After all that has been written about Intel's acquisition of Mobileye(NYSE: MBLY), the biggest-ever Israeli exit, and all the prizes have been awarded to those involved, here are some retrospective insights about it.
Intel: The analysts are unenthusiastic
The universal cheers in Israel about the huge acquisition, while justified in themselves, have somewhat overshadowed the doubts and criticism voices by Intel shareholders and the analysts covering the company.
To summarize the main things that the critics have written about the deal (some of them even downgraded their recommendation for the Intel share), such an important acquisition by Intel in the autonomous vehicle sector reflects concern by Intel's management about a possible decline in the company's core business. Up until now, the company has focused on traditional computing, if this term can be used to describe the existing computer platforms: mobile computers, mobile, and what connects them to each other. All of a sudden, this looks a little old-fashioned and outdated in comparison with the imagination arousing autonomous vehicles.
Analysts also expressed disappointment that Intel is using its huge stack of cash for this acquisition, in addition to the $4 billion it spent on other acquisitions over the past two years. Some Intel shareholders would have preferred to see the company use the money to buy back some of its shares, particularly in view of the fact that Intel's history has proved many times that it has trouble digesting acquisitions.
It is important to note that despite the financial analysts' unemotional analyses, the acquisition itself has been prominently and positively covered by the global media, which praised Intel for such a significant strategic step bringing the company towards leadership of the developing auto-tech market.
Jerusalem: Nonetheless Israel's capital
It is likely that many Jerusalemite hearts are swelling with pride and satisfaction now. In recent years, Israel's sleepy capital, as it is perceived by residents of the Greater Tel Aviv area, has become a lively, widespread, and diverse high-tech center. Only a few weeks ago, one of Israel's largest investors conferences ever took place in Jerusalem - an impressive event organized by the OurCrowd crowdfunding platform, whose offices are located in the city.
Hundreds of startups have arisen in Jerusalem in recent years, and they are getting strong backing from both the city authorities and a constantly expanding network of investors and concerns supporting them. The MassChallenge international accelerator, one of the leading ones in the world, has set up shop in the area of the Mahane Yehuda open air market, and is attracting many entrepreneurs of early-stage companies.
Now to Mobileye.
The great exit of Israeli high tech, which took place in Jerusalem, was the fruit of many years of hard work by hundreds of employees working in the city. According to the reports, thousands more employees will be recruited to work in the Mobileye offices in Jerusalem, and they will continue to reinforce the status of Israel's capital as a leading high-tech center on the local scene, and perhaps also the global one.
High tech: Just what you thought
Mobileye looks exactly like what an Israeli high-tech company should look like. The ingenious and breakthrough inventions of the company's founding team make use of globally cutting edge scientific and technological know-how. Turning these inventions into a series of products that have been developed for years, and installing them in a great and complex industry with diligent professional work also reflects impressive business capabilities and a profound understanding of the market. The company has grown into global leadership in the its sector, and has become a partner in setting the roadmap for one of the most significant trends developing in global high tech. All of this has generated a great deal of value for the company's shareholders, investors, employees, and of course its founders. This happened over many years of hard and determined work.
There is no doubt that the Mobileye example will henceforth be a lodestar for many high-tech entrepreneurs and their investors, whether private investors or institutional concerns, as proof that such companies can be created in Israeli high tech.
Note should also be taken of the differences between Mobileye and other, non-Israeli, companies that also grabbed headlines here a short time ago. US company Snapchat was founded in 2011. Six years later, a third of Mobileye's lifespan, following its IPO, its value was double the amazing price tag set for Mobileye yesterday, when the latter was already 18 years old.
These differences are no accident. Even though Israeli high tech has already proved that it is capable of creating extremely successful applications and media companies, it still appears that most of the value in the Israeli ecosystem, not to mention the Israeli economy and society, will continue to consist of companies like Mobileye, rather than the Israeli Snapchats (but we hope that these will nevertheless arise in our neighborhood).
Exits are good: Remember that
Yes, next time that some politician or nattering nabob of negativism complains about an Israeli company sold to some buyer for $100 million, remind them, and yourselves, that an exit is good. The exit culture is an integral part of global high tech. It is the motivation pushing private investors to make the oh-so risky and imagination stimulating investments that help the most talented entrepreneurs realize their dreams.
In Mobileye, there were private investors who dared to have big dreams, and to risk big money. They revolutionized - no less - Israeli high tech, and they completely deserve to enjoy the economic fruits of the value they created for an entire country. They therefore deserve a lot of real applause. But all those who decide to sell companies at some price because they reached the conclusion that it was right for the various parties involved in the companies they founded also deserve thanks and compliments, because without the hundreds of other exits, large and small, over the past decade, there would be no real high-tech environment here. There would be no international investors, no Waze, no Wix.com Ltd. (Nasdaq: WIX), and no Mobileye, which grew for years as a company that wanted to be a big independent Israeli company - and eventually decided to be sold to another company in a thunderous exit.
The decision is a correct one, like the previous decisions made by hundreds of other companies. This decision will probably pave the way for an entire industry and many more exits that will arise from it. It appears that because of the stunning price tag in the Mobileye deal, there have been fewer ex post facto complaints on this subject over the past 24 hours, but it is nevertheless important to remember: an exit, whether big, medium-sized, or small, is a good thing. Here's to the next exit, and the one after that.
Izhar Shay is a managing partner in Canaan Partners
Published by Globes [online], Israel Business News - www.globes-online.com - on March 15, 2017
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