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Without further ado ...
Today, we'll recap the news from iRobot's (Nasdaq: IRBT ) Q&A session at the 36th Annual JPMorgan Technology Conference held on May 19 in Boston, where iRobot CEO Colin Angle fielded every question the Street could throw at him. As such presentations go, this was a short one. Today, we'll make it shorter still by focusing on the two key points.
Older Americans, newer robots
iRobot divides its business into two key segments, home robots and military robots. Home robots are the (slightly) larger revenue source for iRobot, as well as the way most consumers first encounter the company, so let's begin there. While Angle touched on a number of aspects of the home robotics business, perhaps the most important thing he did was sketch out his long-term plans in this space. In a nutshell, iRobot aims to create products that give homeowners "more time to do other things" than just play house. The holy grail here will be to create gadgets that enable a home to take care of both itself and its occupants.
As America ages, Angle sees us becoming increasingly challenged by mundane housekeeping tasks. Faced with the alternatives of moving to assisted living facilities, or buying robots to help with the housework, iRobot believes people will be inclined to choose the latter.
Sales trends bear that out. While iRobot gave us a nasty surprise earlier this month with the news that one of its retail vendors is going bankrupt and may not pay its bills, that doesn't detract from the fact that retailers like Best Buy (NYSE: BBY ) and Target (NYSE: TGT ) are still selling its pancake-shaped vacuum cleaners like hotcakes. Indeed, despite a slowing economy, iRobot says it's been hitting its targeted "sell-through" rates this year (but bear in mind that the company gets 60% to 65% of its home robot-revenues in the gift-giving-holiday-packed second half of the year).
Fewer soldiers, more Warriors
Moving from the realm of robotic maids to robotic Amazons, let's now look at the military side of iRobot. Three key products were discussed in this realm:
- The SUGV, of which 25 units have been delivered for military testing. iRobot expects to learn the results of the testing in September and, if they are positive, to receive an indefinite delivery, indefinite quantity (IDIQ) contract in late 2008 or early 2009. Angle posited several thousand SUGV unit sales through an IDIQ contract.
- The xBot unexploded ordnance disposal robot, which is already in production. iRobot has delivered 101 xBots to the military already, and the full contract should total about 3,000 units.
- Finally, the Warrior. Whereas the SUGV's main purpose in life is checking out hidey-holes before soldiers enter them, and the xBot aims to de-boom things that usually go boom, the Warrior cranks robotics up one aggressive notch. Angle described this one as a 250-pound "soldier replacement" that is strong enough to lift 150 pounds itself, small enough to enter buildings, and stable enough to carry weapons and do lethal things with them inside those buildings. The Warrior could enter low-rate initial production this year, ramp up production in 2009, and become "one of the drivers" of iRobot's success in 2010.
iRobot continues to evolve its military offerings, and here's why: The U.S. is already struggling to pay for the military we have, and will have real difficulty getting the military we want in the future. Arguing that the average U.S. infantryman costs taxpayers $4 million over his lifetime (in recruitment, training, salary, benefits, equipment, and so on), Angle sees a lot of room for replacing soldiering functions with robotics -- and at a lower cost.
If you figure that the average xBot is going to cost less than $100,000 initially (although servicing, repairs, and upgrades over its lifetime will add to that cost), it seems reasonable to believe that military robots can save taxpayers money. And that's just a secondary benefit to the main goal of saving soldiers' lives. Angle anticipates seeing the military order between 10,000 and 20,000 robots over just the next three to five years -- whereas to date, the company has delivered all of 1,400 robots to the armed forces. Clearly, this could be big business.
Summing up, Angle described iRobot's prospects in military robotics thusly:
It creates an opportunity to be a tier 1 defense contractor. Because the Boeings (NYSE: BA ) , and Raytheons (NYSE: RTN ) , the Lockheed Martins (NYSE: LMT ) doing the GDs missed small robots in their strategic planning. iRobot was there. We won the major contracts. And we are building ourselves out into the major player in small robots.
Which is, I think, just a great note on which to end this column. Fool on!
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