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 Rethink Robotics co-founder and CTO, former CSAIL director and all-around robot luminary Rodney Brooks joined the Disrupt New York stage this afternoon to tackle some complex questions, ranging from robots place in the living room to the...



iRobot Corporation (NYSE:IRBT) designs, develops, and markets practical robots that tackle dull, dirty and dangerous tasks for consumers, governments and industry. iRobot's two divisions, Home Robots and Government & Industrial Robots, have developed millions of cleaning robots and over a thousand tactical robots in use around the world today. iRobot's successful line of home robots and combat-proven government and industrial robots have helped the company maintain a market-leader position in the emerging robotics industry.

Company Overview

iRobot was founded in 1990 by roboticists Colin Angle, Helen Greiner and Rodney Brooks after working together in MIT's famed Computer Science and Artificial Intelligence Laboratory.[1] iRobot was founded with a goal to "design and build innovative robots that make a difference and are adaptable for use in a broad range of applications."[2] The company's mission is to build cool stuff, deliver great products, make money, have fun, and change the world.[3] iRobot Corporation went public on November 9, 2005 with an IPO priced at $24.00 per share underwritten by JP Morgan Stanley.[4]

Business Segments & Revenue Mix

iRobot generates revenue from product sales and commercial and government research and development contracts. iRobot generates the majority of their revenue from their home cleaning robots and their PackBot and SUGV tactical military robots. For the fiscal years ended January 2011 and January 2010, these product revenues accounted for 89.9% and 87.8% of total revenucompany revenue for the fiscal year ended January 2011.[2] In 2010, 87.6% of military product revenue and 96.5% of funded R&D contract revenue came from a single source, contracts with the US federal government.[2]

Home Robots

iRobot currently offers several robots designed for consumer use for cleaning inside and outside the house. These products range in price from $129 to $599 depending on performance characteristics. iRobots current product line includes the Roomba, Scooba, Verro Pool cleaning robot and Looj gutter cleaning robot.


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Various models of iRobot's Roomba vacuum, its flagship consumer product.

iRobot released their flagship home robot, the Roomba, in 2002. The Roomba is an automated robot vacuum cleaner. Roomba's disk shape allows it to easily clean and navigate a room while vacuuming under beds and other difficult to reach places. iRobot continues to release several new models and improve the Roomba's cleaning quality and efficiency.;hilruwfgaow;efghinaihfnasidjvnadsvjnsdavjasdnvasjjv;asdvnksajjjjjjjjjjjva;sjnv asjokdnv;as jnvvvvvvvvvvvvvvvvvvvv


iRobot released the Scooba, an automated floor sweeper and cleaner, in December 2005. The Scooba uses the same technology and form factor as the Roomba, allowing it to simultaneously sweep, wash, scrub and dry hard floors. Unlike a conventional mop that spreads dirty water, Scooba only uses fresh water and cleaning solution stored in its clean tank.

Verro Pool Cleaning Robot

In 2007, iRobot expanded its family of popular home robots by introducing the Verro Pool Cleaning Robot. Users simply drop the robot into their pool, and it begins to clean. The robot features a powerful vacuum and filtration system that picks up and traps dirt, dust, algae, bacteria and particles as small as two microns.[5] IRobot currently offer 3 models with varying features ranging in price from $399 to $1,099.

Looj Gutter Cleaning Robot

iRobot's Looj gutter cleaning robot makes gutter cleaning fast and easy by reducing the need to climb and reposition the ladder multiple times. The Looj was the winner of the 2008 Best of CES Innovations Award. iRobot currently offers three models ranging in price from $129 to $169.[6]

Government & Industrial Robots

iRobot currently offers both ground and maritime unmanned vehicles priced between $20,000 and $195,000 per unit, depending on configuration and order quantity.[2] As of 2011, over 3,500 robots have been delivered and are keeping soldiers, first responders, and police out of harm's way. iRobot's current government & industrial robot product line includes the combat-tested PackBot, the SUGV (Small Unmanned Ground Vehicle), the low-cost Negotiator, and the 1Ka Seaglider.


iRobot unveiled its first tactical robot, Genghis, in 1991. Genghis was designed for extraterrestrial exploration and well as a test platform for researchers to build upon.[7]


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A Packbot Scout searches for booby traps on this truck at Najaf airfield, Iraq.

