It is planning to revitalize its home robot unit, whose performance disappointed analysts in the fourth quarter, both through acquisitions and the launch of new products in fiscal 2007.
But the Burlington, Mass.-based company hasn't offered any details, which makes it difficult for analysts and investors to assess related risks.
The company definitely needs to bring back energy to its home robots unit. In the fourth quarter of 2006, revenue from robotic vacuum and mop products -- the Roomba and Scooba -- grew about 22% to $41.8 million, from $34 million the year before.But sales of Roomba, which debuted in 2002, were disappointing. Shares of iRobot plunged 14% after
Sustainable Growth?Based on the fourth-quarter results of the home robots unit, it seems that revenue jumps when you have new products but falls back after those products have been around for some time. Should we be worried about this lack of sustained high growth for the products despite their low penetration? We don't see this situation as a burst of revenue forward and then falling back. We see the product introductions as iRobot adding legs to the stool. It's a new industry, and we think there's still a great amount of learning to be done.
| Colin Angle
We are certainly trying to bake some cautiousness into our model for second half of the year, but we are also trying to bring down cost of product development and accelerate the rate at which we bring products to the market. The Roomba has about 2% penetration in the vacuum-cleaner market, but shipments grew just about 9% during the year. Roomba has seen single-digit volume increases. What's holding the home products back? When you look at 2006, it is clear we have not yet reached the tipping point with Roomba. The challenge is that the skepticism surrounding robots continues, though customer satisfaction -- once someone buys a robot -- is at an all-time high. We view Roomba as headed in the right direction, although I would not suggest the magic point has been met.