Join us for another exciting episode of the Biz Doc Podcast as we delve deeper into the outlook of small business owners and as we dissect Amazon’s plan to buy the creators of the most popular robot in the market, the Roomba.
Roomba is the product, but iRobot is the company. iRobot was founded in 1990 by three members of MIT’s Artificial Intelligence Lab.
They designed robots for space exploration and military defense; they created a robot to clean up the radioactive material from the Fukushima nuclear reactor disaster. Colin Angle, a co-founder, was the CEO.
In 1998, iRobot was awarded a research contract from Defense Advanced Research Projects Agency (DARPA), a sub-agency of the Pentagon. At that point they were working on the PackBot and an array of defense-related machines.
In 2002, iRobot unveiled the Roomba, which sold a million units by 2004.
In November 2005, iRobot went public on the NASDAQ (under the ticker IRBT) due to their success.
In 2012, the company announced it had acquired Evolution Robotics, the manufacturer of a similar robot: the automated floor mopper Mint. The signs were there that iRobot was dedicated to becoming a robotics company for consumers.
In 2016, they divested (sold off) the military robotics side of the business to Arlington Capital Partners in order to focus more on the consumer market.
Learn the benefits of becoming a Valuetainment Member and subscribe today!
iRobot experienced 10+ years of flat stock price under $50. It had strong stock price growth after divestiture of the military wing, reaching into the hundreds between 2017 and 2019. It then experienced a drop during COVID, a recovery back to the hundreds, and then a slide down back to IPO price.
Even though iRobot seemed to be a company that had already had its heyday, Amazon expressed interested in buying it.
In July 2022, Amazon offers iRobot $61 per share ($1.7 billion). That is an approximately 25 percent premium over $45 trading range—by offering this, Amazon signaled it believes iRobot is undervalued by the stock market.
Amazon aims to expand its presence in the market for smart-home gadgets (with integrated Alexa voice assistant). Amazon fielded a personal robot named Astro, which had failed to resonate with consumers.
In July 2023, iRobot obtained $200 million in debt financing due to decline in revenue, gross margin, and EPS. Amazon revised its offer to $51.75 per share to account for the debt they will have to pay to someone else.
In Sept. 2022, the U.S. Federal Trade Commission raised concerns about market power and privacy issues related to household data collection (the Roomba can apparently collect data on the square footage and other aspects of a house) but did not raise a challenge.
Additionally, UK Competition and Markets Authority raised concerns, but in June 2023 it cleared the deal. The stock subsequently went up.
But then, on November 23rd 2023, it was reported that Amazon was set to get a green light from the European Union (EU) to advance its iRobot deal. Then, just five days later, it was reported that EU antitrust regulators were reconsidering it in the suspicion that the deal might restrict competition.
The European Commission claims that Amazon’s online stores are key to sales of robot vacuum cleaners in France, Germany, Italy and Spain, and Amazon could favor iRobot products over the products of its competitors.
Amazon has since asked for a closed-door hearing, in which it will argue its case that Roomba faces a lot of competition. It is also likely to argue that an irresponsible news leak from Reuters moved iRobot stock price. In the face of sliding results, financial woes are growing.
From this story, Biz Doc pulls out a lesson. When Selling Your Company, Buyers Seek:
- Growing Company
- Accepted, Proven Product or Service
- Scaling Financial Results (at or better than sector)
- Future Growth Potential – Market & Products
- Skilled, Bankable Team
In sum, those lucky enough to be large companies are often unlucky enough to meet regulators wary of market consolidation.
Watch the rest of this Biz Doc episode to hear more details about the iRobot saga, as well as to hear his analysis of the future of small businesses.
Add comment