iRobot Corporation Is Stronger Than You Think

iRobot jumped more than 11% Monday on encouraging patent news, but the data also highlighted one weakness. Here's what investors need to know.

Feb 12, 2014 at 11:04AM

With a market capitalization of just $1.2 billion, iRobot Corporation (NASDAQ:IRBT) is still a relatively small company. But that doesn't mean it can't hold its own with the big boys.

Shares of the robot maker jumped 11% Tuesday, closing at an all-time high after Patent Board ranked the strength of its patent portfolio No. 5 overall in a list of the top 50 competitive electronics and instruments industry leaders. For some perspective, iRobot was sandwiched between two industry giants in the list: Canon ranked just ahead in fourth place, and Samsung trailed close behind in sixth

So what makes iRobot's patents so special?

For one thing, iRobot ranked second in the "Science Strength" metric, which (in Patent Board's words) measures the "degree to which a company's portfolio is linked to core science." iRobot also ranked third in "Industry Impact," which measures how a company's patents affect technology developed by the rest of the industry.

And we're surprised... why?
iRobot has already made the latter clear over the past year, showing it's not afraid to flex its patent muscle.

Last July, for example, iRobot unveiled a patent infringement lawsuit in a German court against five international companies, claiming their strikingly similar robotic vacuums violated five of iRobot's European patents.

Then in September, iRobot obtained preliminary injunctions against Shenzhen Silver Star, when a German court found that three of the China-based company's robotic vacuums infringed four separate iRobot patents. As a result, "infringing goods" were even seized from Shenzhen Silver Star at the 2013 annual IFA consumer electronics show in Berlin.

And while the Roomba is by far iRobot's most popular device, it's certainly not the only one the company has had to defend. In 2007, iRobot had to thwart the efforts of a former employee who stole trade secrets and started a rival company in an effort to copy the widely used PackBot military solution.

iRobot's one "weakness"
In case you're wondering what kept iRobot from winning it all, look no further than its long 13.7-year "innovation cycle time," with which iRobot ranks near the bottom in 48th place.

But that's not a huge surprise, either, considering that last January iRobot CEO Colin Angle made it clear he overwhelmingly favors taking baby steps to build up robotic technology. Specifically, he insisted, "We need to pick applications that have real concrete value to customers, deliver or exceed their expectations, and move on." 

Sure enough, while iRobot did release a slick new floor-scrubbing Scooba robot last month, Angle himself pointed out it was the first major new large-format bot to arrive for the lineup in nearly eight years.

And while I've already suggested iRobot's new brushless Roomba 880 is a massive leap forward from its predecessors, that one still only came a full 11 years after Roomba's original debut.

Foolish takeaway
The thing is, the folks at iRobot know all too well that these kinds of disruptive technologies take time to develop in the marketplace, which is why Angle reminded investors last week that robotic vacuums now represent around 15% of all vacuum cleaner sales. Better yet, he says, that's on par with consumers' adoption of microwave ovens and dishwashers at the same stage in their life cycles, or around 10 to 15 years following their introduction.

Now don't get me wrong: With the stock trading around 30 times next year's estimated earnings, I'm certainly not suggesting investors back up the truck today. However, as I've insisted before, I'm still not willing to part with the shares I already own this early in the game. Over the long term, it seems safe to say the best is yet to come for patient investors down the road.

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Steve Symington owns shares of iRobot. The Motley Fool recommends iRobot. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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