Good day, ladies and gentlemen, and welcome to the Intel to acquire Mobileye Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. I would now like to turn the call over to Mark Henninger, Intel Investor Relations. Please go ahead.
Thank you, operator. Good morning, everyone, and welcome to the conference call regarding the announcement of Intel's proposed acquisition of Mobileye. A slide presentation and audio webcast will be available with this call, and you can access both by visiting our transaction website, intelandmobileye. Transactionannouncement.com Intel's investor website, intc.com and Mobileye's investor website, ir. Mobileye.com.
I'm joined today by Brian Krzanich, our CEO Bob Swan, our Chief Financial Officer and Amnon Shashua, Mobileye's Chairman and CTO. In a moment, we'll hear remarks from all of them, followed by Q and A. Our presentation and discussion today will include forward looking statements related to our outlook, expectations and beliefs. They're subject to a number of risks and uncertainties that could cause actual results to differ materially from the forward looking statements. Please review our press release announcement following the proposed transaction as well as our SEC filings with further details regarding these risks and uncertainties.
Please note that the tender offer in connection with Installed's proposed acquisition of Mobileye has not yet commenced, and our communication is neither an offer to purchase nor a solicitation of an offer to sell any mobilized securities. Mobilized shareholders are urged to read the tender offer statement, including the offer to purchase and a related offer of transmittal and certain other tender offer documents and the solicitation recommendation to be filed with the SEC when they become available because they will contain important information about the proposed transaction. With that, I'd like to turn the call over to Brian.
Thanks, Mark. I'm excited to be here this morning with Amnon from Mobileye to have a discussion with you all this morning about Intel's acquisition of Mobileye, the leader in advanced driver assistance systems. Together, we expect to be the global leader in autonomous driving and we see this market is growing to an over $70,000,000,000 TAM by the year 2,030. We're truly coming together this morning to combine Mobileye, which is the best in class computer vision with Intel's computing, data center, artificial intelligence and connectivity expertise, really bringing the entirety of the advanced autonomous driving system together in one package. We believe this combination will accelerate this auto industry innovation by delivering the world class edge to edge solutions at a much lower cost, faster time to market and complete single solution that our customers are asking for.
Additionally, this acquisition will be immediately accretive to our non GAAP earnings and free cash flow.
We can
go to the next page, please. We've really talked about this at our Investor Day, how we see the world coming together in this virtuous cycle of growth where the things that are down at the bottom there, the circle are connected through connectivity and that could be Wi Fi and 3 gs and 5 gs through to the cloud. The cloud is where the analytics occurs and then there are accelerants that are in there and we use memory and FPGAs and 5 gs as really accelerating this circle. And we truly believe that autonomous driving is one of the best examples of this virtuous circle of growth. And this acquisition of Mobileye really completes that circle.
It really allows us to provide the complete solution down in those things and devices, which is in this case really autonomous vehicles in general. It can be cars, it could be trucks, but it could be other vehicles as well as autonomy continues to grow. And then what we provide additionally is the computing that's additionally on these things and devices that allows the plotting and driving of the vehicles, the connectivity, the data center, the FPGAs, the memory systems like 3 d crosslink, all of these things are now coming together in one package as a result of this acquisition. As I mentioned earlier, Amnon is on the call with us this morning. And I thought it would be really good to actually hand it over and give you our investor group a little bit of a background on Mobileye and what is the Amnon to go through the next set of files here.
So let's go to the next page and Amnon, hand it over to you.
Thank you, Brian. I'll describe briefly what are the core skill sets of Mobileye and what is our portfolio of products or offerings to the market. It's all based and the fundamental core value is computer vision for driving assist. And in the past several years, we have been migrating this kind of capability to support semi autonomous driving and autonomous driving. So that portfolio includes front facing camera processing, it includes surround multiple cameras, surround camera processing, center fusion, mapping.
We have launched a new technology since about a year and a half ago on how to leverage existing Driving Assist portfolio in order to crowdsource data for automatically building high definition maps. We established a number of deals with the automakers and mapmakers to enable crowd sourcing of this kind of data starting from 2018. Our portfolio includes also driving policy, which is the intelligence underlying driving decisions to support autonomous driving. We have partners we work with 27 car manufacturers. We are the leading supplier of ADAS today in the market in terms of camera based ADAS.
