This week, news is still circulating about Amazon’s (NASDAQ:AMZN) $1.7 billion purchase of iRobot (NASDAQ:IRBT).
Bank of America believes that there is some synergy in how Amazon (NASDAQ:AMZN) and iRobot (NASDAQ:IRBT) see the potential for products and services in the smart home. iRobot (NASDAQ:IRBT) will bring to Amazon (NASDAQ:AMZN) its experience and expertise in developing consumer-facing robots, according to the Financial Institution.
The company argued that iRobot’s failure to establish a timeline for when the acquisition might close was unusual, but considers a 6-month timeline to be appropriate. Regulators in the US, UK, EU, and Japan are anticipated to assess the merger based on the markets in which IRBT (NASDAQ:IRBT) competes.
“We’d expect regulators to closely scrutinize the deal given the risk Amazon could prioritize IRBT’s products over competitors on its Amazon.com platform and concerns on how it uses data gathered by the robot vacuums and robot mops, among other areas. On this point, recall that IRBT’s products use cameras to navigate, create a map of users’ homes and gather other data.”
John Babcock on what iRobot’s Position Implies for Sonos
According to analyst John Babcock and team, IRBT’s earnings announcement highlights challenges for Sonos Inc. (NASDAQ:SONO) when considering potential repercussions for other businesses. The BofA analysts note that IRBT (NASDAQ:IRBT) targets customers in a similar income bracket, and its results, as well as those by Logitech and several large retailers, indicate that there has been a noticeable slowing in demand for consumer discretionary goods.
The companies operate in different markets, and SONO has more consistently achieved guidance. The company maintained a Buy recommendation on SONO (NASDAQ:SONO) due to its attractive valuation at a trading multiple of 9.2X EV/EBITDA, but it believes a swing lower on earnings day is probable given that shares had a strong M&A boost when IRBT was acquired.
IRBT stock was down 0.37% on Monday, dropping from $61.00 to $59.32.
More on Amazon’s Acquisition of iRobot
The acquisition also happens to be at a time when Amazon (NASDAQ:AMZN) is attempting to transform its Alexa-enabled products from stationary items like smart speakers to mobile machines that can follow you about your home and react to your requests whenever you need them.
Although the market for robotic vacuums is competitive, it is apparent that Amazon is strongly involved in the future of the smart home. With this transaction, Amazon (NASDAQ:AMZN) has increased and strengthened its knowledge, in a note dated August 5, Raymond James analyst Brian Gesuale wrote.
“There are major players in the robotic vacuum space like LG, Samsung, Shark, and a host of others creating a competitive marketplace that has seen pricing and margins compress over the last few years with no end in sight,” he wrote.
“The broader smart home ecosystem has an even broader set of competitors. Amazon is small in the robot market with its recently launched Astro product, so in the near term it’s more about vertically integrating the channel as it develops a longer-term plan for the smart home and the data attached.”
However, it goes beyond simply creating smarter technology. The acquisition is all a part of Amazon’s larger effort to keep its Prime service at the forefront of consumers’ thoughts. By selling more tangible goods that link to the platform, it can accomplish this objective.
At the moment, Amazon provides its very own robot known as Astro. This very small device, which can be thought of as Alexa on wheels, can now only be purchased with an invitation and costs $999. The price of Astro will be $1499 if and when it is made available to the general public.
On a separate note, iRobot, the business that makes the Roomba, told Forbes that it had laid off 10% (140 employees) of its workforce as it restructured after being acquired by Amazon for $1.7 billion. The company added that the layoffs were unrelated to the transaction.
Featured Image: Megapixl © Avrezn
