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iRobot shares plunge on predicted losses from defense cuts

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February 10, 2012|By Hiawatha Bray

Bots from iRobot are used for a variety of battlefield surveillance and…

Shares of iRobot Corp. plunged more than 34 percent to $25.17 yesterday after the Bedford robot maker warned of possible losses as cuts in defense spending reduce demand for its military robots.

For investors, concern over potential lost revenues from defense work outweighed positive numbers from iRobot.

Yesterday, the company reported fourth-quarter revenue of $131 million, up 15 percent from a year earlier. Net income was $10.6 million, or 38 cents a share, up from 26 cents in the fourth quarter of 2010.

Revenue for the year rose 16 percent to $465.5 million.

Colin Angle, iRobot’s chief executive, predicted that sales of the company’s robots for home use will increase 15 percent this year, “but we’re also predicting the military side to be as bad as 20 percent down, because of the great uncertainty we’re seeing in the marketplace.’’

The military robots are used for a variety of battlefield surveillance and bomb-disposal missions.

As the Pentagon executes plans to reduce its budget by $450 billion over the next decade, iRobot revenues will suffer further, Angle said.

Already, the company’s biggest Pentagon contract, for a smaller version of its PackBot military robot, is being renegotiated and will bring in less revenue than anticipated, he said. “We lost some amount of funding.’’

IRobot had anticipated selling 160 robots to equip four Army brigades, but he now believe budget cuts will reduce the order by half.

“You put those things together, and iRobot’s growth comes down significantly from 2011 levels,’’ Angle said.

Loren Thompson, defense industry analyst for the Lexington Institute in Arlington, Va., said many defense contractors are facing hard times.

“The US Army is being hit hard by budget cuts,’’ Thompson said. “At least eight of its brigades are being eliminated. As a result, they have less money to invest in new technology.’’

But Angle described the cuts as “a temporary weakness,’’ citing statements by Defense Secretary Leon Panetta that the Pentagon will continue to fund advanced military technologies, including unmanned systems like robots.

IRobot predicted revenue for the first quarter of 2012 between $90 million and $100 million, down more than 6 percent from the same period last year. It warned that earnings would be flat at best, with a possible first-quarter loss of up to eight cents a share.

Sales of the company’s home-cleaning robots, including the floor-sweeping Roomba, have surged, especially outside the United States, where 70 percent of its consumer robots are sold. Angle said iRobot’s civilian business generated about 60 percent of revenue last year and is expected to produce 70 percent in 2012.

IRobot also has high hopes for Ava, a tall, wheeled robot with a touchscreen as its “face.’’

Last month, iRobot invested $6 million in InTouch Technologies Inc., a California company that makes “telemedicine’’ software to allow doctors to provide remote medical care. IRobot intends to combine InTouch software with the Ava to create a mechanical caregiver for seniors and disabled people.