The Six Five team discusses Mobileye reset.
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Transcript:
Daniel Newman: Pat, let’s hit Mobileye. They had a really interesting week. It started out the week, or was it the end of last week?
Patrick Moorhead: January 4th, last week to the day.
Daniel Newman: Okay. What happened there?
Patrick Moorhead: Yeah, so first of all, Intel bought Mobileye, brought it in. And like we said at the top of the show when we were talking about Intel getting back to the automotive market, it was really their automotive play. And then based on, quite frankly, valuations that Intel was getting, the best thing for the shareholders was do a soft spin. Soft spin, I mean let’s give it its own tracking number, let’s roll it out. But Intel retains the highest percentage of ownership. And what they did is they had a few rocking quarters. And then they came in basically forecasting being down, I think 50%.
And you and I have gone back and forth on this, really good discussions on this. It’s like, hey, is this kind of like the PC market where everything built up and then demand went away? Or was this something else, maybe not managing your distribution, not having a good pulse on your customers, or maybe you were incented to push product, incentive to push more product in? And for what it’s worth, customers won’t take more product than they need. So pushing this, you can incent them with pricing. But that doesn’t mean they’re going to use them. So their stock went down big time. And I think people then were questioning what happened.
The overall auto market is single digit increases. But when you narrow in on the more modern, let’s say, ones with safety, you’re looking for much bigger growth on that. So that was why there was so much surprising in here because it’s not like Mobileye is just updating what they have in the next version of the cars. It’s adding more ADAS to more cars. So it’s really about a SAM thing rather than, oh, the ebbs and the flow of the auto market. So with that said, I think the Mobileye ADAS offering is strong and it is doing well. I do think in the future it will see a lot more competition from the likes of Qualcomm.
Daniel Newman: So Pat, I’ve had a bunch of theories. And that’s all I have, is theories right now. Look, what’s interesting is Intel’s going a software defined route. It feels like they’re almost hedging Mobileye. They still own 90% or so of the company, but they’re kind of hedging blackbox versus sort of software defined building blocks. Second thing that’s going on was you’re talking about a company that IPOed several quarters ago. Almost every company that comes out of an IPO comes out with an intent of some period, usually four to eight quarters, where they’re looking to stabilize revenue, stabilize EPS, and be sure that they’re able to reward their early investors for getting them listed. Now, that’s not a hard and fast rule. That’s just something that I have sort of witnessed. Companies very rarely come out and bomb in the first. If you bomb in the first few quarters, it’s doom, because people kind of know that generally you can’t.
And so what I’m saying is I think there were some very, very big contracts with big commitments, and then there was some hope that that volume and growth and market strength wouldn’t slow. But I think if you kind of had forecasted this, there was a reasonable expectation that at some point the chickens would come home to roost, and there would likely be a quarter where the sales would fall off a cliff. And I’ve had conversations with some companies in the automotive silicon space, and no one else is indicating such a drastic miss or fall off. So while cars have softened in the market and the demand has shifted, and high interest rates have certainly slowed down some of the purchasing, not to the extent of 25% a quarter or 50% over the course of the year. This was definitely somewhat missed. Pat, you and I, I think both had an eyebrow go up. How did you miss that? People missed-
Patrick Moorhead: How? Exactly.
Daniel Newman: But when you’re forecasting and you’re working on vehicles, remember, vehicles have a minimum of three, four year, and more likely seven or eight year design cycles. So there’s probably more questions than answers about how this got missed this drastically. And it is probably encouraging for most in this space to find out this isn’t an epidemic across all automotive and all automotive silicon. It was seemingly limited to Mobileye. I think they’ll bounce back, but I don’t know if they’ll fully bounce back. This is going to have created some ripples in trust between Mobileye and its investors.
Patrick Moorhead: Yeah, it typically takes five or six quarters to get the trust back. But yeah, this was tough.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