In 1998, the company was approached by DARPA, the central R&D organization of the Department of Defense, to create a robot as part of its Tactical Mobile Robot program.[7] This research contract led to the development of iRobot's first PackBot, a line of small, unmanned tactical ground robots. Since its inception, PackBot has provided users with "eyes and ears" into the world's most dangerous and inaccessible areas. In 2002, PackBot was deployed to Afghanistan to help US soldiers with bomb detection and disposal, reconnaissance, and other dangerous missions. PackBot has also helped search through debris at the World Trade Center in New York City after the Sept. 11, 2001 terrorist attacks and has taken radioactivity readings in Japan's damaged Fukushima Daiichi nuclear power plant.[8] Since 2002, over 3,000 PackBots have been delivered to clients around the world with the vast majority being used for operations in Iraq and Afghanistan.[9]

Small Unmanned Ground Vehicle (SUGV)

The SUGV was developed by iRobot & Boeing under a strategic alliance that began in 2007. It was designed as a robot to give soldiers real-time awareness of critical situations. The lightweight robot (< 30 lbs) is designed to be carried and controlled by soldiers using a modified Microsoft Xbox 360 controller.[10] Over 300 SUGVs were delivered to to the US Air Force's Explosive Ordnance Disposal (EOD) unit in 2010 as part of a government contract with an initial value of $3.84 million.[11]


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iRobot Seaglider deployed in the Gulf of Mexico

The iRobot Negotiator is a low-cost unmanned robot used in civil response operations by SWAT teams or other first responders.


The Seaglider is a deep-diving unmanned underwater vehicle (UUV) initially developed by the University of Washington. The propeller-less and motor-less Seaglider was designed to roam the oceans for up to 10 months on a single battery charge while taking various scientific measurements and observations. In 2008, iRobot signed an exclusive licensing agreement with the University of Washington to commercialize the Seaglider robot.[12] In the spring of 2010, the Seaglider was deployed in the Gulf of Mexico to help monitor the oil spill by providing persistent observation and gathering oceanic data.[13]

Strategic & Competitive Analysis

Porter's 5-Forces Analysis

Threat of entry of new competitors

The threat level of new competitors entering the robotics industry is medium-high. The robotics industry is a niche market that is rapidly evolving. As the market continues to expand, new competitors will enter the industry. New competitors entering the industry would need extensive experience in robotics as the industry requires companies to have large amounts of engineering and robotics-related human capital. Such expertise would need to come from government-sponsored laboratories or universities focused on robotics-based research and development. Some of iRobot's government contracts allow the US federal government to disclose technical data to third parties.[2] The government could provide patent and technical data to third parties as a way to establish additional sources of robots and negotiate for reduced prices. Third parties who receive this information from the government could possibly compete with iRobot in the commercial sector as well as the government & industrial sectors.

Intensity of competitive rivalries

The intensity of competitive rivalries in the robotics industry is low-medium. iRobot competes with developers of other floor cleaning robots, developers of small unmanned ground vehicles, established government contractors working on unmanned systems, and developers of small unmanned underwater vehicles.[2] The niche market for consumer and home robots is small but growing rapidly as demand increases and competitors release new products that are competitively priced with similar performance and functionality. iRobot will face increased pressure from these competitors as the market continues to grow. iRobot also faces intense competition from other companies vying for lucrative government contracts. Many of these competitors for government contracts have substantially greater financial, marketing, and R&D resources than iRobot. Increased competitive pressure could force iRobot to reduce their prices if they lose sales or market share.


Currently there are only a few substitutes for robots in the commercial and government & industrial sectors. iRobot's market-leading position will be tested as the demand for consumer and military robots increases. New domestic robots from Electrolux, Samsung and Evolution Robotics have threatened the Roomba's dominance. Because of the nature of the military-industrial complex, iRobot will always compete with substitute products and technologies from other companies vying for government contracts. iRobot must focus on new product development and customer support if they are to remain competitive in the military robot sector.

Bargaining power of customers

The bargaining power of iRobot's customers is high. In 2010, iRobot derived 38.4% of total revenue, directly or indirectly, from the US federal government.[2] Since iRobot must compete for government contracts with other companies, the US federal government has a large amount of bargaining power when it comes to contract price, length, terms and provisions. Any reduction in the amount of revenue derived from government contracts without an offsetting increase in new sales to other customers would adversely affect iRobot's operating results. iRobot's traditional non-contract customers also have a high degree of bargaining power. These customers have many options including traditional manual upright vacuums and other competing robotic vacuums.

