Intel just bought Mobileye, an Israeli company that leads its market with a camera-based computer vision solution. Intel was a bit late to the game with regard to autonomous cars. It had been working with car makers on in-car entertainment and an advanced headlight system that can see through snow and rain which, sadly has never made it to market, but had largely lagged NVIDIA, which has a full-fledged solution in segment called the Drive PX, now in its second generation.
Let’s talk about using an acquisition to close a competitive gap.
Organic Vs. Acquisition
Technology companies move incredibly fast, so for one to catch another from behind organically is nearly impossible. Ether the lead company needs to stumble or the following company needs to find a shortcut to the end goal. An example of a stumble was Sony building the PlayStation 3 at a cost of over two times what the retail price of a game console currently sold for in market. An example of finding a shortcut to the goal was the iPhone, which moved to consumer entertainment before the entrenched phone vendors even recognized that such a market actually existed.
But the more common way to jump ahead is to make a strategic acquisition, like Apple did with the technology that created the iPod, leapfrogging the Sony Walkman. HP did it with Compaq, moving to the head of the market. Lenovo did it with the IBM PC Company to become a leader in PCs. Microsoft did it with several acquisitions to take on and take out firms like Lotus and Netscape. Most recently, Dell acquired EMC to become what is arguably the largest and most powerful tech companies in the world, something that otherwise might have taken decades instead took mere months.
This is the path that Intel took with Mobileye.
Mobileye is known largely for its camera technology, which was used in the first hands-off, self-driving implementation in production in the Tesla S. Unfortunately, the Tesla implementation was ahead of the technology and a driver died relying too much on it, which resulted in a bit of finger pointing between Tesla and Mobileye. My own review of the problem suggested this was Tesla’s mistake, given that the technology wasn’t truly at a hands-free level yet. It has since disabled the feature, yet still calls it “autopilot,” suggesting it can perform better than it yet does. In addition, camera placement on the car may have been too low and the driver had been behaving irresponsibly for some time, all of this resulting in his death and a bit of an undeserved black eye for Mobileye and a nasty public disagreement with Tesla.
Still, currently, the company appears to lead the autonomous and assisted driving car camera segment and it’s working with a wide variety of car makers and has been in the segment since its founding in 1999.
Driving the Merger
This is likely at the core of why Intel bought the company: the depth of contacts, the existing business relationships, and a tighter coupling between Intel’s computing technology and the leading car camera technology vendor. This allows the company to eventually showcase a level of engagement with the car companies closer to what NVIDIA enjoys and make it more competitive. In addition, since much of the work is currently focused on computer vision, under the belief that if people can drive cars with vision alone so can computers, this potentially reduces the cost of the related autonomous solution significantly.
However, with this acquisition path, Intel has to preserve the assets of the acquired company and not damage it badly with the acquisition process. There is a right way to do these things and most firms choose not to follow it. Intel’s history is less than stellar, but it appears to be folding its efforts into Mobileye, not the other way around, which should help protect Mobileye. I’ve had conversations with the acquisition team’s leadership and they appear understand the reasons behind past failures and argue that they have implemented fixes. We’ll see with this acquisition, but this is where the greatest risk currently resides.
Wrapping Up: Completing a Successful Acquisition
The most assured way to catch up and pass a competitor initially is through acquisition. But the risk is that the firm damages the acquired company in some serious way as part of the process, eliminating much of the value it bought. Intel has demonstrated that problem but has represented that it fixed its process prior to the Mobileye acquisition and is placing its related assets under Mobileye management, which alone should mitigate much of the risk. One final thought: Some of Intel’s better managers have come from Israel and Mobileye is an Israeli company.
Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm. With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+