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Google's Selling Boston Dynamics -- but Who's Buying?

By Rich Smith – Mar 26, 2016 at 12:13PM

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Yes, Toyota and Amazon are possibilities. But there's one company in particular that would make a much better buyer.


Meet Atlas, designed by Boston Dynamics, funded by DARPA. Source: Boston Dynamics.

It never fails. You buy your kid a new toy, and a few weeks later, you find it tossed into a corner, forgotten and unloved. (Hint: He's probably playing with the box it came in.) Well, something similar just happened at Alphabet (GOOG 2.70%) (GOOGL 2.62%) -- although it took years, rather than weeks, to happen.

Three years after buying itself probably the coolest robot company on Earth, Google has gotten bored -- and is selling Boston Dynamics.

History is awesome
Struck by the potential for building robots, and outfitting them with artificial intelligence, Google spent much of 2013 running around, frantically buying up robotics companies. Ultimately, it acquired seven of them (for undisclosed sums), and brought some 300 robotics engineers in-house. The highest-profile of these was Boston Dynamics, which, in cooperation with DARPA, helped to design the Atlas robot (pictured above), as well as the 30-mph Cheetah.


Image source: Boston Dynamics.

It also built the all-terrain BigDog.


Image source: Boston Dynamics.

All of these robots were believed to be heading to market with the military.

Google quickly tapped its Android team head, Andy Rubin, to run its new robotics unit. After taking one look inside the box he'd been handed, Rubin declared that "the future is looking awesome!" Just one year later, however, Rubin had abandoned the project -- and Google -- departing in October 2014.

But Boston Dynamics didn't just lose its chief. It seems to have lost the confidence of its owner, as well. As reported last week by Bloomberg, Alphabet no longer believes it will be able to "generate real revenue" from Boston Dynamics -- at least not in the near term. As a result, Alphabet has decided to sell it.

But who will buy it?

A slightly less-awesome future
Bloomberg suggests that Toyota Motors (TM 0.85%) or Amazon.com (AMZN 3.15%) are both potential buyers. Toyota is known to make extensive use of robots on its automotive assembly lines. Amazon, which might seem a strange choice, actually maintains a warehouse workforce where one out of every four workers is a robot.

Neither Toyota nor Amazon really looks like a good fit for Boston Dynamics, however, because their humanoid robots have clear application in the military; but they don't look particularly suited for either car assembly or cardboard box shuffling. One company that would have made a much better fit -- iRobot (IRBT -0.02%) -- recently sold its military-robots division to a private equity firm. That probably takes iRobot out of the running but puts the P/E firm, Arlington Capital Partners, in it.

If you ask me, though, the very best match for a DARPA-funded military robot maker like Boston Dynamics is a company that works closely with the Pentagon every day -- and has shown both historic and current interest in military robotics. In contrast to other military contractors who focus on aerospace or naval weapons systems, General Dynamics (GD 0.81%) is best known as the maker of the Abrams main battle tank (a land weapon). Indeed, it has an entire division known as General Dynamics Land Systems, devoted entirely to developing weapons for the ground forces -- which, in turn, hosts a subdivision called "General Dynamics Robotic Systems."

In contrast to Alphabet, whose software focus always seemed a poor match for Boston Dynamics' robotic hardware, General Dynamics seems a much-more logical home for this robotics company. And with General Dynamics sitting on a cash hoard of $2.8 billion, it should certainly be able to afford an acquisition.

Long story short, if Boston Dynamics really is up for sale, I'd be betting on General Dynamics to buy it.

Fool contributor Rich Smith does not own shares of, nor is he short, any company named above. You can find him on Motley Fool CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 288 out of more than 75,000 rated members.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon.com, and 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.

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Stocks Mentioned

Alphabet Inc. Stock Quote
Alphabet Inc.
GOOGL
$100.05 (2.62%) $2.55
General Dynamics Corporation Stock Quote
General Dynamics Corporation
GD
$220.45 (0.81%) $1.78
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOG
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Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$118.01 (3.15%) $3.60
Toyota Motor Corporation Stock Quote
Toyota Motor Corporation
TM
$136.89 (0.85%) $1.15
iRobot Stock Quote
iRobot
IRBT
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