Calling New Contract a “Sustaining Bridge” to IRobot’s Future Plans, Exec Says Company Set to Deliver First Robots on January 8
Evidently things got a little festive over at iRobot (NASDAQ: IRBT) late Friday evening, when the company learned that it had been awarded a contract worth up to $286 million to supply so-called “xBot” bomb-detection robots to the U.S. Army. “I think there might have been a beer or two,” said Joe Dyer, president of iRobot Government and Industrial Robots, in a telephone interview this morning. And indeed, said Dyer, the contract brings with it much for the company to celebrate. “It’s important strategically and tactically for the company,” he said. Not only does it give the company some much-appreciated near-term cash flow, he said, “but more important than that is it solidifies iRobot’s position of market leadership for both design and production of robots into the larger Army infantry market.”
IRobot is already hard at work on the xBot contract, Dyer indicated. The terms call for an initial order of 101 robots—although that total could go up to 3,000 over the next five years. He said the Burlington, MA-based company will deliver the first pair on January 8. “Then we deliver five in February, and then 30 in March, and then 30 in each month following,” he added, until the initial purchase order is filled (a final delivery of four robots rounds out the purchase, the company says). The company says it already has indications from the military that more will be ordered after that.
IRobot has been pursuing the contract at the same time it’s been waging a legal battle against Robotic FX, an Alsip, IL-based company founded by a former iRobot employee; in two separate lawsuits iRobot contends that Robotic FX’s Negotiator robot is a knockoff of iRobot’s Packbot. You can find our detailed coverage of the case here, and a separate breaking news story here about this morning’s announcement that iRobot had won the contract. But to briefly explain this latest development, Robotic FX had originally won the contract in September with its bid of $279.9 million; iRobot was the next-lowest bidder. While challenging Robotic FX in court, iRobot also filed a series of protests with the Army. Ultimately, the Army did not deem Robotic FX responsible to perform the work and, Dyer said, iRobot was next in line for the award. “The ground rules were that if the first bidder was for any reason found not responsible, in this case, to execute the contract, that it would go to the next-lowest bidder and the next lowest bidder’s bid,” he said.
The company has seen much drama on the path to this point. Dyer said that around iRobot, some people refer to the Robotic FX case as like a W.E.B. Griffin novel. “It had all the aspects,” he said. “It had theft of trade secrets. It had betrayal. It had cover up—cover up of the cover-up.” It even had the U.S. government injecting itself in a civil dispute between two companies (early on, the military and the U.S. Attorney’s Office both interceded on behalf of Robotic FX, claiming in part that American troops would be endangered by any delay in fulfilling the contract), he noted. Dyer paused slightly, then said: “I’ve met an awful lot of nice lawyers since this started.”
IRobot will continue to pursue its lawsuits against Robotic FX, according to iRobot spokesperson Nancy Dussault Smith. Meanwhile, Dyer stressed the importance of the contract not only to iRobot’s near-term cash flow but, more importantly, to the company’s long-term prospects in the military market. To date, Dyer explained, most of iRobot’s PackBot military robots have been sold to special EOD (explosive, ordnance, and disposal) forces. These are the bomb specialists that focus on the improvised explosive devices, or IEDs, that have proved so deadly to U.S. troops in Iraq and Afghanistan. But that’s a relatively small market, Dyer said. The new order is to deliver bomb-detection robots to the wider Army. “The infantry is a tremendous market, and represents adoption of robots across a broad tract,” he said.
Dyer also depicted the order as a critical step toward iRobot’s farther-reaching plans. In 2004, he said, the company won a $50-plus million R&D contract to do early design and development work on what are called SUGVs, or small unmanned ground vehicles, for the Army’s Future Combat Systems program. Of the SUGV, he said, “that’s a robot that’s faster, it’s lighter, it’s linked to the networks. It will be really the robot of the infantry’s future. But it’s not yet ready to be delivered to the field, so this contract represents a sustaining bridge between today and the delivery of the small unmanned ground vehicle.”
IRobot opened trading today at $19.30, up 12 percent from yesterday’s close of $17.19; but by late morning it was back down below $18.