Intel Inherits Mobileye's Problems

Trip Chowdhry of Global Equities Research was likely very surprised to learn of Intel Corporation (NASDAQ: INTC)'s $15 billion acquisition of Mobileye NV (NYSE: MBLY) - a company he previously referred to as a "hyper-inflated" stock that shouldn't be worth more than $10 a share.

Intel disagrees with Chowdhry's assessment and is willing to pay north of $60 per share for the Israel-based company. Nevertheless, the analyst's conviction remains unchanged and now Intel has "inherited Mobileye's problems."

Chowdhry commented in a brief report he doubts Intel has the capacity to "fix" Mobileye's issues, some of which include:

• Non-sustainable pricing power which will erode revenue and margins
• Non-durable first mover advantage
• Heightened competitive environment from Autoliv, NextChip and Continental
• Mobileye's out-dated reliance on cameras in the auto space which has moved on to Sensor Fusion

Not Intel's First Mistake

Chowdhry further noted that Intel has a history of failed acquisitions:

• In 2009 Intel acquired Windriver systems which was supposed to revolutionize the transport industry but the transaction remains a "non-event" to this day.
• In 2010 Intel acquired Mcaffee which proved to be a "total disaster" and provided zero traction in the security software segment.
• In 2014 Intel acquired Basis to enter the wearable technology market but it has failed to take off.

Bottom line, Intel is "failing" against NVIDIA Corporation (NASDAQ: NVDA) in categories such as machine learning, GPUs and deep learning and the acquisition could even support multiple expansion for Nvidia.

Related Link:

Intel Corporation, Mobileye May Be Star-Crossed Lovers, But Chowdhry Calls Veronian Tragedy

Intel Under Selling Pressure After Mobileye Deal