iRobot's New Products Could End Up Lonely and Unloved

Two new products by iRobot ( IRBT), a gutter-cleaning device and a virtual communications robot, are an attempt to expand the company's portfolio of consumer-targeted devices.

But the two offerings, with their limited appeal, may not do much for the company's crumbling stock.

On Thursday, iRobot introduced the Looj gutter-cleaning robot and the ConnectR virtual-visiting Robot to supplement its existing line of the Roomba vacuum cleaning robot and Scooba, an automated floor washing device.

Consumer robots accounted for 36% of the company's revenue in the second quarter fiscal 2007.

The Looj is designed to clean a stretch of gutter, sweeping out dirt, leaves and other debris that can cause costly water damage and overspills, says iRobot. The cheapest version of the product is priced under $100.

It may be an affordable buy for suburban homeowners, but Looj has significant limitations. It can't turn corners and has to be hoisted up a ladder into a gutter. There's a holster available that can be worn around the waist to carry the device up. Looj also can't turn off automatically when the cleaning is done.

The larger issue is: How many of these machines can iRobot actually sell? The company has sold about 2 million Roombas since it was introduced in 2002. But sales of Looj could be a fraction of that.

Shares of iRobot were off 35 cents, or 1.7%, to $19.64 in recent trading. The company' stock is down almost 20% since news last Monday that it lost a much-anticipated military contract to a private competitor, Robotic FX.

With ConnectR, its communications robot, iRobot seems to be digging deeper into a niche market.

The ConnectR robot links to a home wireless network and provides VoIP-quality video and two-way audio. The device has a full tilt-and-zoom video camera, speaker, microphone and headlight to enable its users to interact with people in the home as if they're in person, says iRobot. The device is steered around the house through a computer.

The company is hoping ConnectR will appeal to families, but its $500 pricetag could bring sticker shock to many potential customers.

iRobot has a pilot program starting later this year to make it available to select customers for $199, but the company isn't accepting new participants into the program.

The high price and the device's lack of a clear value proposition could make its prospects dead on arrival. "It's a niche concept product that may not even make it to full mass production," says James Ricchiuti, an analyst with Needham, in a note. Needham has an investment banking relationship with iRobot and makes a market in iRobot shares.

iRobot has said revenue from Looj and ConnectR will not materially impact its fiscal 2007 results. But it hopes the devices will give the company a chance to get feedback from its consumers and test the waters for newer product categories.

Even if the two new products don't succeed, they send a message that iRobot is willing to take its consumer robots line beyond the idea of cleaning and expand its market, according to Morgan Stanley analyst Heidi Wood.

"The company has a vision of the iRobot home, a place featuring robots that assist not only in household chores, but also in facilitating communications and interpersonal connectivity," wrote Wood in a recent research note. Morgan Stanley has an investment banking relationship with iRobot.

It's a lofty vision for the company, but if Looj and ConnectR fail to take off, it could become an expensive mistake amid a struggle to establish mass-market potential.

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