We have partnerships on going forward on semi autonomous driving and autonomous driving. The well known ones are with BMW and Intel that was announced in July last year. With Delphi, we also have partnerships with Audi. We announced other partnerships during the CES. We have altogether 10 production programs in semi autonomous driving and autonomous driving and many scores of production programs going forward until 2026 in ADAS.
In terms of financial results, we have strong financial results. In 2016, revenue was around $360,000,000 revenue with a gross margin of 76 percent and the GAAP operating margin of 34%. We have been growing considerably year over year in terms of revenue and EBITDA. Our headquarters is in Israel. We were founded 18 years ago, 1999.
We have today 6 60 employees. If we go to the next slide, we see there a picture of how Mobileye and Intel are really complementary. If you combine the 2 assets together, you get a very, very powerful proposition. In addition to our core skill sets, Intel has assets in mapping and infrastructure, has assets in data centers, has assets in artificial intelligence and in machine learning, which complements our assets in that area has assets in hardware, has assets in simulators. If you put all of that together, you really get an end to end solution for autonomous driving, from the car to the data center.
Therefore, putting us together, this joining of forces together becomes a very, very powerful proposition, value proposition. I think this is what I have to say about those two slides.
Okay. And if we can go to the next slide, please. Thank you very much, Amnon. So as Amnon said a couple of minutes ago, this really is bringing together all of the assets and as he said, complementary. It really puts together the whole package what that's required to put together autonomous systems in a very complex overview.
It's we believe we've pulled together now the silicon level with Mobilize IQ technology combining it with Intel Xeon and FPGAs. We've got memory and communications with our 3 d cross point, our 5 gs work that's going on and our existing 4 gs work. We're putting together on the software and technology side mobilized very advanced vision systems with our work already with Wind River, with Android, our work with Linux that really allows you to put the complete software system together for the car. And then we've built partnerships and other investments to really work together in this industry. So we talked about BMW and Delphi, but we've done purchases this year that expand well beyond this with Nirvana, which is really one of the most advanced high end artificial intelligence ASIC based systems.
We've done Movidius, which is a lower level computer vision system that gives us the ability to take a look at computing vision computing from top to bottom now with this addition of Mobileye. We've done an investment in here. I'm not going to kind of talk to you about that, but there's a lot of work being done together with our partners across the industry of how do you take this visual information and move that into the precision maps. And so this is really what customers are looking for. Single points that brings together all of these hardware and software technologies from top to bottom that really allows you to build a system.
You need to think of these autonomous cars as becoming much more like a system level component or like we like to talk about it as a server or rack scale system on wheels. If we can take just a moment to go to the next slide. I wanted to take a second and just talk about how we see this market evolving over the next few years. And we talk about autonomy and autonomous driving kind of the levels. And we talk about level 12, which is what you see in your cars today.
It's things like adaptive cruise control. It's like lane departure capabilities, which are using Mobileye technology and in many cases Intel technology as well in existing systems that are really managing, I'll call that, that low level of autonomy. But what you see as we move through the next decade or so is that it moves from this level 12 to level 34. And level 34 where you really start to get hands off control, It starts to combine those systems of lane departure and adaptive cruise control with precision mapping and collision avoidance and many other aspects of autonomy and really provides level 3 and then eventually level 4 autonomous driving systems. And you see how that grows throughout this decade.
We expect level 1 and 2 adoption to continue to grow through this the near term, but the level 3 and 4 adoption is expected to grow to roughly about 30% by the 2,030 timeframe. When you put that together, the very compute intensive operation, especially as you start to move more into Level 3 and 4. And this is where that $70,000,000,000 TAM that we talked about at the beginning comes from. It's the level of engineering. It's the level of computing that has to go into these systems as you move to levels 34, really grows what this TAM is.
If we go to the next page, we think that the market is actually quite a bit bigger than just that $70,000,000,000 TAM though. That $70,000,000,000 TAM was really what I'll call the hardware and software systems that are required to build out the services and hardware systems in the vehicle itself. And you kind of see that in that middle chart there, where you can see on the right hand side, the 2030 chart, the vehicle systems is the hardware and software within the vehicle and the data and services are some of those things like pushing the data out to the cloud and being able to provide some navigational information as well as you go and move along. But if you look to the right hand side, we think there's an additional set of incremental opportunity that drives us to that greater than $100,000,000,000 And that is really this cloud and data center and network connectivity. These cars are going to require higher and higher levels of connectivity and larger and larger amounts of data center and cloud computing as you're starting to increase the mapping requirements, the learning and algorithm improvements as we continue to drive this autonomy and move forward.
