Putting lipstick on the Roomba
IRBT has announced several good news, which upon a closer consideration don't look nearly as good. First came the announcement at the condference that the plan to launch some new product category(s) in the second half of the year is well on track. Then the press release said that Germany has ordered another 22 PacBots. Yet another press release informed us that the CEO and a couple of other executives terminated their selling plans. The caveat? All 3 events happened in one day. It just so happened that Germany presumably let IRBT know of its decision precisely at the day of the conference, at 3 am Greenwich time, and that Colin Angle has decided to terminate his plan at exactly the same time. In a further evidence that great minds think alike, the other insiders have made the same decision at exactly the same hour of the same day. What a coincidence!
The simultaneous termination of selling plans becomes all the more remarkable if we recall that just a few weeks ago, Mr. Angle said in the interview with Street.com that diversification (i.e. insider selling) is something that he and his fellow executives were committed to. Some factor has caused all of them to abandon their commitment. On a side note, Wall Street has shown what it thinks about the diversification line by shaving another 15% off the stock price after the interview, but surely it had nothing to do with this sudden reversal.
Surely the stock took off like a rocket, the short squeeze (and there was a potential for one, according to TA people) propelled the price even higher, and then even the stupedest short realized just how dangerous it is to short IRBT and decided to leave the battered stock alone, right? Well, not exactly. Actually, not at all. And I can even take a guess as to what psychological factor might have stopped IRBT's PR offensive in its tracks. It is true that serious investors read press releases, but they do it for a very different reason. Their purpose is to learn about the company's prospects. Strangely enough, they don't want to be reassured that the management is doing a great job grouping non-events together in an effort to create a mini-spike on the chart. And the theory that insider buys/sales are important is based on the assumption that insiders buy and sell because they see the the price is too low or too high. When we know that they stopped selling in order to make us think that they think that the price is too low, then instead of thinking that they think that, we begin to wonder what they actually think.
Going back to event number one, I have to say that I was not sold on the presentation. There was some numerical data showing a rather tepid growth on the home front and some impressive performance in the military division, but no hint as to how they are going to address the very real challenges they are now facing (with Roomba sales reaching their natural ceiling, IRBT is barely breaking even; profitability has been sacrificed for the sake of R&D, which was channeled into ridiculous projects like DirtDog and Create, as well as some yet unknown new robot which the company itself expects to produce a very tiny revenue stream). The slide about their future potential looked somewhat schisophrenic, considering that the talk about landscaping, elderly care, energy, and other such applications came from a company that stated in its annual report that in the foreseable future, most of its revenue will be coming from Roomba sales (in other words, that they see themselves a vacuum company). But while it was easy to shrug off the "potential" talk is a pure PR, I felt very uneasy when looking at the "Home Robots Vision" slide, which was deliberately misleading. The slide features a robomower and a pool cleaning bot, both which may be within IRBT's grasp (though I have my doubts, especially about the pool bot), but it also features products that are obviously not intended to ever be launched. What is that ridiculous turtle sitting on top of the clothing drawer? Is that a dust-wiping robot whose happy owner is supposed to move it around the house - from the drawer to the bookshelf to the computer desk? And what's its comrade doing on the sofa? Did it jump there on its own or is it just waiting for the housemaid to put it on another sofa? What's that big robot with no hands walking on its hind legs with no apparent useful purpose? And that android in the kitchen - has IRBT just bought Honda or did I miss something?
Meanwhile, as IRBT is producing stock-pumping press releases, the field is getting hotter. Last week, an Israeli company presented a Viper Robot that looks like a PackBot, only more advanced (http://robotstocknews.blogspot.com/). IRBT has similar plans to weaponize the PackBot with the only difference that its initiative is a) a couple of years behind the Viper and b) IRBT cannot handle it on its own anyway - it will be other companies putting stuff on the PacBot platform. Today was the introduction of yet another robot from Talon. Meanwhile Microrobot is preparing to launch its cleaning bot (a vacuum and a mop combined). IRBT's product line is looking increasingly stale, and the new and not-so-new $100 robotic toys (http://www.hammacher.com/qsearch/default.asp?query=robots&promo=electronics_bug) look more mechanically advanced than all that IRBT ever designed in-house. Just the time to put some lipstick.