Use access key #2 to skip to page content.

EScroogeJr (< 20)

rethinking IRBT

Recs

0

January 11, 2007 – Comments (2)

I may regret my overly optimistic view of IRBT, which I expresses earlier in CAPS. The more I think about its prospects, the less I like it.

The headstart they got 3 years ago is now rapidly disappearing. Some serious competition may appear as soon as 9 months from today, according to this report:

http://www.t...mp;cm_ite=NA

Since the introduction of Roomba, IRBT has done nothing but modifications of the existing platform. Not a single new design, not a single attempt to get outside the cleaning niche, not even a single meaningful improvement like, for example, ability to recognize computer cable wires. But behaving like a one-trick pony is not the worst shortcoming of IRBT. More ominously, for the last year we've seen the new tendency of IRBT to DEGRADE the quality and usability of its products.

-DirtDog is a Roomba without a vacuum.

-The last Roomba model has a shorter battery life that the original Red.

-Roomba Create is a Roomba without vaccum and without brushes.

Add to that the observation that the targeted market niche also decreases with every new product offering.

-IRBT is estimated to be selling 1 Scooba for each 5 Roombas. For the year, it is something like 500,000 Roombas and 100,000 Scoobas.

-The DirtDog is selling only through the company's web site - a sure sign that big stores don't think it worthwhile even to try. All evidence suggests that IRBT will be lucky to sell maybe 20,000 of those.

-RoombaCreate is for enthusiasts who want to make their own robots. Now we are not even talking tens of thousands, 4-6 thousand seems more realistic.

One can almost formulate "the law of five" for new IRBT products.

The decision to launch the DirtDog and then RoombaCreate may have done more damage than good to the company. To add these extra $3-4 mln bucks to the top line, IRBT demonstrated to the investors who had payed 2.5 times sales, 60 times forward earnings that it couldn't think of a more promising new product idea than the good old Roomba with some vital "organ" removed.

I wouldn't want to bet against IRBT with real money because this is exactly the kind of company you don't short. Moreover, I still think everybody should have a small never-touch position in this stock. For all we know, they may still have surprises in store, and after all, you don't want to argue with MIT.

But before they introduce their new product - a Roomba without wheels - I will liquidate my trading position and short IRBT in Caps.

2 Comments – Post Your Own

#1) On January 12, 2007 at 10:25 AM, TMFBreakerJava (99.49) wrote:

How about the military line? That seems like a promising, profitable and high growth market.

Java

Report this comment
#2) On January 12, 2007 at 2:09 PM, EScroogeJr (< 20) wrote:

Not enough. At least until 2009, I don't see military orders growing fast enough to pick the slack if the consumer division fails to deliver the kind of of growth that is priced in.

Report this comment

Featured Broker Partners


Advertisement