Authored by: Lisa Chai

    August 11, 2022

    Amazon to Aquire iRobot for $1.7B all-cash deal

    Amazon’s acquisition of iRobot, the robotic vacuuming pioneer and a member of ROBO and THNQ, will impact the smart home industry more than most would believe. Amazon will acquire the Roomba maker in an all-cash deal valued at $1.7 billion or $61 per share, making it its fourth largest acquisition to date. This represents just a little over 1x enterprise sales and 20% above the closing price on August 4. If approved by regulators, the acquisition will extend Amazon’s dominance in the connected smart home market.

    iRobot’s autonomous cleaning products, which include robotic vacuums and mopping for the home, dominate the industry with a 57% market share and offer a strategic fit to Amazon’s portfolio of home automation. iRobot has a long history of innovation and investing in artificial intelligence as it was first a spin-off of MIT’s Computer Science & AI Laboratory (CSAIL) department. Founded in 1990 by former CSAIL director Rodney Brooks and his then students Colin Angle (current CEO) and Helen Griener, the company has grown revenue to over $1.5 billion in 2021 and has sold nearly 15 million connected devices.

    iRobot remains a trusted brand and a top seller on Amazon’s online marketplace and has held a prominent standing on Prime Day sales periods over the last several years. As of February 2022, about one-third of U.S. households with Internet connection had an Amazon Fire TV device according to Comscore, and many of those also use Echo speaker devices. Meanwhile, the number of Amazon Prime members in the United States is projected to reach more than 176 million subscribers by 2025, up from 163 million in 2022, according to Statista research. The company still has a huge opportunity to grow its Prime service or other connected device subscription plans using iRobot’s products and services.

    In recent years, iRobot has faced challenges on two fronts, which explains the lack of premium that Amazon is paying for this global franchise of robotic solutions. First, China import tariffs have eaten into previously comfortable margins. Second, growing business beyond Roomba devices and floor care has been difficult. With advanced AI capabilities, machine vision technology, and Amazon as a parent company, the potential to do just that could be greatly enhanced.

    While regulators will have to keep an eye on data privacy issues with this acquisition, the concern longer term could also be the inoperability of iRobot’s devices with other smart home devices. Over the coming years, Amazon, Google, and Apple will continue to push the technical boundaries on smart devices that can be personalized and affordable but also easy to deploy.

    Longer term, we believe iRobot will play a critical role in Amazon’s portfolio of smart home automation products, from lighting to video to cleaning and lawn care. It’s very possible that Amazon will try to create a central hub to unite all their own devices (and services) that can help with any household tasks. Building a smart home portfolio of connected devices is about reliability and easy-to-use features that will protect users’ data.

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