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Seems everywhere you look these days, there are robots.
Since conglomerates like General Electric (NYSE: GE ) first introduced us to them on the assembly line, robots have evolved into something much more personable. Honda's (NYSE: HMC ) built one that can walk, and Toyota (NYSE: TM ) has another that can run. Intuitive Surgical (Nasdaq: ISRG ) just reported another great quarter for robotic surgeons (even as Hansen Medical admits it could use a robotic accountant).
iRobot falls apart ...
For years, I've railed against the unrealized potential of iRobot. No matter how ubiquitous its Roombas are in the living room, its PackBots on the battlefield, the company always seemed better at building robots than at managing its finances. As margins dwindled, inventories ran wild, and iRobot resembled nothing so much as a hapless Roomba, stuck chewing on a carpet fringe and unable to make real headway.
... then pulls itself together
Recent quarters, however, have seen iRobot's financial engineers begin to put the pieces into place for a recovery -- an effort that continued into last evening's third-quarter earnings release. Management's whittling down inventories and ramping up free cash flow (which stands at $21 million for the year, and should surge higher after this holiday season).
Whereas just a year ago, I was musing publicly about the company's nearly empty coffers, today iRobot boasts nearly $63 million in cash, versus a mere $4 million in long-term liabilities.
How has iRobot achieved this neat feat? If you listen to management, a big part of the improvement comes from ramping sales of military robots to combatants in foreign theaters of war, and another big part from expanding sales of "home robots" internationally.
iWish iWas, homeward bound
If I have any reservations about the iRobot story, though, they reside in that second point. International Roomba/Scooba sales surged 55% in Q3, which would be grand news but for one thing: Total sales of such mechanical domestic servants are down 17%, suggesting weak sales at U.S. distributors like Best Buy (NYSE: BBY ) and Sears Holdings (Nasdaq: SHLD ) .
Seems to me, the Great Recession is hindering iRobot's efforts to sell glorified vacuum cleaners at $200 a pop (or more) here on the homefront. If the economy doesn't improve soon, and more consumers don't find jobs sooner, how will iRobot keep the profits improving through Q4?
I don't know the answer. But one thing I do know: If iRobot doesn't get its sales trends turned around soon, then investors could be in for a bleak Christmas.