The Boston Globe
By Robert Weisman, Globe Staff | November 9, 2005
IRobot Corp. has charmed homeowners with its Roomba vacuum cleaners that scour floors for dust. It's buoyed soldiers with its mobile PackBots that hunt for ammunition in caves. But today the Burlington company faces its toughest constituency yet: investors.
In a rare public stock sale by a robot maker, iRobot issued 5 million shares for $24 per share yesterday, raising $120 million for the company. IRobot will begin trading on the Nasdaq exchange this morning under the symbol IRBT.
IRobot's initial public offering will be a test of whether robotics, a field that long has drawn public fascination but Wall Street skepticism, is finally ready to emerge as a business sector worth investing in. The company's public launch will also measure the health of the nation's IPO market, largely frozen since 2001, which has been slowly thawing the past two years. The ability to take a company public is critical to entrepreneurs and their backers.
''This stock might tickle the fancy of people who want to be involved in that kind of robotics sector," said David Menlow, president of IPOfinancial.com, an independent research firm in Millburn, N.J.
Menlow, who put iRobot on his firm's ''hot list" of stock offerings, said investors may be willing to buy a unique business like iRobot so long as it is on solid financial footing.
In fact, that iRobot issued more than the 4.3 million shares the company had planned to sell and at a higher price than the expected range of $21 to $23 per share suggests that demand for the issue was high.
Founded in 1990 by a trio of robotics engineers -- Rodney Brooks, Helen Greiner, and Colin Angle -- with roots in MIT's Artificial Intelligence Laboratory, iRobot has taken a long road toward its IPO that in its most recent turn could make all three founders multimillionaires . While software and Internet start-ups rushed to the public market in the 1990s, iRobot spend much of the decade designing a six-legged walking robot as a tool for researchers.
Its big break came in 1998, when a grant from the Defense Advanced Research Projects Agency led to the development of PackBot, the tactical mobile robot now deployed in Iraq and Afghanistan.
With its Roomba vacuuming robot, rolled out in 2002, iRobot gained a foothold in the home. To date, it has sold more than 1.5 million Roombas and more than 300 PackBots. Last year, the company won an Army contract, now valued at over $50 million, to develop an unmanned ground vehicle for the service's Future Combat Systems program. Earlier this year, it introduced Scooba, a floor-washing robot.
The company's home robots use an intelligence system consisting of dozens of sensors to guide them across a floor. The Roombas sell for several hundred dollars depending on the model. Its military robots are guided by remote control and are used to defuse roadside bombs or search through caves for ammunition stores.
IRobot had net income of $2.6 million for the first nine months of 2005, compared to a loss of $189,000 for the same period last year, according to the company's securities filings; revenue grew almost 66 percent. iRobot finished 2004 with a $219,000 profit.
Company executives declined to comment, citing a preoffering ''quiet period" imposed by the Securities and Exchange Commission.
Neena R. Buck, vice president of emerging frontiers at Strategy Analytics Inc., a Newton research firm, said much of the research in the robotics industry today is funded by the Pentagon, which wants to deploy fleets of autonomous unmanned ground vehicles and airborne drones by the end of the decade. In that market, iRobot faces competition from Foster-Miller Inc., a Waltham engineering company owned by QinetiQ Ltd. in the United Kingdom.
In the future, however, the success of products such as Roomba and Scooba could fuel the growth of a consumer market for robots that do everything from mowing lawns to washing windows, she said. ''The investment community has been reluctant to fund companies in the robotics space because a lot of technologies have to come together for robots to work," Buck said. ''It's been very difficult to visualize a whole series of products that don't exist yet but might change the world."
Buck said iRobot's stock sale will be ''a test case for the robotics industry." But its success, she predicted, could attract a new crop of look-alike household robots to challenge Roomba and Scooba. ''You're going to see a lot of robots crawling around your floor," Buck said. ''But you also need robots that are able to climb walls and do vertical stuff like scrubbing your bathroom tiles."
IRobot's public launch also comes at a time when the IPO market has been sending out mixed signals.
Internet search giant Google Inc., poster child for the new IPO class, has more than quadrupled in value since it went public in August 2004. On the other hand, online diamond retailer Odimo Inc. is down more than 80 percent since its market debut in February.
Nationally, there were 219 offerings last year that raised a total of $41.6 billion after several lean years, according to the New York research firm Thomson Financial. But so far this year, the overall number of IPOs is only at 162; they have raised $27.9 billion.
In New England, the picture has been brighter. There have been a dozen IPOs in the region this year, raising $2.8 billion, up from the nine offerings that raised $581.2 million all of last year, according to Thomson. And as of last Friday, the average after-market gain of New England companies that have gone public since the start of 2004 has been 59.9 percent, compared to 22.8 percent nationally.
''For three years, we were wandering like Moses in the desert," said Richard J. Peterson, senior researcher for Thomson Financial. ''Now the market may be suitable for an iRobot."
Robert Weisman can be reached at weisman@globe.com.