And that's where we really see this market moving to. It's a $100,000,000,000 TAM. And this acquisition allows us to play from end to end, kind of when we talk about is from the data center all the way down through the connectivity into the car and right out to the edge of the car and the cameras that are out viewing the world. And as we kind of stay at the bottom there, this combined opportunity, we believe, brings a world class edge to edge solution, which is what our customers are looking for because what they want is lower cost, faster time to market and the ability to go to one place and get a end to end solution. So with that, I'd like to hand it over to Bob Swan, our CFO, and have him walk you through a couple of foils that really talk about the valuation and kind of the dollars and cents of this deal.
Great, Brian. Thanks. As you've heard from both Brian and Amnon, this transaction is primarily about growth and capitalizing on the complementary capabilities of Mobileye and Intel in meeting the needs of customers in the rapidly growing autonomous driving space. We've identified 4 major sources of value. First, the Mobileye business, a great standalone business and global leader in the computer visioning and machine learning space with high visibility design win pipeline, excellent top line growth and strong earnings cash flow conversion.
2nd, we expect the combined business to deliver superior autonomous driving platforms and services to the market faster
at a
lower cost, improving our ability to capture market segment share. 3rd, building on Mobileye's groundbreaking crowdsourced localization mapping product and Intel's strengths in the data center, we see a growing opportunity for services. And finally, while the transaction is primarily about growth, we also see cost related synergies driven by some overlap in our product development roadmaps and on the margins of lower SG and A related expenses and some tax related benefits from the transaction. We expect the cost related synergies to offset a significant portion of the purchase price premium of the transaction. All in all, we see significant sources of value at a valuation we believe makes sense for the mobilized shareholders and a combined business that will create significant value for Intel shareholders.
Next chart, please.
Let me just give you
a quick overview of the transaction specifics. The tender offers to acquire all the mobilized shares for $63.54 per share, representing an equity value of approximately $15,300,000,000 and an enterprise value of approximately 14,700,000,000 dollars We expect to finance the transaction with all cash, leveraging our strong international cash position, and we expect to retain a strong investment grade rating post close. We expect the months. Closing conditions require a tender of at least 95% of the shares of outstanding ordinary shares and the transaction is subject to certain regulatory approvals. With that, let me turn the call back over to Brian as to wrap things up.
Thanks a lot, Bob. So as we've talked about this morning, we've gotten to know the Mobileye team and Omnon over the last few years working with them closely on some important partnerships. Through that collaboration, it's been clear to us that we could accomplish far more together than either of us could separately, really bringing together as we started this conversation 2 world class complementary technologies, allowing an end to end solution for the autonomous driving world. We also, as we've talked about here both by my talk and some of Bob's talk, see this market growing to an over $70,000,000,000 TAM in hardware and software alone. If we look broader than that into Intel's bigger businesses, it's a greater than $100,000,000,000 TAM market.
And while being immediately accretive to our non GAAP EPS and free cash flow, we think this is an excellent acquisition for Intel. And we're thrilled to be welcoming Omnon and the Mobileye team to Intel. And with that, I'd like to hand it back over to Mark to guide us through our Q and A period.
All right. Thank you, Brian. Moving on to the Q and A, as is our normal practice, we would ask each participant to ask one question and just one follow-up if you have one. Operator, please go ahead and introduce our first questioner.
Thank you. Our first question comes from Rod Lache with Deutsche Bank. Your line is now open.
Hi, everybody. Congratulations. I had two questions. One is, I would imagine that Intel had quite a bit of insight into not only mobilized efforts, but other companies as well. And as you work together and proceeded through diligence, I was hoping you might be able to comment on some of the key factors that gave you confidence in the long term leadership of mobilized franchise and how significant REM was in that maybe?
And then operationally, are there any activities that you think may accelerate now in a way that wasn't happening when you were collaborating, for example, with BMW?
Sure. So this is Brian. I'll start with the conversation and Amnon may want to join in after. I think if you take a look at it, we've worked with Mobileye now for well over a year on various projects. And we absolutely looked at the complete and entirety of the industry, continue to come back to Mobileye as being the leader in this computer vision technology.
