The Intel (INTC) empire is really striking back. For years we have watched Intel on the fringes of the great markets such as mobile devices, Internet of Things, anything Apple (AAPL) and most certainly the autonomous car.
The company, once the largest semiconductor business in the world -- surpassed by Samsung -- took a big leap forward this morning when it closed on the Mobileye (MBLY) deal, the $15 billion purchase of the 663-employee company with a very strong franchise in autonomous driving. At the same time it is taking advantage of the rift between Qualcomm (QCOM) and Apple and making a long-awaited move to grab more Apple business, especially modems for tablets and some of the guts of the new Apple Watch. (Apple is part of TheStreet's Action Alerts PLUS portfolio.)
I cannot stress how important this is for the company that pioneered the microprocessor for the personal computer and moved up from an also-ran in the business in the 1980s to being the king of all chips.
Of course, the personal computer business stopped growing years ago, yet it still produces a gigantic return for Intel, which has used the cash to buy back stock at times, to give you a higher-than-average dividend and to acquire companies.
Its record is mixed. It bought a cybersecurity firm, McAfee, and a company that makes designer chips, Altera (ALTR) , and, if you ask me, both have just been OK, and McAfee has been spun off for a lower valuation than I thought it could get. Intel CEO Brian Krzanich defended the McAfee acquisition this morning when we interviewed him on Squawk on the Street, saying it retained upside. Altera's doing OK. This time he said he is directly going to be involved in the Mobileye integration and that he recognizes that the biggest land grab out there -- maybe as big as the cellphone -- is the autonomous driving vehicle.
What's tough about this market is that he's going against Nvidia (NVDA) , which has a fabulous record when it comes to chips that help autonomous driving -- it replaced Mobileye in Tesla (TSLA) when Mobileye management had a tiff with Tesla -- and I think it has an amazing ecosystem for these kinds of chips, among others, that might be difficult to top.
However, Brian talked about merging Intel's considerable and growing Internet of Things business with Mobileye to offer a connected-car package that could come under Nvidia's price, as its chips are known to be expensive.
That's a very real possibility that could truly take some business from Nvidia, not that the market is so small that it will matter. But it's putting the hurt to Nvidia today. It actually acts like a dog -- my dog!
Importantly, Brian also acknowledged that Advanced Micro Devices (AMD) has become a more formidable competitor and is winning business again. He made two points. One is that AMD's making these chips because they are selling into a great market -- something most people do not believe. Second, he's got chips that will strike back later in the year.
Finally, Intel is capitalizing on the big fight between Qualcomm and Apple. You can't talk about being an Apple supplier without risking being cut off, so he deftly dodged my inquiry. But Eric Jhonsa, who writes about these things for TheStreet and is the best out there, suspects Intel is making inroads in the modem business for Apple all over the place, perhaps including the new empowered Apple Watch.
I know it's become fashionable to label Intel as a fuddy-duddy and an also-ran. To me, Intel at 12 times earnings is one of the great bargains out there, and as I said last week, I would make this bet with great comfort, especially as the stock yields 3%.
Sure, it will be hard to beat Nvidia. Yes, AMD is rejuvenated. Absolutely PCs are in decline. But Krzanich sees all that and is doing something about it. For $36, it's worth a ticket to see how he does.