It’s been a little under a year since we last talked about self-driving car tech company Mobileye, and it’s time to start studying for their IPO.
Calcalist financial news said on Monday that Mobileye is planning its initial public offering on the NASDAQ exchange at some point this year.
Self-driving and road-aware vehicles is one area of technological development we’re particularly bullish on, so this could provide a great opportunity to tap into the market as it’s still developing.
When we looked at Mobileye last July, the company was valued at $1.5 billion after a $400 million capital investment from Goldman Sachs (NYSE: GS), Blackstone Group (NYSE: BX), and three others.
The current rumor is that Mobileye seeks to raise approximately $500 million in its IPO based on a valuation of $2.5 to $3 billion dollars. We don’t have any financial data at our disposal, so we’re going to have to look at the company from a value perspective.
Mobileye at a Glance
Mobileye is a fifteen-year old Israeli company headquartered in The Netherlands. Its chief products are aftermarket driver assistance systems for fleet vehicles and individual consumers. The company’s systems, such as the Mobileye 560, rely on monocular “smart cameras” that attach to the front windshield of vehicles and survey the environment.
The systems analyze such things as lane placement, vehicle speed, and traffic signs, and detect vehicles and pedestrians for the driver. The systems can detect imminent collisions, lane drifting, intelligently switch high beams on and off, and monitor clearance and headway. Consumer systems use the driver’s smartphone to deliver alerts and realtime data.
Additional modules can be added to Mobileye’s systems, depending upon the demands of the customer. One such module adds a vibrating motor to seats to enhance notifications beyond simple audio cues, and controls the vehicle’s hazard lights and cruise control.
The platform that has been put to varying degrees of use by 19 automakers worldwide, including BMW (BMW:GR) and GM (NYSE: GM). Fleets such as DHL, UPS, CR England (3,500 trucks), and Abbott Pharmaceuticals have incorporated Mobileye’s solutions. Germany’s IN tIME Express Logistik and its 20 subsidiaries in Hungary in Romania have also begun to use Mobileye’s systems in over 4,000 vehicles.
The company’s first major valuation was in 2004, when it was put at $195 million. In 2007, Volvo introduced its first CWAB system, which was developed in conjunction with Mobileye. By 2012, the company had installed more than a million systems, and expected to grow to five million by the end of 2014. So in ten years, Mobileye will have seen a 1440% increase in value, and a 500% increase in market penetration in a single year.
Size of Market
CAR Magazine recently ran an article titled “Driverless cars: why you won’t be buying one soon,” which lists eight major reasons why consumers won’t be sitting behind the wheel of a self-driving car for at least another fifteen years. The reasons it lists are: a lack of consumer interest, a lack of a legal framework, a lack of global standards, and inferiority to the good old human brain.
However, there are two major failings to this conclusion.
Firstly, a point the article makes itself, that “semi-autonomous cars are better” than driverless cars. These vision and assistance systems do not yet need to take full control of a vehicle to be useful and (highly) marketable. For the last five years, The U.S. and EU have been studying frontal collision detection, drift warning, and autonomous braking systems to see how they can be incorporated into law.
These aren’t going to be “ghost cars,” right out of the gate, but each generation is more intelligent than the last.
Secondly, the idea that “you won’t be buying one” is no indication of the value of driverless systems. The world of fleet vehicles, huge and robust, is separate from consumer sentiment, and isn’t subject to its whims.
In the United States, UPS has the largest truck fleet, made up of 89,414 trucks, vans, and sport utility vehicles. UPS is followed by AT&T, Comcast, Verizon, PepsiCo Inc, Tyco International, ServiceMaster, Quanta Services, Cox Enterprises, and Sears Holding Corp in the top ten largest fleets in America. Their combined fleets total more than 295,000 vehicles, and their purchase, maintenance and system integration is completely independent of the consumer market. (Source: Fleet-Central.com)
That’s not even counting federal, state, and municipal fleets. According to the U.S. General Services Administration, the federal automobile fleet — including military and U.S. Postal service vehicles — was 650,061 in 2012. Over half a million vehicles belong to the U.S. Government alone! Every state and municipality has its own fleet including police and emergency vehicles, as well.
Competition
If Mobileye does not secure partnerships or licensing agreements with auto manufacturers, it faces competition from the in-house developments from the automakers themselves.
Japanese car manufacturer Subaru, for example, developed its own stereoscopic detection system called Eyesight, which has been in select Legacy, Outback, and Forester vehicles since 2008.
Certain manufacturers, however, utilize sensors other than digital vision for their collision detection systems, and aftermarket Mobileye products could conceivably exist alongside them if functionality isn’t duplicated. Honda developed its Collision Mitigation Brake System (CMBS) more than a decade ago, and was the first car maker to release a consumer vehicle with autonomous braking. That system uses millimeter-wave radar instead of vision.
Though Nissan does not currently utilize Mobileye’s platform, it could integrate with existent radar-based systems. This was actually how it ended up being used in Volvo’s cars. 
Mobileye and Delphi Automotive PLC (NYSE: DLPH) teamed up to create hybrid radar-vision systems for Volvo, and ended up releasing the industry’s first system of the sort. Mobileye says it offers a number of advantages over pure radar and pure vision systems.
Part of the value of Mobileye is that its technology has been proven to play well with competing technologies.
The Waiting Game
It’s been a good year for IPOs, and for investors who believe in the power of “smart” things (smartphones, smartmeters, etc.) Mobileye will be a worthy candidate. We just have to wait for the announcement…