Bargaining power of suppliers

The bargaining power level of iRobot's suppliers is medium. Raw materials used in robots are a significant cost item for iRobot and can fluctuate on a periodic basis. Suppliers of steel, plastic, rubber and electronics are numerous and allow iRobot and its contract manufacturers to find quality raw materials at the best possible price. Labor costs are also a significant cost of revenue for iRobot. iRobot outsources the manufacturing of their home products to China where labor is plentiful and costs are favorable compared to the rest of the world. This has allowed iRobot to cheaply manufacture their domestic robots. iRobot's labor costs for the government segment are much higher because they are produced in the United Sates. iRobot produces government robots domestically because intellectual property can easily be stolen when manufacturing abroad.

SWOT Analysis


iRobot's major strengths are their human capital and intellectual property. iRobot's founders worked in MIT's Computer Science and Artificial Intelligence Laboratory for several years gaining the knowledge and experience necessary to operate a commercial robotics company. Competition for hiring engineers with high levels of robotics experience is intense. iRobots talented employees and extensive collection of patents will give them a competitive advantage when attracting and hiring the top talent in the industry. iRobot's extensive backlog of government contacts and its longstanding relationship with the US government will also prove to be a major strength and benefit the company into the future.


One of iRobot's glaring weaknesses is its continued reliance on several single source contract manufacturers in China. iRobot could suffer from delays, lost sales and revenue if these companies terminated their manufacturing contracts or failed to meet production requirements. Moreover, iRobot and its manufacturer's also rely on short-term contracts with a limited number of suppliers for raw materials. Any hiccups in the supply chain will require iRobot to locate alternative suppliers, which could take months. iRobot must develop new or alternative manufacturing and supplier relationships to strengthen its production capabilities and avoid future supply chain issues.


One of iRobot's largest opportunities for growth is the continued transformation of the United States' armed forces into a unmanned fighting force. iRobot's existing relationship with the US government allows them to take advantage lucrative government research and development contracts to create the robotic soldiers of tomorrow. The technology developed from government-sponsored R&D products can also be used to create new consumer and industrial products allowing iRobot to enter new markets.


Since iRobot depends on the US federal government for a significant portion of its revenue, cuts to defense spending could negatively impact the company. The ongoing battle over the budget in the United States has cast doubt on future defense spending. These cuts would hurt iRobot's revenue from lucrative research and development contracts with various organizations within the United States government. Another threat to iRobot's future success is increased competition within the growing robotics industry. iRobot has enjoyed relativity little competition and competitive rivalries. New competition from larger and more diversified companies would threaten iRobot's market-leadeing position.

Financial & Operating Metrics

This chart displays iRobot's recent revenue and earnings history
This chart displays iRobot's recent revenue and earnings history

iRobot's success depends on their ability to discover, develop, and market products that use the innovative technologies they develop. Research & Development Expense is an especially important component of iRobot's expenses, allowing them to create innovative technologies that provide unique competitive advantages. In fiscal year 2010, iRobot increased its research and development expense was $24.8 million, a 68.2% increase from 2009.[2] iRobot is committed to consistently maintaining the level of innovative design and development of new products and has significantly expanded their R&D capabilities. This has allowed to use free cash flows on R&D activities. The table below compares IRobot's FCF margin with other industry competitors. One useful metric used to evaluate the effectiveness and efficiency of R&D expenditures is the R&D/Sales Ratio. For the fiscal years ended January 1, 2011 and January 2, 2010, research and development expense was 6.2% and 4.9% of total revenue, respectively.[2] It is important for iRobot to realize maximum returns from their R&D expenditures by focusing investments on high value areas within the robotics industry such as healthcare. iRobot's rising R&D/Sales Ratio shows these investments are not as profitable as they once were. iRobot's ability to create unique value propositions and refocus R&D expenditures on high value areas within the industry will help it maintain its market-leading position in the years to come.

This chart compares iRobot's trailing twelve months (ttm) free cash flow margin with other industry competitors.
This chart compares iRobot's trailing twelve months (ttm) free cash flow margin with other industry competitors.

