iRobot (Nasdaq: IRBT ) shares fell more than 20% Monday, following news that a major $280 million contract to supply lightweight tactical robots to the U.S. Army was awarded to rival Robotic FX.
The news is a serious setback for iRobot, because the contract was awarded after the army hosted a "drive-off" competition among dozens of robot makers at Redstone Arsenal earlier this summer. Obviously, Army officials saw something they liked very much in Robotic FX's robots.
The exact reasons for the selection weren't outlined by Army officials, but a news release from Robotic FX claims that its robots were selected for their relatively low cost and unique "plug and play architecture." The latter, Robotic FX says, will allow for the easy integration of new wireless communications systems, helping the robot quickly adapt to the military's ever-changing needs.
This is a tough loss for iRobot, but I'd strongly encourage the company's investors -- I'm a shareholder, too -- to take a deep breath before deciding to jump ship.
This past August, the company filed two lawsuits against Robotic FX, claiming patent infringement. More specifically, the company believes that Robotic FX president and founder Jameel Ahed -- a former iRobot employee -- stole iRobot's proprietary designs and patented materials.
I can make absolutely no claim on the validity of these accusations. I merely want to point out that just because iRobot lost this battle, it hasn't necessarily lost the war to become one of the Defense Department's leading suppliers of robots in the future.
Furthermore, it's worth remembering that iRobot makes more than just military robots. It's also a leading maker of domestic 'bots such as the Roomba and Scooba. In the longer term, company officials have indicated that iRobot might also begin developing new robots to service new markets -- for example, helping the world's growing elderly population to remain more independent.
We're still in the early days of robotics, and despite this setback, I still believe that iRobot has a promising future.
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