iRobot: Ready to Clean Up
It's been a busy few months for iRobot Chief Executive Colin Angle.
The Burlington (Mass.) company delivered a new version of its hit Roomba vacuum-cleaning home robot (BusinessWeek.com, 8/21/07) in August, then confronted production problems that hurt its third-quarter results. In November, the company won an injunction against a competitor, Robotic FX, founded by a former employee accused by iRobot (IRBT) of stealing trade secrets. On Dec. 18, iRobot won a $286 million contract to supply the U.S. Army with robots that can disarm bombs, overturning the Army's original decision to award the business to Robotic FX. Meanwhile, iRobot is developing a new type of product, a "virtual visiting" robot called ConnectR, that combines robotics with an Internet connection to help users stay in touch despite distances.
Angle spoke recently with BusinessWeek.com technology writer Aaron Ricadela about iRobot's last quarter, the lawsuit, and the future of home robotics. Edited excerpts follow.
In October you raised the company's revenue outlook for 2007 to $240 million to $250 million, vs. the $237 million analysts were expecting. One of the reasons you cited was strong orders for home robots. How have you been trying to broaden the market?
What we've been trying to do with the launch of the [new] Roomba 500 series is build a robot that meets the dream of what a vacuum-cleaning robot is supposed to do: that you turn it on and have your home reliably taken care of for years afterward. We had some challenges we hadn't fully solved on the earlier products, like vacuuming Oriental rugs with tassels, so we needed good engineering to solve the problem. So that's an example of a broadening of the market. We also needed to improve our navigation for successfully docking the robot. And we have lighthouse beacons that help the robot find its way back home, which is a big step in reliable cleaning. Cleaning your home every day for three to five years is a benchmark that's very hard to achieve. So this was a ground-up redesign over three years in the making.
We're trying to focus on the chief household officer vs. early adopters, or people who are fascinated by robot technology. We're positioning Roomba as a durable appliance that will give you freedom to do more of what you want to do during the day. As you look at your life inventory, and the amount of time you spend doing things you enjoy vs. those you dislike, we're asking, "How can we show you that robots can give you more freedom in your life?" That messaging, and delivering the goods in the product, is important—that robots aren't things of the future, but very practical today.
Despite the increased fourth-quarter revenue forecast, iRobot had a $1.4 million loss in the third quarter, due in part to production delays for the new Roombas. What happened, and what have you done to fix the problem?
What happened there is very simple. We were bringing out a new product with an entirely new factory and a new manufacturing partner, Kin Yat in Southern China. The risks were higher than we'd modeled, and it set us back a number of weeks. That shifted a huge amount of revenue from the third quarter into the fourth. I'm not reaffirming guidance—that would be a material disclosure. But at that time we signaled that this was more than a shift. We left bottom-line guidance constant. Kin Yat is a high-quality, excellent manufacturer. But building robots is something that very few manufacturers on the planet know how to do. Our other manufacturer, Jetta, also a Chinese company, did the 400 series for us. We're still using them for projects. But this was a conscious diversification move.
Where are the opportunities to use robots to tackle new kinds of distasteful tasks, like you've done with vacuuming and mopping?
Vacuuming has been a success. Our Scooba [mopping robot] and Looj [gutter-cleaning robot] help with maintenance tasks that suffer from neglect. Our ConnectR robot, which we'll test next year, [will] give you some additional opportunities to have positive experiences, like spending more time with your family.
While we haven't announced any new products and won't be announcing anything for quite some time, for everything from raking leaves to shoveling snow to mowing lawns or washing windows, robots would be doing us all a service if they could take on some of that burden. In the game of robots you're always fighting against the cost of hiring someone to do that task for you. There are upper bounds on what these devices can cost.
You've sued a competitor, Robotic FX, for misappropriating trade secrets. Its founder, Jameel Ahed, used to work for you. Bring us up to speed on where things stand with the suit.
We brought a suit against this former employee who stole trade secrets and infringed on our patents. The preliminary injunction was given by a judge in light of the facts of that case; it's given when the judge feels it is highly likely the outcome of the trial would be in favor of the prosecution. And the injunctive relief is a very strong statement by the judge that she felt there was very strong evidence that trade secrets were misappropriated and used. The injunction prohibits Mr. Ahed and Robotic FX from using those trade secrets in the sale of products. This is a great intermediate outcome.
What do you think of Pleo, the robotic dinosaur from startup Ugobe that just hit the market? It's being billed as quite an advance in robotic toys.
A robot pet that can provide some companionship and be a little artificial life form people can connect with is a great idea. Furby [the '90s hit toy designed by Ugobe founder Caleb Chung] sold 40 million units, and at least half of them weren't sold to children. There's certainly a need or desire for some device in people's lives they can interact with. And perhaps taking care of a pet is too much of a challenge or not allowed. It's this human need of making people feel less lonely. Pleo's exceptionally well done, but it's priced around $350, so it's not a cheap device. It will be interesting to see how big sales are; is it going to be a market of thousands, or hundreds of thousands? That remains to be seen. But it's a technological marvel, and from everything I've seen, pulls at your heartstrings.