Call it "corporate empty nest syndrome," or whatever you like, but iRobot's (NASDAQ:IRBT) got it bad.
A couple of years ago, we told you how one iRobot ex-employee left the company with a few boxes of proprietary IP in tow, set up a garage shop as "Robotic FX," and attempted to land a contract for nearly 3,000 military robots that pitted him against his old employer. (He almost succeeded. Luckily for shareholders, iRobot vaporized its nascent rival in court.) The latest news out of iRobot has a familiar ring to it, but hopefully a more amicable endgame.
Baby birds leave the nest
Last year, as you may recall, two of iRobot's co-founders -- first Rod Brooks, and then Helen Greiner -- departed the company to work on their own pet projects separately. Brooks proceeded to establish Heartland Robotics, focusing on building the blue-collar factory robots that iRobot has heretofore avoided. Greiner, we now learn, has set her sights a bit higher.
In a brief announcement on xconomy.com yesterday, we learned that Greiner has cut short her retirement to establish a "stealth" company (meaning few details are available, nor will they soon become so) under the romantic moniker "The Droid Works." Details remain sketchy, but Greiner reportedly told one reporter than Droid Works' first project will be something "in the UAV space."
Will these chickens come home to roost?
This could have been bad news for iRobot. No sooner had iRobot dispatched one upstart rival in the military robotics market than a new competitor took its place. But if Greiner's shop will focus on flying robots, that's more the province of aeronautical giants Boeing (NYSE:BA) and Northrop Grumman (NYSE:NOC). Long story short, for the time being, it appears that both of iRobot's newly spawned scions have elected to fill niches in which the parent company does not play -- industrial robots for Heartland, unmanned aerial vehicles for Droid Works.
Thank goodness, the kids found jobs
So, crisis averted. But could the absence of bad news here eventually turn into honest-to-goodness good news? I'm feeling downright optimistic about these latest developments, thanks in part to my 2007 interview with iRobot CEO Colin Angle about his company and its prospects.
Back then, I gave Angle a list of companies working in the robotics space -- Toyota (NYSE:TM), Honda (NYSE:HMC), and others -- and asked him which posed the greatest competitive threat to iRobot. His response: "What we would like is for companies interested in the emerging robot industry... to focus on finding new practical applications that can help grow the marketplace. There are so many opportunities out there, we could be helping each other grow the entire industry."
Do you hear what I hear?
Later in the interview (read the whole transcript as part of your free trial subscription to Motley Fool Rule Breakers), I compared iRobot to an early-stage -- i.e., pre-Xbox -- Microsoft (NASDAQ:MSFT). I quizzed Angle about whether iRobot might improve its profit margins by focusing on making the software "brains" for other people's robots, and leave the lower-margin manufacturing of robotic hardware to third parties?
The idea wasn't exactly new to Angle, and his answer came readily:
It would have been very difficult for Microsoft to exist without IBM (NYSE:IBM). In the robot industry, there is no IBM. Thus, iRobot has been playing the role of both hardware and software developer. We are focused on developing enabling technologies that allow third parties to develop for our common platforms, and one day perhaps develop their own platforms using our software and sensor technologies. Ten years from now, I believe that iRobot will still be making complete robots, but a large part of our business will have grown up around licensing our technology to other robot designers.
Do you see what I see?
Both of the recently departed iRobot cofounders, Greiner and Brooks, remain active members of iRobot's board of directors. Judging from what we know of their companies, neither one is now a competitor to iRobot -- and either may become its partners as their new businesses get off the ground.
Fools, I believe we're seeing the birth of a network of potential robotic software licensees for iRobot. If Greiner's and Brooks' shops focus on making new robotic "bodies," while iRobot focuses on robotic "brains" -- each party concentrating on doing just one thing well -- this could yield improved profit margins for everyone involved. And it could yield happy results for iRobot shareholders -- in a lot less than "10 years."
