Intel lowers target for Mobileye, aiming for $30 billion IPO

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(Bloomberg) — Intel Corp. is lowering expectations for its initial public offering of Mobileye in the face of a broader stock drop and could delay selling the stock until next year if conditions don’t improve, people familiar with the process said.

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The company expects the IPO to value the self-driving technology business at up to $30 billion — less than originally expected — according to the people, who asked not to be identified because the discussions are private. The initial plan was to offer the stock around mid-2022, and Reuters and others reported potential valuations of more than $50 billion.

Intel CEO Pat Gelsinger is trying to capitalize on the Israel-based business, which was acquired in 2017, by partially spinning off its shares. Mobileye makes chips for cameras and driver-assistance functions and is seen as a valuable asset as the automaker races toward fully automated vehicles. However, Intel faces a falling market for chip stocks and a lack of IPOs, making the deal more difficult to complete.

If semiconductor stocks recover, the offer could still be possible in 2022, according to the people. Otherwise, it will be repelled.

Intel shares fell as much as 1.1% to $31.10 on Monday, hitting session lows, after the Bloomberg announcement. The stock recovered most of its losses at 1:45 p.m. in New York.

Representatives for Mobileye and Santa Clara, Calif.-based Intel declined to comment.

A successful Mobileye IPO could clear a growing backlog of chip-related assets waiting to come to market. SoftBank Group Corp. is also trying to sell shares in semiconductor designer Arm Ltd. until early next year. Ampere Computing LLC, a startup that makes processors for data centers, is also planning an IPO.

For Intel’s Gelsinger, a successful IPO would help show that his turnaround plan is paying off. The company has suffered from declining sales and profits, along with losing market share to rivals such as Advanced Micro Devices Inc. The CEO has outlined an ambitious spending plan to rebuild Intel’s manufacturing capacity, enter new businesses and restore its technology leadership.

Intel will remain the majority owner after the transaction, which includes the offering of newly issued Mobileye shares, the company said in December.

The majority of the revenue will be retained by Intel, Gelsinger said, but Mobileye will get a balance sheet that will allow it to fuel its expansion plans, he said.

Mobileye was a particular bright spot. The business, acquired for about $15 billion, has consistently grown faster than its parent, which is set to report a revenue decline of up to 16% this year. In the second quarter, Mobileye posted sales of $460 million, a 41% year-over-year increase. That helped operating income rise 43% to $190 million.

Intel shares have lost 39% of their value this year, worse than chip stocks overall. The Philly Semiconductor Index is down 31% in 2022.

(Updates Intel stock in the fifth paragraph.)

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