Company profile, iRobot (IRBT: nasdaq)

Business.  iRobot Corp. designs and builds servant robots for household, industrial, and military applications.  Its two business segments are:

  • automated robots, which perform indoor & outdoor cleaning operations for households and generate 55% of revenues. 
  • remote presence robots, which are primarily ground and maritime unmanned vehicles designed to gather intelligence and perform dangerous tasks.

CEO/Chairman Colin Angle (age 46) is a co-founder with previous robotics experience at NASA.  Other co founders have remained with the company since it was founded in 1990.

Business operations.  The company performs its core operations of design, development, and marketing.  The manufacturing and administrative operations are outsourced to 3 Chinese firms (domestic robots) and U.S./Indian firms (commercial robots).  Profits are earned from sales (88% of revenues) and contract research (12% of revenues).  Product distribution channels are online sales, government contracts, and retail stores.  Product price range is $200-$800 for automated robots and $20,000-$195,000 for remote presence robots.

Service Robotics/Personal Robotics Industry.  Service robots are used in non-manufacturing activities.  Personal robots are a subset of service robots which are sold as consumer products.  The service robotics industry was projected to grow from $5 B in 2005 to $17 B in 2010 and $52 B in 2025.   An independent report projected global growth of service robotics from $1 B in 2005 to $8 B in 2010 and $16 B in 2025.  The research challenges are improved performance and product development (design, safety, and cost).  The U.S. lags behind Japan and Korea in product development.

Market position.  The company’s competitive disadvantages are 1) big competing firms and 2) global market dominance by Korean and Japanese robotics firms.  The company’s patents and trademarks provide a competitive advantage.

Primary risk.  iRobot’s primary risks are an unstructured market in the U.S., patent infringement, and dependence on significant revenues from government contracts.

Growth strategy.  The company’s goals are to strengthen current market positions and open new markets.  One new market will be “product maintenance and support”.  The firm’s combined investment in future technologies averaged14% of total revenues over the past 3 years.

Stock valuation.  The common stock (IRBT: nasdaq) is a growth-opportunity stock with a market capitalization of $0.7 B and 67% institutional ownership.  The P/E declined from 88 in 2009 to 27 in 2011 as a reflection of growth in earnings.  Beta is 1.1.  Shareholders are rewarded by share buybacks and growth of assets.  No dividends are paid to shareholders.

Copyright © 2011, Douglas R Knight

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