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Intel to Expand in Automated Car Space with Stake in HERE

Intel Corporation INTC recently announced that it is acquiring 15% stake in German digital mapping company HERE. Although financial terms were not revealed, the transaction is expected to complete in the first quarter of 2017. Intel shares climbed 0.91% to close at $36.60 on Jan 3, 2017.

HERE is a well-known name in the high-precision digital mapping and location based services for automotive and Internet of Things (IoT) market. Currently owned by a consortium of auto firms that include BMW, Audi and Daimler, who bought it from Nokia NOK in mid-2015, HERE is a close competitor of Google Maps.

As reported by Reuters, the consortium recently sold 10% of their stake in HERE to Chinese digital mapping company NavInfo, internet group Tencent and Singapore's sovereign wealth fund GIC.
 

INTEL CORP Price and Consensus

 

INTEL CORP Price and Consensus | INTEL CORP Quote

HERE: A dominant Name in High Definition (HD) Mapping

HD mapping is critical for the smooth functioning of an autonomous car. As such, these kinds of cars require HD maps that can precisely locate objects, curves and traffic within centimetres. Per Wired “They also need to be live, updated second by second with information about accidents, traffic backups, and lane closures.”

HERE is a dominant name in this market due to its superior HD mapping technology. By using the LiDAR technology, the company’s HD-maps captures billions of 3D points to model the surface of the road to an accuracy of 10 to 20 centimeters.

Per HERE, the HD maps in combination with advanced sensor technology enable an autonomous car to anticipate “what’s coming rather than just react to it.” HERE’s HD maps have already being used to test autonomous vehicles in the U.S., France, Germany and Japan.

The company launched a new-set of traffic services in collaboration with BMW, Daimler and Volkswagen in Sep, 2016. The service will keep drivers updated with live information about road conditions using data from automakers. Per Reuters, the service is “an industry first” and availability of this massive data will be of immense help in developing autonomous car technology.

Hence, this will provide HERE a significant technological advantage over the likes of Google, Apple AAPL, Tesla and others who are engaged in developing autonomous vehicles.

Most recently HERE entered into a strategic collaboration with Mobileye to integrate their respective autonomous driving technologies (including HD Live Map and Open Location Platform) into an improved industry-leading offering for automakers.

Intel-HERE to Develop Joint Solution

Intel-HERE now plans “to jointly develop a highly scalable proof-of-concept architecture that supports real-time updates of high definition (HD) maps for highly and fully automated driving as well as explore opportunities in IoT and machine learning.” Further, the collaboration will market opportunities from enriching edge-computing devices (like drones) with location data.

We believe that Intel’s stake in HERE will expand its presence in the automated driving technology market and challenge the dominance of NVIDIA NVDA. The company’s newly created division Automated Driving Group (ADG) focuses on this fast-emerging market. Post the completion of the transaction, Intel will nominate Doug Davis, senior vice president and general manager of ADG to HERE`s Supervisory Board of directors.

Intel has said that it is currently involved in 30 vehicle programs, but that number would swell to 49 by 2020. Moreover, the company’s venture capital division will invest $250 million over the next two years into autonomous driving technology. The fund will support the development of self driving and other technology (connectivity, communication, context awareness, deep learning, artificial intelligence (AI), safety and security) for cars globally.

Share Price to Rebound in 2017?

We note that Intel’s stock price generated a modest return of 7.21% in the last one year, underperforming the Zacks Semiconductor General industry which witnessed a strong return of 32.37% in the same time frame.



The underperformance of the stock could be attributed to a sluggish PC market, intensifying ARM-based competition, revenue concentration and a failed mobile initiative. However, we believe that Intel’s investments in IoT, security and memory will help the stock rebound in 2017.

Zacks Rank & Key Pick

Currently, Intel carries a Zacks Rank #3 (Hold). NVIDIA sporting a Zacks Rank #1 (Strong Buy) is better-ranked stock in the sector. You can see the complete list of today’s Zacks #1 Rank stocks here.

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NOKIA CP-ADR A (NOK): Free Stock Analysis Report
 
APPLE INC (AAPL): Free Stock Analysis Report
 
INTEL CORP (INTC): Free Stock Analysis Report
 
NVIDIA CORP (NVDA): Free Stock Analysis Report
 
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