Intel’s Mobileye IPO is not shaping up to be the shot in the arm its parent company needs.
Last December, Intel made known its intent to take Mobileye public by mid-2022. However, the plans were repeatedly delayed due to volatile market conditions. On Sept. 30, the Israel-based self-driving tech firm, which Intel bought five years ago, finally filed for an IPO. Only now, it’s looking to sell fewer shares at a smaller valuation.
As Intel revamps its core business to serve as a foundry for others, making and outfitting more fabrication plants—or “fabs”—is an expensive affair. That’s why CEO Pat Gelsinger was betting heavily on Mobileye’s IPO to fund the shift to contract semiconductor manufacturing. But unfortunately for the chip giant, this year’s US IPO market is in its worst shape in two decades. And even the companies that have gone public in the last couple of years offer little hope, with the vast majority trading below their IPO prices.
Mobileye shares are expected to start trading on Oct. 26. A day after that, Intel reports earnings, which some analysts expect to be “not great.” They forecast a 15% drop in revenue and an 81% fall in earnings year-on-year. In November, the chip maker will reportedly start slashing headcount.
“These are always hard decisions, but our costs are too high and our margins are too low. We have to take actions to address them,” —CEO Pat Gelsinger said in a video address to staff, as per The Oregonian/OregonLive.
By the digits
$50 billion: the valuation Mobileye IPO was hoping to fetch earlier this year
$15.9 billion: the likelier IPO valuation for Mobileye
$15.3 billion: how much Intel bought Mobileye for in 2017
$820 million: how much Intel is looking to raise from the Mobileye IPO
10% to 20%: shares Intel is looking to sell; Intel will remain majority owner
800: number of vehicle’s Mobileye’s tech is in. Its client roster includes, Audi, BMW, Volkswagen, and others
41%: Mobileye’s revenue growth year-on-year to $460 million in the quarter ending June 30, 2022
121,000: Intel employees worldwide
$70 billion: Intel’s investments into new fabs and packaging sites across North America and Europe
41%: revenue growth year-on-year to $460 million in the quarter ending June 30, 2022
87%: companies that went public last year in the US that are trading below their IPO price
27%: Intel’s revenue share that came from China last year
Charted: Intel’s tumble
Intel’s business ups and downs
Like with other industries, high inflation, rising interest rates, and supply-side constraints are testing chip makers, too. But there are more headwinds dragging Intel down.
For one, PC shipments are in free fall, resulting in a drop in demand for their processors.
Then, the US commerce department dealt Intel and peers another blow with new rules, which require chipmakers to obtain individual licenses to sell advanced chips in China. Consequently, Intel can’t export any of its current-generation chips—which are smaller than the 14-nm threshold specified—into one of its major markets.
With revenue not looking up and the underwhelming Mobileye IPO on its way, Intel is getting creative with cost-saving while expanding. In a first, Intel inked a deal with Canada’s Brookfield Asset Management, which provided it with an additional $15 billion of free cash flow over several years. The private equity firm will claim a 49% stake in the project to cover half of the $30 billion Intel needs to expand its Arizona fab business.
‘Tis the season for tech layoffs
Intel isn’t the only tech company resorting to layoffs in this tough market. Just this year:
🪟 Microsoft cut around 1,000 jobs.
👻 Snap laid off 20% of its workforce as the company reported its worst earnings in five years since going public, and its stock price has slid nearly 80% this year.
📮 Flipboard booted 24 employees, a fifth of the company’s workforce, because of a struggling ad business.
🤫 Facebook parent Meta has been resorting to “quiet firing” to slim down its staff.
👥 Trading app Robinhood fired 23% of its employees to correct for over-hiring in 2021
📺 Netflix laid off some 450 workers earlier this year after losing subscribers for the first time in a decade.
🚗 Tesla scrapped 200-odd autopilot jobs
💸 Coinbase pared down its workforce by 18% due to economic headwinds and high costs
📌 How Intel became Biden’s main marketing tool for the US innovation bill
🚗 Intel’s $15 billion bet that its future lies in self-driving cars
🚨 If semiconductors are “the new oil,” what does that mean for the petrodollar?