Amazon's iRobot Acquisition Is About More Than Just Vacuums

[mahatmakanejeeves]

I read about the acquisition last week, but I didn't think anything about it. I should have.

Hat tip, Joe.My.God.

Amazon Buys Roomba Maker In Order To Map Homes
August 8, 2022

Amazon's iRobot Acquisition Is About More Than Just Vacuums

Billy Duberstein, The Motley Fool
Mon, August 8, 2022 at 9:15 AM

Last week, Amazon (NASDAQ: AMZN) announced it would be purchasing Roomba maker iRobot (NASDAQ: IRBT) for $1.7 billion, or $61 per share. In its second-quarter report, released in conjunction with the acquisition announcement, iRobot reported revenue down 30% from a year ago, with operating losses ballooning to $63.9 million, from a $3 million loss in the year-ago quarter.

{snip}

However, iRobot totally mismanaged its cash position. Just one year ago, the company had $415.8 million in cash -- flash forward to today, and it has just $63.4 million, and that's in spite of taking out $35 million from its revolving line of credit! ... Where did the money go? Two things: First, management spent huge amounts on inventory over the past year, perhaps thinking the boom times of the pandemic would continue. In the recent quarter, days of inventory ballooned to 210 days, nearly double the 112 days of inventory last year.

Not only that, but iRobot also blew $150 million on share buybacks last year, committing the all-too-common sin of management teams repurchasing shares when times are good and the stock price is high, only to deplete the cash reserves and leave the company vulnerable to a downturn. ... In fact, Amazon's purchase price is well below the level where management was gobbling up shares last year. iRobot spent $50 million on buybacks in the second quarter of 2021 at an average price of $112, and then another $100 million at an average price of $83. Remember, Amazon just bought the company for $61. ... That's terrible for iRobot shareholders, but it sure looks like a great vulture investment by Amazon.

But iRobot could be more than just a value grab

{snip}

Robots are ascendant across Amazon's business

Amazon is also increasingly using robots to streamline and automate its vast e-commerce and fulfillment operations, speeding deliveries and improving safety for employees. ... In its recent earnings release, Amazon pointed to several robot products used in its warehouses, including Proteus (carrying packages across a warehouse while avoiding employees), Cardinal (a robotic workcell that lifts and turns large and heavy objects and completes complex packaging tasks), Amazon Robotics Identification (artificial intelligence-powered scanning), and a Containerized Storage System (delivering packages to employees without them having to bend down, climb ladders, or reach up). On the delivery side, robots are also gaining prominence, as Amazon just announced it has begun its first deliveries-by-drones in the markets of Lockeford, California, and College Station, Texas.

{snip}

Here's Bloomberg's take. Back to Joe.My.God.:

Amazon Buys Roomba Maker In Order To Map Homes
August 8, 2022

Bloomberg News reports:

Amazon.com Inc. hasn’t just bought a maker of robot vacuum cleaners. It’s acquired a mapping company. To be more precise: a company that can make maps of your home.

The company announced a $1.7 billion deal on Friday for iRobot Corp., the maker of the Roomba vacuum cleaner. And yes, Amazon will make money from selling those gadgets. But the real value resides in those robots’ ability to map your house.

As ever with Amazon, it’s all about the data. The size of your house is a pretty good proxy for your wealth. A household without much furniture is a household to which you can try to sell more furniture.

Read the full article.

Link to tweet

{snip}