And it shows in their market share in the existing systems that are out there today, the level 1 and 2 automation. But also as we tested their roadmap for future silicon and software and really Amnon's view of the world of where autonomous vehicles were going and really how do we do things like bring autonomous vehicles to the safety levels that we want to have in vehicles in general and how do we test software for how it gets implemented into vehicles. We came to see that our visions of the future were very much aligned. And as we showed in the slides, the complementary nature of the technology and how the silicon and software could fit together with both Intel's in vehicle silicon and software, but also our cloud, our connectivity and all of that came quite nicely. And that extends, as you just made the comment, all the way out through our REM data, which is really how do you get data from the road, from the car out into those precision maps.
And as we were making investments in things like HERE and other mapping technologies, we saw Amnon's view of that almost identically aligned. And we think that's additionally why bringing the 2 companies together will make solutions come faster and better. To your second part of your question, which was what do we think we can accelerate. First, I want to just make sure we're really clear. For the next 9 months or so, we have to really operate as 2 independent companies.
That's required for regulatory bodies and the regulatory process. So you'll see us continue to behave just like we behave today as 2 independent companies. We believe once we're joined together though, there's synergies that Bob talked about that will allow us to take that spending and both save it. We believe that there's R and D overlap that we'll be able to combine and align to. And like most of our technologies, when you have this synergistic complementary view, we find that if we align those a bit, we can bring solutions that are faster, lower cost and quicker time to market and actually offer better performance than they could being isolated.
And so we expect once we get approval and start to move together, we can really align to that. The last thing I'd say is the confidence in our shared vision is why we were comfortable actually if you look through this is the center of Intel's autonomous vehicle work will move to mobilize headquarters and Jerusalem. So our confidence in the shared vision was such that we're going to move the our program over to the mobilize team combining these teams and under Amnon's leadership. I don't know if, Amnon, you had anything else to add to that.
Yes, yes. I think I'll add a bit more color about the value of joining together. The kind of deep collaboration we need to do in order to accelerate things cannot be done if we are not one organization. Now we need to have deep collaboration on data centers regarding REM, regarding sensing states that will be sent from vehicles. We need to collaborate on middleware software.
We need to collaborate on Fusion. We need to collaborate on simulators. There are many aspects of this kind of collaboration and they run very deep. And practically, this can be done only if we are one organization. And the core proposition that will come out of it is that we'll be able not only to provide better performance, but also accelerate everything and meet the finish line of autonomous driving sooner and better than anyone else.
Great. Thank you.
Thanks, Rob.
Thank you. Our next question comes from Jon Spitzer with Credit Suisse. Your line is now open.
Yes. Good morning, guys. Thanks for letting me ask the question. Brian, I guess my first question is, clearly in hindsight this deal will make a lot of sense if you're able to kind of bring out a system level solution that becomes a de facto standard for autonomous driving. But just given how early we are in the process, why are you confident that this IP is kind of the way to go?
You could one could argue that one of the auto manufacturers that's furthest ahead in autonomous driving Tesla decided to go down a different route. So any sort of color you give us there would be helpful.
Sure, John. So what I'd tell you is that the whole the complexity of this in order to really provide a complete solution is going to be quite high. And I don't believe that every car manufacturer is going to be able to invest the money to do independent development of this. And so what we plan to do is what like we've done with most system level architectures. You can look at what we've done with the data center and what we do with the PC.
As we go and we assemble all of the pieces, so we've talked about how Mobileye is complementary key element in this. We put them together in the most efficient way. We then are able to drive lower cost, faster implementation and faster development in R and D as Amnon just talked about. When you get these together, you can really do the deep integration. And then we believe that scale is going to be important in this market.
And so Mobileye's presence already in the level 1 and 2 systems and the ability the relationships that they have with the OEMs, the ability to take those relationships and take that technology actually and move it up into level 34 will allow us to bring the complete system and the combined entity to that same level as well. So we think that we can allow OEMs to build on top of this base technology, allow them to customize around the personality they want to have for their autonomous vehicle, but provide them a much lower cost, faster way to get to autonomous vehicle implementation. And that's where we think we'll have a differential advantage.
That's helpful. And then as my follow-up, when you think about the endpoint TAM for this market, it's very significant, but it's still well north of 10 years out. I'm wondering how are you going to think about sort of some near term technical and financial milestones once this deal closes?
Sure. So the first key is that you've seen that we already have a joint program with BMW and that system has several technical milestones along the way. For example, there needs to be 40 cars on the road by the end of this year. There's levels of automation that we need to have over the next 2 years as we target that 2021 model implementation. And most people are looking for level 4 type systems around 2021.
