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Intel Acquires Habana Labs for $2 Billion

martinwolf Transaction Analysis
*Financial Information
  • Transaction Value: $2 billion
Transaction Facts
  • Intel Corporation (NASDAQ: INTC) announced today that it has acquired Israel-based AI chip-making startup Habana Labs for approximately $2 billion.
  • According to the press release, this acquisition advances Intel’s AI strategy. Habana will remain an independent business unit and operate under Intel’s Data Platforms Group.
  • In 2019, prior to its acquisition of Habana Labs, Intel expects to generate over $3.5 billion in AI-driven revenue, an increase of more than 20 percent year-over-year.
  • Shares of Intel are unchanged since the deal was announced.
martinwolf Analysis
  • AI is Hot: This acquisition deepens Intel’s push into the artificial intelligence market, which Intel expects to grow to $25 billion by 2024. Intel acquired Israeli tech company Mobileye (NYSE: MBLY) for $15.3 billion in 2017, and in 2016 it purchased Nervana Systems Inc. for $400 million and Ireland-based startup Movidius. The purchase of Habana fits nicely into Intel’s broader strategy of attacking newer computing markets instead of maintaining its share of the market for computers’ main processing chips, according to general manager of Intel’s data centers and AI, Navin Shenoy.
  • A Year of Ups and Downs: Intel’s continued forage into the AI-market comes near the end of a year of volatility within the company. Intel struggled with production issues that led to the company underestimating demand and not meeting investor expectations. CEO Bob Swan noted in Intel’s last earnings update that he expects production issues to resolve by 2020. This transaction is the latest step in Intel’s goal to identify new growth opportunities as it deals with challenges in some of its core markets.
  • Are Stormier Clouds Ahead?: Intel continues to invest in many nascent technologies, which theoretically would give Intel a higher probability to pick a winner. But — the concern is that Intel does not have a competitive advantage in these new markets. It continues to lag as a smaller player in new, fast-growing markets. It has a great brand, an improving balance sheet and strong channel partners — but the more it invests in startup and AI technology, the greater the risk becomes. It has to get that bet right.
For more information about this transaction, click here to read the press release.
*Financial information from press release. martinwolf was not the advisor in this transaction.
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