iRobot Doubles Down on Consumer Robots By Selling Military Unit

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iRobot, founded in 1990, has made its name by selling vacuum cleaner robots, although in the early days the company made its money from military robots. For the first 10 years of its existence, iRobot was purely focused on the space and defense sector with its Genghis test platform and Ariel mining robot. iRobot won a major DARPA contract in 1998 to develop a tactical mobile robot, which eventually led to the development of Packbot, the company’s highly successful land mine clearing robot, which also played a role in rescue operations after the September 11 terrorist attacks on the World Trade Center in 2001. A year later in 2002, iRobot’s first generation vacuum robot Roomba was launched, and since then iRobot has sold more than 14 million consumer robots. On the other hand, it has only sold around 5,000 military robots.

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(Source: iRobot)

iRobot’s 2015 revenues were $616.8 million, a growth of 11% from 2014. The majority of this growth came from its consumer robotics business, which grew by 25%, with China being a major driver of this growth. As a result, iRobot has decided to sell its military robot business to Arlington Capital Partners for $45 million. With more than 90% of its revenues coming from consumer robots, and having had a highly successful run in China over the past few years, iRobot thinks it would be best to look at the future, and focus its resources on the growth of its consumer robotics business.

This development is very much in line with how Tractica views the robotics market, with consumer robots entering a second age, in which companies like iRobot and a host of new players from Silicon Valley are working to realize some of the unfulfilled promises of the past. Around the middle of the last decade, there was a call to arms by pioneers like Bill Gates to get a robot into every home, which was soon overshadowed by the iPhone and the subsequent smartphone revolution. Vacuum robots are expected to continue playing a lead role in the consumer robotics market, as illustrated in Tractica’s recent report on Consumer Robotics, with the category estimated to constitute 45% of consumer robot shipments and 52% of consumer robot revenue by 2020. iRobot is seeing increasing competition from companies like Ecovacs, Neato, and Dyson, with China being a major market for all of them.

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Although Tractica sees the market for military robots continuing to grow, most of the innovation and growth is coming from drones rather than mining robots, which is iRobot’s focus. The timing of iRobot’s military unit sale is evidence that iRobot doesn’t want to miss out on the growth opportunity in the consumer robotics market and its leadership position within it, and rather than divert its attention from the opportunity at hand, it might be better placed to innovate on vacuum robots, but also invest in R&D focused on other robot types like family robots, where a lot of activity is taking place today.

One area that iRobot has been pursuing is that of creating a smart home platform on the back of its Roomba robot. Using 3D mapping capabilities, the company wants to locate and track objects in the home, and eventually integrate other smart home devices into its platform, possibly also creating a companion family robot. While this is quite an ambitious plan, in our analysis iRobot is better off focusing its energy and resources in realizing this plan after divesting its military unit, which until now was diverting a lot of R&D dollars from consumer robotics.

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