IRobot's Military Business On A Roll

Strong sales of robots to the U.S. military propelled iRobot in the first half of the year, but the company is counting on sales of home robots to lead its way in the second half.

Consumer sales had slowed as the company sold off inventory ahead of the release of its next-generation Roomba robotic vacuum cleaners. These new models, the Roomba 500 series, are set to hit store shelves on Wednesday.

Though iRobot IRBT stopped shipping, promoting and advertising Roombas in the first half, consumer sales held up well, says Colin Angle, iRobot's chief executive.

"We've been very pleased with how strong the current generation Roomba sales have been," Angle said. "There hasn't been much discounting in the channel. Sales continue to be strong."

Yet, the company's robots for the military, which help troops check for roadside bombs, drove growth.

For the second quarter, the company said revenue from home robots rose 3% from the year-earlier quarter to $17.2 million. But revenue from military robots rose 67% to $29.8 million. Overall, sales for the quarter rose 36% to $47 million, the biggest percentage jump year-over-year since the first quarter last year.

For the first six months, home robot sales fell 8% from the year-earlier period to $36.6 million. Military robot sales, however, rose 52% to $49.9 million. Total sales for the first half rose 19% to $86.5 million.

In addition to the Roomba, iRobot sells Scooba floor-washing robots and Verro pool-cleaning robots. It also makes Dirt Dog workshop floor-sweeping robots.

The company plans to announce two more types of home robots on Sept. 27 at the Digital Life Expo in New York. IRobot is tight-lipped about the new products.

New Products Coming

Angle says the new robots are "very cool" and "very different" from Roomba and Scooba.

"They're not floor-cleaning robots," he said. "They're not lawn mowers and they're not butlers. But that's all we've said so far. These robots are going to make you think."

Meanwhile, sales of military robots have been "going gangbusters," Angle said. Troops in Iraq and Afghanistan use iRobot's PackBot robots to do reconnaissance and check out possible roadside bombs and disarm them.

"The PackBot (business) continues to grow," Angle said. "We've been reaching new marketplaces."

For instance, military police are using PackBots to sniff out car bombs. The company also is outfitting PackBots with systems for locating snipers and mortars.

IRobot has "enormous opportunities in the government sector," said Kevin Calabrese, an analyst with Argus Research, who rates the stock a buy. "Some of those projects for the U.S. military are almost mind-boggling they're so large. The U.S. military says it wants as much as a third of their force to be mechanized in the next six to seven years."

IRobot has delivered more than 1,000 PackBot tactical mobile robots to military and civilian customers worldwide. They have performed tens of thousands of missions in combat and are credited with saving scores of soldiers' lives.

Burlington, Mass.-based iRobot has been expanding its market presence through alliances.

In April, it announced a pact with Boeing BA to develop and deliver a next-generation Small Unmanned Ground Vehicle to military, civil and commercial users. The robot, named SUGV Early, will let users remotely conduct reconnaissance and secure real-time intelligence while remaining out of harm's way.

For example, a soldier could throw one of these robots through a window to search a building for the enemy instead of sending in troops .

Boeing and iRobot expect to deliver the first SUGV Early in 2008.

SUGV Early Could Be 'Huge'

The SUGV Early will be a smaller, lighter version of the combat-proven PackBot. It's expected to weigh less than 30 pounds, or about half that of a PackBot.

"That's going to be a huge new leg on the government and industrial side" of iRobot's business, Angle said.

The market for PackBot-class robots over the next three to five years is about 2,000 to 3,000 units, Angle says. But the market for SUGV-class robots is about 10,000 to 20,000, he says.

If successful, the new robot class could become standard gear for infantry squads and SWAT teams.

IRobot also has teamed with Lockheed Martin LMT, Taser International TASR and Deere & Co. DE on other robotics projects.

Based on better-than-expected results in the first half, iRobot raised its guidance for the full year. It expects revenue of $233 million to $243 million, up 23% to 29%. It had forecast $225-$235 million. Analysts polled by Thomson Financial expect iRobot to earn 12 cents a share for the year. That's down 14% from 2006. But they expect earnings per share of 33 cents next year.