This past week, my fellow Fool Rick Munarriz reported that iRobot (Nasdaq: IRBT ) surprised Wall Street by reporting earnings of $0.39 a share -- more than four times its expected earnings of $0.09. This greater-than-expected growth was attributed in large measure to the strength of its military and government division, which has sold a number of PackBot robots to the Defense Department.
While the sale of robots -- which have seen extended duty in Iraq and Afghanistan and are proving themselves to be extremely helpful in detecting roadside bombs -- is good news, the cloud hanging over the company's head is that military sales could diminish if the U.S. begins phasing out its presence in Iraq.
It's a legitimate concern -- especially in the next 18 to 24 months -- but long-term investors have good reason to be optimistic. This past weekend I read a very interesting article in the British newspaper The Guardian.
Here's the operative paragraph:
By 2015, the US Department of Defense plans that one third of its fighting strength will be composed of robots, part of a $127bn (68 billion pounds) project known as Future Combat Systems (FCS), a transformation that is part of the largest technology project in American history.
One-third of our fighting strength will be robots. One-third! Even if that number is on the high side (and I have been trying to confirm where the author obtained the figure, but have been unable to), I agree with the broader point that the use of robots will only continue to grow more pervasive in the future.
This is because robots can do more dangerous things; they don't need sleep or rest; they're constantly improving in terms of their capabilities; and, best of all, if one becomes a casualty, well, it's a robot.
Now, it is important to understand that iRobot is not the only robot manufacturer with government contracts. Foster-Miller (a subsidiary of Qinetiq), John Deere (NYSE: DE ) , and a number of smaller companies also make robots. Furthermore, the figure for robots also includes Unmanned Aerial Vehicles, of which Lockheed Martin (NYSE: LMT ) , Northrop Grumman (NYSE: NOC ) , and Boeing (NYSE: BA ) are major manufacturers.
Nevertheless, in the defense contract world, the U.S. government often likes to have multiple contractors in critical fields. Now that this is poised to become one of those mission-critical fields, it is clear that iRobot is well-positioned to be at least one of the main beneficiaries of the Defense Department's push into robotics.
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Having grown up with Rock 'Em Sock 'Em Robots, Fool contributor Jack Uldrich likes the idea of robots -- instead of people -- fighting. He owns shares in iRobot. The Fool has a strict disclosure policy.