Contract Loss Smacks iRobot

Shares of iRobot Corp. skidded 23% to $18.27 Monday after the maker of bomb detectors and the Roomba cleaning robot lost out on a Defense Department contract to supply more than 3,000 bomb-detecting robots to closely held Robotic FX Inc. "This is a significant setback for iRobot," said JPMorgan analyst Paul Coster, who sliced his 2008 earnings estimate 12% to $0.30/share and revenue forecast 2.4% to $285M on the news. "The loss of the contract to a startup suggests neither IP nor economies of scale are barriers to entry, and iRobot's sales and marketing execution may be flawed," he added. IRobot had been considered the favorite for the deal and shares had run up some 35% since early August in anticipation of the $279.9M, five-year contract award. Some analysts, however, said the pullback presented an opportunity by taking some of the risk off the table as the company prepares to introduce two new products. On August 20, iRobot announced that it had filed two lawsuits against Robotic FX and its founder Jameel Ahed (a former iRobot employee) seeking damages and a permanent injunction against sales of that company's "Negotiator," claiming it infringed on patents covering iRobot's PackBot.

Sources: Press release, Bloomberg, The Street.com
Commentary: iRobot Jumps As Pentagon Stocks Up On Robots • iRobot's R&D Investments Could Go A Long Way
Stocks/ETFs to watch: IRBT. Competitors: LMT, GD

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