In addition though, the mobilized base business and Intel's base level onetwo system has growth projections that we'll continue to drive. And then in some of these side systems like Rev, which is our mapping technology, We already have the relationship with here with both companies and there are set of milestones about how do you start to build and architect the that And so there's a set of milestones along that way that really proves out and shows that the REM technology will work as well. And so don't forget, we look at this as you're going to need all of these segments in order to produce an autonomous car. You've got to have these precision maps. In order to have those precision maps have real functionality, you have to have scale, you have to have enough cars out there seeing as roadside changes, as construction occurs.
And so we think that, yes, there will be individuals off doing these one offs, but scale is going to win in this market because you're going to produce the most accurate maps and the most complete cognitive system.
And John, from a financial standpoint, when we talked to you back at our Analyst Day, we talked about delivering on the present, while also creating the future. And while this is a significant investment, that's an investment that actually checks both boxes because of the high growth and profitability of the Mobileye business. And as I mentioned in the prepared remarks, we see this transaction being accretive right out of the gates. High growth, high net margin business, accretive right out of the gates. And when we looked at the while these are very complementary capabilities, when we looked at our multi year roadmap, we saw overlap between the two companies.
So high growth, highly profitable business with significant cost savings and tax synergies that really make up a significant portion of the purchase price premium. So we think this will be both a deliver on the present accretive transaction in the near term, while a great opportunity for Intel shareholders in the medium to long term.
Thank you.
Thank you. Our next question comes from Stacy Rasgon with Bernstein Research. Your line is now open.
Hi, guys. Thanks for taking my questions. Around the cost synergies, 175, I wanted to ask about the potential for reinvestment, just given the growth goals that we're seeing here and frankly, your own statements at Analyst Day and your history with other things. What are the areas that you think actually might need an uptick in R and D? And what is the prospect for those cost synergies over time to actually be reinvested to hit the growth targets that you're putting out?
John, I think both or Stacy, sorry, both businesses had significant investments in this opportunity over time. When you look at the discussion that we had a few weeks back at our Analyst Day, we highlighted autonomous driving as a meaningful source of investment for Intel on a standalone basis over time. So in our base business, if you will, this was going to be a big investment. That being said, there was real overlap between the two businesses, while primarily these are complementary capabilities, there was really real overlap. So when we look forward over the next couple of years, both in 2018 and beyond, we saw significant duplication in what it is we were trying to do relative to the capabilities that MobileIron already had.
So that was the basis of the the primary basis of the cost synergies. That being said, in our outlook, obviously, this is a big market and our expectations are we'll continue to invest and grow in the technologies that we think are required to win.
Got it. Thank you. And one housekeeping question on the balance sheet. It sounds like using offshore cash, which at least according to my model will pretty much drain you dry. Are you going to be taking on debt onshore to replenish the cash balances?
Yes. As you know, we got well over $15,000,000,000 of our $20,000,000,000 plus cash is offshore in short, medium and long term maturities. So our expectations are we have more than sufficient cash in the near term to finance a transaction. We'll evaluate over time whether to supplement our international cash position with debt offerings. But I think that's a TBD.
Now we've got plenty of cash to handle this.
Got it. Thank you, guys.
Thanks, Stacy.
Our next question comes from Brian Johnson with Barclays. Your line is now open.
Yes. I have a strategic question and a transaction housekeeping question. On the strategic side, I dare say that some of the appeal of Mobileye versus Tier 1s who are developing their own software to the OEMs and to the other Tier 1 partners has been its fast paced startup culture, the whole Israeli startup nation pace that Mobileye was able to drive combined with its focus on safety. What do you have in place in terms of retention of engineering talent as well as preservation of culture? So there isn't from the point of view of big auto that you become just another slower moving legacy tech provider?
So I'll start and then actually I think it would be good for Amnon to kind of add his point of view. So first I'd say I don't look at Intel as a slow moving big auto type of company. I think we're pretty fast and nimble. And if you look at the markets and the technologies we bring out and play in, I think we're as fast as anybody in the market. That said, we have thought a lot about culture.
And Amnon and I both have personally spent a great amount of time talking about how do we really maintain that mobile eye. And you'll hear Amnon often refer to it as a Delta Force kind of a quick moving fast acting culture. That is what I wanted as well in our autonomous driving organization. And it is why we are actually putting this under Omnon and having Omnon report direct to me. And so we believe that keeping the center in Jerusalem where Mobileye is located, which we have a long history of working in Israel, we're in Israel's largest private employer, The long history, we understand Israeli culture.
