Intel Corporation (NASDAQ:INTC) is reportedly exploring the possibility of selling part of its stake in Mobileye Global Inc. (NASDAQ:MBLY), its autonomous driving systems subsidiary, as part of a broader strategic overhaul. This comes at a challenging time for both Intel and Mobileye, as both companies face mounting industry pressures. The Intel Mobileye sale would mark another significant shift in Intel’s business strategy as it seeks to regain leadership in the semiconductor space.
Intel’s Stake in Mobileye: A Struggling Asset
Mobileye, founded in 1999, provides advanced software and hardware for autonomous driving systems. Intel currently holds an 88% stake in the Jerusalem-based company, which went public in 2022. However, Intel’s potential sale of a portion of this stake comes as Mobileye struggles to maintain profitability. Shares of Mobileye have plummeted by over 70% this year, with its market value now sitting at approximately $10.2 billion.
Amid a global post-pandemic supply glut, automakers have scaled back production, further impacting Mobileye’s revenues. In recent months, Mobileye slashed its revenue forecasts and reduced its projected adjusted operating income, signaling ongoing challenges. The company is on track to record its third consecutive annual loss, which has sparked concerns about its long-term viability.
Intel’s Strategic Shift: Why Now?
The Intel Mobileye sale discussions come as Intel navigates one of the most challenging periods in its 56-year history. Under the leadership of CEO Pat Gelsinger, the chipmaker has been undertaking significant restructuring efforts to regain its foothold in the semiconductor industry. Gelsinger’s strategy includes building new manufacturing plants and advancing semiconductor technology to regain the company’s competitive edge. However, Intel’s financial performance has been underwhelming, with the company reporting a net loss of $1.61 billion last quarter.
Mobileye is not the only division under review. Intel is also considering options for its Network and Edge division, which manufactures chips used in telecommunications and computer networks. This unit reported a sharp revenue decline of nearly a third last year, bringing in around $5.8 billion. As part of Intel’s broader strategy to create a leaner, more agile organization, it is exploring potential sales, partnerships, or restructuring options to maximize shareholder value.
What Would a Mobileye Sale Mean for Intel?
Selling a portion of its Mobileye stake could help Intel raise capital during a period of uncertainty. Intel has already sold part of its stake in Mobileye in 2022, generating around $1.5 billion. However, any further sale now would likely yield less, given Mobileye’s declining stock price. On Friday, Mobileye shares dropped as much as 9.3%, hitting a record low of $11.45.
For Intel, a partial divestiture of Mobileye could help streamline its operations and focus on its core semiconductor business. However, it would also mean relinquishing a significant part of its foray into autonomous driving technologies, a market that is expected to grow in the future despite current challenges.
What’s Next for Mobileye?
Mobileye’s future remains uncertain. Despite its current financial woes, the company is still recognized as a leading player in the autonomous driving sector. However, its struggles to generate consistent revenue amidst fluctuating demand from automakers have raised concerns among investors. The company’s revenue decline has been exacerbated by a slower-than-expected adoption of autonomous vehicles, as regulatory and technical challenges continue to delay widespread deployment.
As Intel deliberates its options, Mobileye’s board is expected to discuss the potential sale during a meeting later this month. Any decision on Intel’s stake will likely hinge on the broader industry outlook and the company’s ability to navigate near-term headwinds.
Intel’s Broader Strategy: A Look Ahead
Intel’s challenges extend beyond Mobileye. The semiconductor giant has been battling declining market share, increasing competition from companies like NVIDIA (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD), and rising operational costs. CEO Pat Gelsinger has outlined an ambitious turnaround plan, which includes splitting Intel’s product-design and manufacturing divisions to create a more streamlined operation.
With Intel’s stock down more than 60% this year, the pressure is on Gelsinger to deliver results. As the company explores divesting assets like Mobileye and its Network and Edge division, Intel is also studying potential mergers and acquisitions as part of a broader strategy to regain profitability.
Conclusion: A Wait-and-Watch Scenario
The Intel Mobileye sale deliberations mark a critical juncture in Intel’s ongoing transformation. For existing shareholders, the company’s focus on reshaping its operations to drive long-term value is encouraging, but challenges remain in both the autonomous driving sector and Intel’s core business. Investors will need to keep a close eye on Intel’s next moves, particularly as it decides whether to offload its Mobileye stake and how it handles other underperforming divisions.
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