Intel Considers Selling Stake in Mobileye Amid Strategic Review

Intel Considers Selling Mobileye Stake and Exiting Foundry Business

Intel is reportedly contemplating selling a portion of its 88% stake in Mobileye, an automated driving systems provider, amidst a strategic review. This move comes as Mobileye's stock witnessed a 71% decline this year, with the company poised for its third consecutive annual loss. Furthermore, Intel's Network and Edge business, which experienced a nearly one-third revenue drop to $5.8 billion last year, is also under scrutiny. In an effort to enhance its financial performance, the tech giant is exploring options that may include exiting its foundry business, potentially leading to a significant increase in earnings per share and improved gross margins. CEO Pat Gelsinger is prioritizing shareholder value and advocating for a more streamlined, agile company. These critical decisions will be deliberated at the upcoming Mobileye board meeting in New York.

Key Takeaways

• Intel is exploring the sale of part of its 88% stake in Mobileye, which suffered a 71% stock decline this year.

• The Network and Edge business of Intel, with a revenue drop of nearly one-third to $5.8 billion last year, is also under review.

• Analysts from Citi forecast that exiting the foundry business could potentially elevate Intel's EPS by $3.00-$4.00 and enhance gross margins to the low-to-mid 50% range.

• Mobileye's stock downfall by approximately 71% this year has significantly reduced its market value to around $10.2 billion.

• Intel's CEO, Pat Gelsinger, is dedicated to accelerating profitable growth and establishing a more efficient, simplified, and agile Intel.

  Analysis

  Intel's strategic reassessment, triggered by the dwindling stock value of Mobileye and the challenges faced by the Network and Edge business, aims to bolster the company's financial performance. The potential divestiture of Mobileye stake could help stabilize Intel's portfolio, while an exit from the foundry business might lead to an improvement in earnings and margins. In the short term, Intel is confronted with investor scrutiny, but in the long term, a leaner structure may revitalize growth. The decline in Mobileye's market value impacts investors and partners, while Intel's strategic shifts influence suppliers and competitors.

  Did You Know?

  • Foundry Business: The foundry business involves a company, such as Intel, providing manufacturing services to create chips for other companies based on their designs, as opposed to designing and producing chips for internal use. Exiting this business could signify an end to this service, as Intel may focus solely on its own chip designs and production.

• Gross Margins: Gross margins reflect the variance between a company's revenue and the cost of goods sold (COGS), represented as a percentage of revenue. For example, if Intel's gross margin falls within the low-to-mid 50% range, it implies that for every dollar of revenue, Intel retains 50-55 cents after accounting for the direct costs of product manufacturing.

• EPS (Earnings Per Share): EPS measures the net income earned per share of outstanding stock, serving as a financial performance indicator. A higher EPS signifies increased profitability. In this context, exiting the foundry business could potentially elevate Intel's EPS by $3.00-$4.00, leading to a corresponding per-share earnings increase.