Numerous investors had already feared it, but now it’s official: the planned takeover of the pioneer for vacuum robots, iRobot, by online giant Amazon has been called off. Regulatory hurdles ultimately caused the $1.4 billion deal to collapse. The reaction of investors was drastic. Immediately after the announcement, iRobot stocks tumbled by 20%. Over the past 12 months, the stock has lost two thirds of its value.

iRobot – the pioneer of vacuum robots iRobot has long been considered the undisputed leader in the household robot market. The majority of its revenue (over 80%) comes from the Roomba vacuum robot. The rest is generated through complementary products such as the Scooba mopping robot, the Braava sweeping robot, and robots for cleaning pools and gutters.

With a market share of up to 60% in certain markets such as the US, iRobot has been the undisputed market leader in recent years despite increasing competition. However, the situation is becoming increasingly difficult. Not only is iRobot struggling in the Chinese market, but the US company is also facing slowing growth and margin pressure in other regions.

Experts say market is far from saturated Although iRobot is by far the largest player and has sold over 20 million units, the market is far from saturated, according to market researchers at ResearchandMarkets. They expect the industry to continue to see significant growth. According to analysts, the market volume could increase from $10.3 billion in 2023 to $24.5 billion in 2028. Currently, the market is still heavily focused on North America, but the use of these helpful robots is growing in households in Europe and increasingly in Asia.

Revenue shrinks by 29% This year, iRobot has hit some rough patches: in the first nine months of 2023, iRobot’s revenue shrank by 29.4% to $583 million. Although the average selling price per device increased from $325 to $354, the number of units sold decreased from 2.85 million to 1.90 million (-33.4%).

According to management, there are two main reasons for this: increased price competition between companies and changing consumer sentiment. Higher inflation has had a negative impact on consumer behavior.

The decline in revenue has also had a significant impact on earnings. Net losses increased from $202.2 million to $241.1 million.

Amazon cancels acquisition In the meantime, Amazon had reduced the originally agreed purchase price of $61 per share to $51.75, but now the deal has finally fallen through. Due to resistance from European competition authorities, online retailer Amazon has completely canceled the acquisition. According to the tech giant, there is no way to obtain approval from the EU for the $1.4 billion deal. Amazon has long been criticized for allegedly exploiting its market power. The acquisition of iRobot would have further strengthened the world’s largest online retailer’s already strong position in the market for intelligent household appliances. Amazon already owns the „Alexa“ assistant system and home security specialist „Ring.“

iRobot cuts jobs The response from iRobot management was prompt: the company announced comprehensive restructuring. This includes laying off 350 employees, which is 31% of the entire workforce.

The restructuring plan aims to improve profit margins by $80 to $100 million through changes in areas such as design and contract manufacturing. Research and development costs are also expected to be reduced by $20 million. This could also affect innovations in air purification, robotic lawn mowing, and training.

Centralization of marketing activities and reduced spending on representation are expected to save an additional $30 million annually. In addition, certain properties will be sold.

Amazon must pay $94 million fine As compensation, Amazon will pay $94 million for the cancellation of the deal. After the stock plunge, iRobot’s market value is now only around $400 million. By comparison, at the end of January 2021, investors valued the robotics specialist at over $4.4 billion.