| March 13
March 13 Intel Corp has had a tough
time squeezing value out of recent mega-deals, putting some
pressure on the success of its proposed $15 billion acquisition
of Israeli car-technology firm Mobileye NV.
Self-driving cars are widely seen as the future of
transportation and a growth area, but the Intel deal depends on
more than technology as it looks to expand revenue in an
increasingly competitive nascent sector.
The company's largest-ever deal, the $16.7 billion
acquisition of programmable chipmaker Altera, has so far failed
to meet its objective of helping to offset the continued decline
in Intel's larger PC business.
Intel also spun out its cyber security division, formerly
known as McAfee, last year in a deal valuing it at $4.2 billion
including debt, about five years after having bought the
anitvirus software maker for $7.7 billion.
"We can recall few cases where so much has been spent
(habitually) to buy so little," said Bernstein analyst Stacy
Rasgon, who rates the stock "underperform", notes Intel has
spent over $30 billion in the last few years, while only adding
about $2 to $3 billion in revenue.
Perhaps learning from those missteps, Intel's Mobileye deal
is uniquely structured. The Santa Clara-based company's
Automated Driving Group (ADG) will combine with Mobileye and
will be led by Mobileye Chief Executive Amnon Shashua.
Betsy Van Hees, an analyst at Loop Capital Markets, said
that Intel has previously attempted to fold acquisitions into
its structure but they have not always been the right fit.
Intel's deals for embedded systems software maker Wind River
Systems and McAfee exemplified that strategy.
"One of the things Intel has tried to do in the past is that
they've taken a square peg, and they have taken a round hole,
and tried to put it in a square peg," said Van Hees, who rates
Intel a "buy".
Intel, which is the largest private employer in Israel,
hopes to bank on its experience to maintain Mobileye's startup
culture, bringing Mobileye's "quick moving, fast acting culture"
into Intel's autonomous driving division, Intel Chief Executive
Brian Krzanich said on a conference call with analysts.
Intel, which has been looking to shift away from its
traditional business, missed the smartphone boom in the last
decade but analysts hope the company will avoid a repeat.
"Investors should be pleased with the perspective that they
(Intel) are getting in on this trend fairly early," according to
CFRA Research analyst Angelo Zino.
(Reporting by Narottam Medhora and Aishwarya Venugopal in
Bengaluru; Editing by Bernard Orr)