We understand how to work in Israel, leaving the organization under Amnon's leadership. And I believe we've got good retention with Amnon in this. And Amnon and I have built a very strong relationship over the time. We believe those combinations will keep us with that same culture that you just described, which I actually agree with. My only disagreement was that Intel is a big slow moving company.
I think we're fast. So, Amnon, I don't know if you want to add anything else.
Yes. I embrace every word that Brian just said. And Brian knows that I'll push back if there is anything in the cultural adoption that will prevent us from being a Delta Force. I spoke already with a number of key customers and they all see this very, very positive. It is the same people that are today in front of customers that will remain in front of the customers.
It's the same people who are doing the work on driving assist and semi autonomous driving that will keep on doing that work. What is going to change is that we'll get access to more resources and will enable us to move faster, not slower.
Okay. And just as
a follow-up, just from transaction housekeeping, did you look at other offers? How do you get comfortable on the mobilized side with the price that you're obtaining and so forth?
Umno, you have to answer that one. I can't answer for Mobileye.
If we look at other offers?
Yes.
I think this is a tricky question. I need to ask lawyers what I need to answer here. Maybe the CFO would answer. This is Rolfe. I think that strategically this transaction makes sense for all the reasons that were spelled out in this conference by both Amnon and Brian.
So the fit was very, very obvious, and therefore, we felt very confident with this transaction.
Okay. Thanks. Thanks, Brian.
Our next question comes from Harlan Sur with JPMorgan. Your line is now open.
Hi, good morning and congratulations on the deal. I can appreciate the end to end solution strategy here. If I go one step lower going to the details, how does the team see the silicon integration roadmap? You obviously have the application specific processors such as IQ and you have FPGA. You also have general purpose compute silicon like Xeon in the same system.
So how does Intel see this sort of all coming together? Are you going to be focused on a single chip solution or do you continue to see a multi chip solution kind of longer term? Obviously, system and silicon costs are a potential barrier to kind of longer term adoption here.
Sure. So I'll start and then again, Amnon may have an add in. But first thing I would tell you is that in the near term, there's really there's no shifts, right. Changes in silicon take a few years to lay out. I think we see this world as always having a spread of solutions that are going to be from low cost or lower cost and lower levels of autonomy through very high end systems that have built in redundancy and higher levels of compute on either side of the equation.
But as Anand mentioned earlier, the ability to work closer together allows us to provide all of those solutions faster and at a lower cost. So if there are after closure places where we want to put a single solution piece of silicon, put both pieces of software on there, really drive the costs lower, we can do that now after this acquisition. That said, if the upper end where you really want to have the higher end of compute, you're going to want separated silicon, really application specific capabilities. We can bring to bear all of the other Intel technologies like we've done in the FPGAs. Really take a look at this strategy somewhat similar on the silicon level as we did with Ultera, where what we can do is provide same package, but separate pieces of silicon that provide you a very higher much higher performance and lower cost and a differential advantage that gives you a smaller footprint, lower cost, but a much, much higher performance at the same time than those 2 high end pieces of silicon sitting separately on a board.
And so there this whether you're talking about the high end or whether you're talking about the lower end with lower cost, this now allows these two teams to work together to provide those solutions in a better way. And so I think that's how we see this market playing out is all of those solutions are going to be required for the market, but we can do them better now as a team. Amit, do you have anything you want to add?
Just a few. When you're looking at it from a perspective of a solution, even though silicon is a necessary condition for success, having the right silicon, the high performance silicon, having a scalable silicon, but there is much more than silicon going on here because we're talking about the solution, not only a solution in the car, algorithm, sensor fusion, middleware software, but solution up in the cloud for sending data, there's communication here, there are algorithms in the cloud. When you talk about the solution, then the position of the silicon, although it is important, becomes much, much smaller and we are targeting a solution.
Great. Thank you for that. And then maybe sort of the same question on the data center side. I mean, it's a $40,000,000,000 TAM opportunity as you pointed out. How does this deal further solidify the team's position in the data center?
As you mentioned, the algorithm part, there's the database of information that you have with your REM partnerships. And again, the question here is, does the team envision an application centric sort of data center off the shelf solution that will help your auto OEMs and value chain partners get to market faster? Or similar to sort of the answer to the last question, do you continue to see it being more of a kind of piecemeal solution based on individual cases?
