Intel INTC recently announced a program called Ignite with an aim to encourage innovation in technology startups. The company attempts to accelerate development of robust technologies, including AI and autonomous systems, among others, in an open ecosystem.
Intel aims to introduce Ignite in Tel Aviv, Israel in this year, and eventually extend the program to other countries. Further, the company notes that it doesn’t intend to “seek equity in or rights to intellectual property from these companies.”
Per the terms of the program, Intel will carry out a 20-week program for select 10-15 Israel startups. The companies will obtain “hands-on mentorship” from the industry experts and professionals.
Intel has always acknowledged the skill-set of Israel based technology companies and has left no stone unturned to encourage the innovative startups with technical expertise.
To quote Intel CEO, Bob Swan, “Israel has the deep skill base in AI, autonomous systems and the underlying technologies critical to these inflections that make it a natural choice to launch our Ignite program.”
Intel’s significant Israel presence is expected to be a tailwind.
Intel Corporation Price and Consensus
Intel Corporation price-consensus-chart | Intel Corporation Quote
Strategic Expansion of Footprint in Israel Bodes Well
Santa Clara, CA-based Intel forayed into Israel in 1974. The company already has approximately 12,800 employees in Israel which includes around 1,000 employees of Mobileye.
Notably, Intel's acquisition of Israel-based Mobileye (for $15.3 billion), an autonomous vehicle technology provider, is enabling the company to rapidly penetrate the autonomous car technology market.
In fact, Swan recently took an autonomous vehicle ride which is currently under testing in Jerusalem, per media reports. Notably, around May 2018, Intel’s Mobileye initiated testing of around 100 self-driving cars in Jerusalem.
Additionally, in January, per a Reuters report, Intel is making an investment of approximately $11 billion to upgrade a chip plant in Kiryat Gat and develop a new chip manufacturing facility. Per the finance ministry of Israel, Intel is getting a grant of approximately $1 billion for the same.
Furthermore, in September 2014, Intel received approval from the authorities in Israel to invest $6 billion to upgrade a chip plant in Kiryat Gat to develop its new advanced 10-nanometer (nm) chips. Notably, management anticipates it to hit the shelves of its OEM partners’ PC systems by holiday season of 2019.
We believe Intel’s optimism in Israel’s startup community and technical expertise is aiding it to expand business prudently. For instance, Mobileye contributed $209 million in first-quarter 2019 revenues, up 38.4% on a year-over-year basis.
Moreover, media reports indicate that over a period of 45 years, the company’s Israel’s exports amount to $40 billion. The amount comprises acquisitions, investments and research and development (R&D) initiatives. However, these growth initiatives are likely to limit Intel’s near-term margin expansion.
Notably, Intel lost its $6 billion bid to buy “Israel-based” Mellanox per reports. The deal would have expanded the chipmaker’s presence in Israel considerably. However, NVIDIA, Intel’s prime competitor in semiconductor market, sealed Mellanox acquisition for $6.9 billion, which is expected to close by the end of calendar year 2019.
Zacks Rank & Key Picks
Currently, Intel carries a Zacks Rank #3 (Hold).
A few better-ranked stocks worth considering in the broader sector are eGain Corp. EGAN, Rosetta Stone Inc. RST and j2 Global, Inc. JCOM, each sporting Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for eGain, Rosetta Stone and j2 Global is pegged at 30%, 12.5% and 8%, respectively.
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