Securities, said, according to Bloomberg.

Intel had already invested in self-driving technology this year. In January, the company announced it bought a 15 percent stake in Here, a provider of mapping data and services that’s co-owned by German automakers Audi, BMW and Daimler. One estimate values that stake around $375 million.

Intel sees its role in the space as data-driven.

“Our strategy is to make Intel the driving force of the data revolution across every technology and every industry,” Krzanich said in his letter to employees. He also mentioned that the self-driving industry is expected to be a $70 billion market by 2030.

Intel’s biggest acquisition is of Altera, the San Jose chipmaker. It announced the $16.7 billion cash-and-stock deal in 2015.

The Mobileye acquisition is expected to close by the end of the year.