Intel Corp. is reportedly exploring options for its significant stake in Mobileye Global Inc., a company that has faced considerable challenges in the automated driving systems sector. According to sources familiar with the matter, Intel is contemplating selling part of its 88% ownership in Mobileye as part of a broader strategy overhaul aimed at improving its financial performance. This comes at a time when shares of Mobileye have plummeted to record lows, reflecting the company’s struggles in a competitive market, making this a critical decision for Intel.
Mobileye, founded in 1999, specializes in providing software and hardware for self-driving systems. However, the company has recently faced a downturn, with its stock down approximately 71% this year alone. The decline has been attributed to a reduction in production by automakers, who are grappling with a post-pandemic supply glut, significantly impacting Mobileye’s market position. In fact, Mobileye’s shares fell as much as 9.3% to $11.45 after trading opened on Friday, marking the lowest level since its initial public offering in 2022.
Intel’s potential divestment of its stake in Mobileye could take the form of a public market sale or a transaction with a third party. This decision is expected to be discussed during Mobileye’s upcoming board meeting in New York later this month. Last year, Intel had already sold part of its stake in Mobileye, raising around $1.5 billion from that deal, highlighting the ongoing financial strategy adjustments. However, the current market conditions present a challenging backdrop for any further sales, making the timing of this decision crucial.
Economic difficulty
The financial landscape for both Intel and Mobileye has been difficult. Mobileye recently slashed its revenue forecasts and lowered its projections for adjusted operating income, indicating that it is on track for a third consecutive annual loss. The company’s market value has dwindled to approximately $10.2 billion, a stark contrast to its previous standing in the industry, underscoring the severity of its financial struggles.
Intel, based in Santa Clara, California, is also exploring options for its enterprise networking division, which has seen a significant revenue decline. The Network and Edge business, which manufactures chips for telecommunications networks, reported a nearly one-third drop in revenue last year, totaling about $5.8 billion. This further emphasizes the need for Intel to reassess its strategies and consider asset sales to stabilize its financial position, highlighting the broader challenges the company faces.
Despite these challenges, Intel remains committed to enhancing shareholder value. A representative for the company stated, “We have an unwavering focus on shareholder value creation and are executing the plan we shared last month to accelerate profitable growth and create a leaner, simpler and more agile Intel for the future.” This statement reflects Intel’s strategic priorities amidst its financial restructuring efforts.
As Intel navigates this turbulent period, the pressure is on CEO Pat Gelsinger to implement a successful turnaround strategy. The company has experienced a net loss of $1.61 billion in the last quarter, and analysts predict further losses in the upcoming year. Discussions are ongoing regarding various strategic options, including the potential separation of its product-design and manufacturing businesses.
Intel’s exploration of selling part of its stake in Mobileye is a reflection of the broader challenges facing both companies. With Mobileye’s stock struggling and Intel’s own financial difficulties, the upcoming decisions could significantly impact their futures in the tech industry. Investors and market watchers will be closely monitoring the developments from Mobileye’s board meeting and Intel’s strategic planning sessions as they unfold, anticipating the potential outcomes.
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