10 Minutes On Amazon’s Real Reason for Acquiring iRobot with Voicebot’s Bret Kinsella (Video)
Amazon last week announced it was acquiring iRobot for $1.7 billion. The Roomba robot vacuum maker just posted questionable financial performance and a rapid erosion of its cash position. iRobot was certainly going to need to raise cash this year as retailers have cut back on orders, and its direct-to-consumer business isn’t making up for the shortfall. But this isn’t purely a rescue package by Amazon.
In this video essay, I break down the recent financial performance of iRobot and what makes it attractive to Amazon despite recent challenges. I also walk through the smart home and robot synergies that we should expect Amazon to gain from the purchase.
Deteriorating Financial Performance
If you are wondering how badly iRobot was struggling, the chart below will offer some clarity. Revenue was down 18% in the first half of 2022 compared to 2021. The year-over-year comparison of the second quart is even worse. Revenue declined 30%. Many of the forecasted retail orders and direct-to-consumer sales for 2022 have not materialized. That has tied up a lot of iRobot’s cash in inventory. In the past 12 months, iRobot has shed over 70% of its cash. iRobot has also shed about two-thirds of its market cap in 19 months. Ouch!
Smart Home Synergy
However, there is a lot of synergy between what Amazon is doing in smart home and the Roomba robot vacuum cleaner portfolio. Amazon can bundle Roomba’s with its other smart home devices, including smart speakers, to drive incremental sales and drain down the inventory surplus. Amazon has a successful case study in this regard with Ring. One caution I would have on this thesis is that robot vacuum cleaners are a more mature market now than video doorbells were in 2018. With that said, there is clear synergy.
The other smart home synergy is in relation to home robots. iRobot knows a lot about robot technology, some of which is embedded in the company’s 1,500 patents. Amazon has expressed interest in this space and is testing out the Astro Robot with beta testers. iRobot technology could offer Amazon a boost or at least protect it from patent litigation. The full breakdown, including a reference to the ill-fated Fire Phone, in in the video. Let me know what you think about the news.
More About 10 Minutes On Interview Series
This video is part of a new series called 10 Minutes On by Voicebot.ai. The discussions and interviews focus on a single topic, are short enough to watch between Zoom meetings, and long enough to share some interesting insights and solution details. You can find more video interviews like this on Voicebot’s YouTube channel or by clicking Videos in the website’s top navigation bar.