When the chips fall: Intel preps for $16b Mobileye IPO

Far cry from the $50 billion valuation Gelsinger hoped would fuel foundry empire

Intel expects the initial public offering of its Mobileye business unit to muster a valuation of $16 billion, a fraction of the nearly $50 billion figure the autonomous driving division was expected to fetch earlier this year.

According to an SEC filing [PDF] Tuesday, Intel will offer 41 million shares of common stock priced at between $18 and $20, which should raise $738 million to $820 million.

Intel announced in December its intent to take Mobileye public in mid-2022 via an IPO. By April, the chip giant appeared to take the first steps toward realizing this plan, tapping Goldman Sachs and Morgan Stanley to lead the IPO targeting a valuation as high as $50 billion.

However, even then, deteriorating market conditions were raising concerns. By July, the x86 giant reportedly tapped the brakes on the IPO over fears market volatility would capsize the effort. Despite the delay, Intel remained aggressively bullish, with a spokesperson insisting Mobileye would still IPO this year, though noted that timing was still being determined.

By September, it was widely reported that Intel, faced with worsening market conditions, had scaled back its expectations to a $30 billion valuation. However, even that appears to have been optimistic, with the chipmaker now expecting Mobileye’s valuation to be a little more than half that at $16 billion. For context, that’s about a billion dollars more than Intel paid for the Israel-based company in 2017.

As we’ve previously reported, the lower than expected valuation could prove problematic for the chipmaker’s recovery. CEO Pat Gelsinger was betting heavily on Mobileye’s IPO to fund the corporation's shift to contract semiconductor manufacturing. To date, the chipmaker has committed to more than $70 billion of new fab and packaging sites across the United States and Europe.

The high costs of the facilities, each of which can run between $10 billion and $20 billion, and the uncertainty surrounding the allocation of CHIPS Act subsidies from the US government has forced Intel to get creative. In August, the company turned to Canadian private equity firm Brookfield Asset Management to bankroll half of its Arizona fab project, which, due to changing market conditions — namely inflation — had ballooned in price by 50 percent.

Making matters worse, Intel, which will report third-quarter earnings October 27, is expected to confront stiff economic headwinds in the face of rapidly declining PC demand across the industry. Gartner last week reported PC shipments during the quarter had fallen nearly 20 percent from this time last year.

Intel is also expected to announce thousands of layoffs at the end of the month, with some teams – notably sales and marketing – losing as much as 20 percent of staff. The biz, which over the summer said its annual revenue will be as much as $11 billion below its previous projection, employs more than 110,000 people worldwide. ®