Value Chain Analysis

Product Development

iRobot's core competency is the design and development of robots. iRobot's research and development efforts are not only a way to develop new products, enhancements and accessories but also an important revenue source predominately supported by contracts with US governmental research organizations. In 2010, approximately 50.4% of iRobot's R&D spending was funded by government-sponsored research and development contracts.[2] These lucrative government contracts are essentially a "free" source of R&D for the company and help accelerate the development of multiple technologies at once. iRobot retains ownership of patents and know-how and is generally free to develop other consumer or industrial products by fully utilizing the technologies developed during government-sponsored projects. Likewise, iRobot uses the same strategy in reverse to design and develop products for government and industrial applications. As of January 2011, iRobot holds 82 US patents and over 150 pending patent applications.[2] iRobot frequently uses strategic alliances to leverage the work of individuals and organizations that offer specialized technological expertise. These relationships help iRobot develop industry-specific technologies and reach new market segments. Certain models of iRobot's robots are designed with open interfaces and serial ports that allow third-party developers and individuals to modify and improve their product. iRobot's release of the Roomba's application programming interface (API) has created a large community of Roomba hackers online who modify, improve, and create new accessories for the Roomba. This has broadened the applications and appeal of iRobots products at little cost by creating a durable, dependable and affordable platform for doing robotic research.[14]


iRobot's manufacturing strategy is to outsource non-core competencies, such as the actual production of robots, to third-party entities skilled in manufacturing.[2] This strategy allows iRobot to focus their engineering expertise on the research and development of consumer and military robots. iRobot outsources the manufacturing of their consumer products to three contract manufacturers, each operating out of a single plant in China.[2] iRobot's government robots, such as the PackBot and SUGV, are produced by an Ohio-based manufacturer.[15]

Marketing & Brand

iRobot has built a trusted, recognized, and award-winning brand by producing high-quality robots. This reputation along with grass-roots marketing efforts have made customer word-of-mouth and press coverage significant drivers of the brand's success to date. iRobot plans on using national advertising, trade shows and direct marketing to improve brand awareness by associating it with innovation, reliability, safety and value.[2]

Sales & Distribution

Home Robots: iRobot sells its consumer products through retailers, distributors, and the internet. In the US, iRobot's products are sold through a large network of over 30 national retailers and smaller domestic distributors.[2] iRobots's products are also sold internationally in approximately 40 countries through in-country distributors. iRobot also sells their products domestically and internationally through on-line stores, such as Amazon. On-line sales accounted for 11.5% of total home robots division revenue in 2010.[2] On-line sales have helped iRobot establish customer lists they use to maintain close relationships with previous and potential customers.

Government & Industrial Robots: iRobot sells their government and industrial products directly to government clients as well as to contractors and distributors. The majority of iRobot's products are sold to the US federal government, but iRobot has also sold to the governments of over 15 foreign countries including UK, Germany, France and Canada. Military products sold overseas are subject to the International Traffic in Arms Regulations (ITAR).[2] iRobot's government products are sold by a team of sales specialists with experience in selling to government and defense agencies.[2]

Human Resources

iRobot's management team consists of professionals from various industry backgrounds including robotics, engineering, defense, business and healthcare. The management team receives relatively modest executive salaries (for Angle, $234,520 in 2004).


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  1. iRobot Corporation: Our History
  2. 2.00 2.01 2.02 2.03 2.04 2.05 2.06 2.07 2.08 2.09 2.10 2.11 2.12 2.13 2.14 2.15 2.16 2.17 iRobot 2010 Annual Report
  3. iRobot Mission Staement
  4. iRobot Investor FAQs
  5. iRobot Expands Home Robot Family with Pool-Cleaning Products
  6. iRobot Announces 2nd Generation Looj
  7. 7.0 7.1 iRobot at a Glance
  8. PackBot Looks Inside Japan's Nuclear Reactor
  9. [1]
  10. iRobot's SUGV
  11. Boeing and iRobot team receive SUGV contract from US Air Force
  12. How IRobot Took the Plunge into Underwater Vehicles
  13. iRobot's Gulf Oil Spill Response
  14. Interview: iRobot CEO Colin Angle
  15. A Robot That Could Hit A Wall
  16. [2]
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