Why iRobot Needs Better Robots

Don't look now, but it looks like some new companies are going to give iRobot (NASDAQ: IRBT  ) a run for its money.

The maker of Roomba robotic vacuums and PackBot bomb-disposal robots (and, admittedly, a lot of other robots besides) shed 14% of its market cap last week after beating earnings expectations but failing to wow analysts with its guidance for the rest of this year. Shaky guidance, however, may be the least of iRobot's problems. Turns out, the company's starting to encounter some resistance from competitors in at least two of its key markets.

Trouble at "home"
In robotic vacuums-for-the home, for example, iRobot remains the company to beat. Sales grew 20% in the most recent quarter, the company's Roombas continue to dominate search results on Amazon, and it scores impressive reviews on independent websites as well.

All that being said, rivals are now attacking iRobot's monopoly. On the one hand, you've got "dirt" cheap alternatives from China-owned Dirt Devil enticing shoppers at the low end of the income scale. On the high end, Samsung has a new line of "Navibot" vacuums that cost more than the Roombas but whose space-age appearance makes iRobot's products look positively 20th century.

And trouble downrange as well
Meanwhile, iRobot's reputation for innovation in military bomb-disposal robots may also be eroding. Why, in just the past month, the U.S. Department of Defense has placed not one but two separate orders for "Talon" explosive ordnance disposal (EOD) robots from iRobot's British rival, QinetiQ. At $28.2 million in combined value, these contracts come close to equaling the $30 million Pentagon contract that iRobot won that same month.

Now, this week we learn that a previously unheard of company also has a dog in this fight -- or more specifically, a "tiger." According to DefenseNews.com, Turkey's biggest defense contractor, Aselsan, has recently been conducting tests in cooperation with the U.S. and other NATO allies, exploring the potential for use of that company's Kaplan (Turkish for "tiger") EOD robot in NATO units.


Aselsan's line of robotic devices, Source: Aselsan.

Kaplan's claim to fame is that it boasts a three-dimensional ground-penetrating radar system integrated into the robot's design. According to Turkish defense website TRDefence.com, the Kaplan's radar is capable of detecting explosive devices buried several feet underground or concealed inside "thick boxes and packages." So not only can the robot be used to dispose of bombs, but it may also be better at detecting bombs in the first place than are iRobot's 'bots.

The attraction such an innovation would hold for the military is obvious. Just as clear is the need for iRobot to quit coasting on its past successes and start upping its game. Investors won't willingly pay 38 times earnings for low-teens earnings growth, and "same old, same old" products forever -- not when the competition seems to be doing iRobot's job better than iRobot does it itself.


 

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  • Report this Comment On July 31, 2013, at 11:22 PM, jwc99 wrote:

    I tend to disagree with the tone of this article. Most of the "developments" mentioned are old news. Samsung has had an expensive range of robot for a while. They are close to twice the price of high end iRobots and that is why they have never made inroads into the mass market. Who is going to pay $1200 for a vacuum cleaner, however space age it looks, except a few wealthy tech geeks? From the reviews I have seen it also tends to get stuck more than the Roomba. I would expect artificial intelligence and something with the suction power of a Dyson for that price!

    At the low end the dirt devil may be some competition for the iRobot Mint but ia prices ao low that it is mainly likely to attract people who wouldn't have otherwise bought a robotic vacuum cleaner.

    As far as the military competition goes, Qu

  • Report this Comment On July 31, 2013, at 11:36 PM, jwc99 wrote:

    -inetiQ, along with Northrop Grumman have competed with iRobot for years and iRobot has been able to hold it's own. iRobot has never had a monopoly in this field but has managed to compete effectively.

    Overall I think iRobot has competed very effectively as evidenced by the expanding household appliance revenues and its continuing military wins. Strategic purchases of companies such as Evolution Robotics should ensure it has the IP to continue to upgrade its range. Plus the recent expansion into the healthcare field is also very encouraging.

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