Business & Investment

Opinion: The Mobileye IPO will help Intel raise the coveted cash, but is that enough?

Intel Corp.’s plans to unveil its Mobileye business next year should raise the funds needed to fund its large-scale semiconductor manufacturing program, but it’s too early to say some.

Intel at the beginning of Tuesday
+ 3.10%

And its Mobileye subsidiary confirmed The Wall Street Journal Monday Report The chip giant plans to go public in mid-2022 for an automotive system company. Intel plans to maintain a “clear majority” stake, but refuses to be more specific.

One of the earliest questions about the company’s brief conference call to discuss the news came from analysts asking if an IPO would be Intel’s so-called IDM funding mechanism. [integrated device manufacturing] 2.0 plan. This is what chip makers call a new manufacturing strategy. Intel will be about in October $ 25 billion to $ 28 billion About building more manufacturing facilities as part of the promotion to become a bigger player in contract manufacturing.

“Although there are some cash benefits, overall, Intel believes it has a balance sheet, debt rating, cash flow from the business and can implement its IDM strategy with or without this transition,” Intel said. Patgel Singer, Chief Executive Officer of Intel, said. On Tuesday, Intel added that it wanted to unlock the fast-growing Mobileye. “But I hope it will be fully realized in the market. This is a unique asset.”

The journal’s report cited the potential for Mobileye’s valuation of over $ 50 billion, citing executives familiar with the issue. However, at the conference call, Intel executives do not discuss the rating at this stage. And some analysts were a little skeptical about that number anyway.

“I’m not sure how much it’s worth in this market, but given the nature of the asset, it’s probably fair to claim that Mobileye is worth more than the $ 15 billion Intel paid in 2017,” Bernstein Research said. Analyst Stacy Lasgon wrote a note on Tuesday.

But Intel needs additional cash. After first disclosing the capital investment plan, several analysts have been concerned about the need for cash. During October BMO Capital Markets Analyst Amblish Sri Bastava Downgrades Intel He pointed out that he was worried about Intel’s cash position in a major expansion plan.

“Given the decline in the FCF over the next two years, Intel sees little coverage of its dividend commitment,” he wrote at the time, worried about dividends as Intel has the ability to take on new debt. I added that it wasn’t.

In a memo on Tuesday, Raymond James analyst Chris Casso wrote: We offer the long-awaited cash, but we are not confident in the return of that cash investment due to the significant challenges Intel faces in catching up.
Manufacturing industry. “

Obviously, Mobileye is a hidden gem within Intel, and as Gelsinger explained that it created an advanced driver assistance system, there is great potential for autonomous driving. Intel is wise to leverage its assets, but it’s not clear how much value it can achieve as it works to regain supremacy in the previous manufacturing industry.

Opinion: The Mobileye IPO will help Intel raise the coveted cash, but is that enough? Opinion: The Mobileye IPO will help Intel raise the coveted cash, but is that enough?

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