Okay. That's an excellent question actually. So this is one of the key areas of differentiation that we believe we can provide putting these two assets together. And especially under Amnon's leadership and what he just talked about where there's a component here of silicon, but it's the software and it's the system view that's really key. So if we take a look at the data center, you're right, there's really I've always said there's kind of 3 levels of data center that you're talking about here.
There's going to be one level of data center that's going to be really taking the data off the cars, doing the artificial intelligence work to drive the models about how to drive and how to drive in the environments you're in and then pushing those systems back to the car. There's another set around the REM data or the mapping data. And then there's going to be another set of data centers that's really focusing on services that can be provided off the data. Think about that the car now becomes something that can see the world. And once you have that visual data, you can provide new services off visual data that weren't available before.
When you talk about things like cell phones that really can only provide XY data and search data, but don't have a view of the world and visual data. So there's really a continuum of data centers here. By having this complete solution, we can walk in and we've already started to architect this in our partnership with BMW and our partnership with Delphi where and our partnership with here, where together we can go in and architect how the data center is built, how data comes in and out and flows, how the software then takes that data and utilize it in the car or in the mapping. And by working together now, we can go much, much deeper than we could prior as 2 separate companies and really provide an even lower cost, faster and better performing solution. But it's critical to have that connection between the data center and how data is assembled and then analyzed and pushed back to the car, it's critical to have that connectivity between the 2 organizations.
And now we can go much, much deeper and break all the barriers and really let the data flow freely between the IQ systems that are really looking at the world and the Intel systems that are then using that to plot the movement of the car and then the Intel systems up in those data centers. And we think that will be a very much advantageous for our OEM partners because they'll be able to go to one place and get all of those solutions. But also it's going to be at a lower cost and higher efficiency as well.
Great. Thank you.
Thanks, Harlan. And operator, I think we have time for one more questioner.
Okay. Our last question comes from C. J. Muse with Evercore ISI. Your line is now open.
Yes, good morning. Good afternoon. Thank you for taking my question. I guess first question, unusual structure where you're folding in your automotive into Mobileye and running that out of Israel. And so curious given that it's an all cash transaction, how are you thinking about aligning interests and incentives there?
And then I guess my follow-up question would be on the cost synergy side, very important growth potential for Intel. Are we really going to see those synergies that you outlined? Or should we be thinking that you're reinvesting and that, that is not something we should be putting into our model today? Thank you.
Sure. So let me start and then I'll have Bob talk about some of the synergies and the investment model. So, Amnon and I have both spent a lot of time because at the end of the day, this is an acquisition of people and organization and intellect and capability. And we've spent a lot of time really thinking through how to retain the real experts on both sides. And so we've talked about how do we do the organizational structure.
We've talked about how do we retain the top employees. And that includes Omnon and Ziv and how we structured their retention. So there are retention programs and I'm not going to go into the details of those. There are retention programs throughout the organization to really keep employees for a long period of time. But also we believe by doing the acquisition the way we are, where we're moving the center to Israel and moving it under Amnon's leadership, we believe that will be an additional retention factor as well long term.
And so I think we've learned a lot at Intel about how to do acquisitions, how to really adapt. I think we saw what we've done with our McAfee acquisition, we've seen what we've done with our Ultera acquisition. Now we think we've taken all of those learnings into this acquisition and actually even grown well beyond that by doing this kind of structure. And then having Amnon report directly to me and as he said, visibility, I'm very confident that if there's something that gets in his way, he will push back, just having done a negotiation with him. And that is actually a strength that we value and having him have access direct to me will allow that retention and that culture to continue.
And then for the synergy one, I'll let Bob talk a little bit about that.
Yes. As I indicated, we look at this opportunity, this combination and the synergistic value primarily about growth. But at the same time, there are significant synergies from a R and D overlap perspective to a much lesser extent, some SG and A costs. And 3rd, as I mentioned, real inherent tax benefits from the combination. We believe that we can generate those synergies, while also continuing to invest in the business to capture the growth oriented synergies that we've laid out in the plan.
So we feel confident that we can do both, capture the cost oriented synergies and invest in the business to position it to capitalize on the significant market opportunity that
collectively see.
Great. Thank you, CJ. All right. I'd like to thank everyone for joining us today. And operator, please go ahead and wrap up the call.
Thank you. Ladies and gentlemen, thank you for participating in today's conference. You may all disconnect. Everyone, have a great day.