Roomba: Hitting the Wall | The Moat | 2

26:13It's May 2019 on Wall Street. Colin Angle is live on CNBC from the New York Stock Exchange trading floor. He's here to talk about the latest tech debut from iRobot. It's been a year since Ecovacs launched its combo mop and vacuum. Reviewers have found the Ecovacs combo performs well, but still gets tangled in power cords, a problem higher-end Roombas have mastered. And now iRobot has made its highest-end Roomba yet. It's called the S9 Plus, and it's the first Roomba that's not disc-shaped. Instead, the S9 Plus is shaped like the letter D. This design, which is similar to a niche robot vacuum called the Neato, lets the Roomba S9 Plus get into corners more easily.

27:02The new Roomba can also do something else that old models can't. It can communicate with another robot, the Brava Jet M6. When the new Roomba is done vacuuming, it saves a detailed map of the house and sends a message to the Brava Jet to go mop down a specific room. Angle explains to the CNBC anchor. And so taking the next step forward was, well, what if I wanted to mop after I vacuum the kitchen? And so that the new M6 robot also has a map. And because they have a common understanding of the home, they can start working together. This is iRobot's answer to the combo mop vacuums from Ecovacs and Roborock.

27:44And it's a premium answer. The new Brava Jet retails for$500, and the new Roomba, when paired with a self-emptying base unit, costs$1 ,300. The two machines will run consumers$1 ,800 together. That's about$1 ,300 more expensive than the combo mop vacs from Roborock and Ecovacs. That pricing is by design. Angle believes the premium price point is where iRobot and the Roomba separate themselves in the market. He thinks there's no money to be made in low-cost, low-tech robot vacuums because the profit margins are just too slim. But there's one big problem. iRobot's high prices might be driven even higher thanks to a trade war.

28:37Most Roombas are made in a Chinese factory, and the Trump administration has been ratcheting up tariffs on Chinese goods. iRobot absorbed the higher costs in the first round, but now tariffs have jumped to 25%, and that's a lot harder to swallow. iRobot is moving some of its manufacturing out of China, but Engel tells CNBC that's easier said than done because the new Roombas are highly complex machines. More complex, he says, than most cell phones. Now, remember, iRobot was built on simplicity. The company's founding mission was to make useful robots that ordinary people could use. Its first Roomba debuted in 2002 at$199, and users turned it on with a press of a button.

29:27Now, 17 years later, the newest Roomba is both high-tech and high-priced, costing$1 ,100 more than the original model. Even with this shift, iRobot is making money. By the end of 2019, the company has brought in$1.2 billion in revenue, a 20 % increase over the prior year, and the most money iRobot has ever made. iRobot is chasing the top end of the market, while Roborock, Ecovacs, and others are doing something different, making useful robots at low prices. And when 2020 arrives and a global pandemic comes along with it, it looks like both strategies just might work. But, you know, here's the thing about making these sorts of predictions.

30:20Profit statements can only tell you what's just happened. They're a snapshot of the recent past. What they don't tell you is why things have been profitable. Or to put it another way, what's going into consumer calculations to spend big on pricier robots when cheaper models are out there? Imagine, say, that the cost of living more broadly starts to rise sharply. Or try to imagine something less obvious that could shake things up, like the collapse of supply chains that make these robots profitable to build in the first place. We won't have to imagine much longer.

31:05It's October 2020 in Massachusetts.

31:08Colin Angle:Colin Angle peers into his laptop monitor. Because of pandemic shutdowns, he's calling into CNBC instead of being there in person. And he's about to go live to talk about iRobot's third quarter numbers. They're stellar. With Americans stuck at home and looking for ways to keep their places clean, home robots at all price points are selling fast. iRobot's revenue is up 43 % year over year, and earnings per share have crushed analyst estimates. But on Wall Street, traders aren't celebrating. They worry the sales boost won't last, and iRobot's stock drops by more than 12%. One concern is that iRobot has everything riding on two products, the Roomba and the Brava Jet.

31:58Earlier in the year, the company shelved plans for a robotic lawnmower because he couldn't afford to launch it. That's not a company with much room to maneuver. Engel, appearing on a blurry video feed from his office, says he doesn't understand why traders aren't more excited about iRobot's financials. Well, it's a little disappointing. You know, things have been going very well for us when we posted extremely strong numbers. And so that, from my perspective, the company executed well. We're looking at a very strong Q4. Angle is right. The fourth quarter is strong. And at the end of the year, iRobot brings in$1.43 billion in total annual revenue.

32:42It's best year ever. By early 2021, investor pessimism over iRobot's sustainability seems to have faded. In January, iRobot's stock jumps to$161 per share, an all-time high. iRobot's strategy looks solid.

33:03Colin Angle:But in 2021, as the pandemic's stay-home mandates begin to lift, iRobot quickly discovers that much of its success depends on a world that no longer exists. The global supply chain breaks under the strain of a sudden return to normal. There are chip shortages and shipping delays. By the fourth quarter of 2021, iRobot has more than$35 million worth of orders it can't fulfill because it can't get the parts. Revenue that year actually grows slightly to$1.56 billion, another record high. but profitability collapses. On investor calls, Angle blames supply chain woes. But there might be something else going on.

33:56iRobot ramped up production to meet the 2020 pandemic boom. But as that boom faded, iRobot's expenses didn't. And now, sales are slumping. In the first quarter of 2022, iRobot sells 100 ,000 fewer robots than it did the year before. Its weakest sales are in Europe, the Middle East, and Africa. All markets where Chinese competitors like Roborock and Ecovacs have been gaining ground for years. The sales decline and the higher expenses add up to a$23 million quarterly loss.

34:36Colin Angle:Meanwhile, iRobot's stock price has fallen by more than$100 a share from its all-time high. Investors are seeing what consumers are feeling. In early 2022, inflation is stubbornly high. Gas is selling for around$3.50 a gallon in the U.S., about 40 % higher than the year before. Groceries are up, too. In fact, everything seems more expensive. And in the middle of all of that, iRobot is leaning harder into its most expensive models, even as total unit sales decline. It's placed a bet on the high end at a time when consumers are being squeezed and when they have more robot vacuum choices than ever before, including lower-priced offerings from China that pack multiple features into one machine.

35:30This is the moment where you can see the gap between how iRobot thinks about its product and how consumers think about it. Angle's building a premium product that tries to do the best possible clean, but a lot of consumers just want one robot that can do multiple jobs without an$1 ,800 price tag. It's the same disconnect

35:52Colin Angle:that doomed 100 premium products before it. The best is often the enemy of good enough. For iRobot, the problem is clear. Competitors are getting cheaper, adding features, and taking market share. iRobot still believes it has something those machines don't. Robots that truly understand the home. But iRobot can't win the fight for the smart home on its own. It needs help. And that help might be just a phone call away.

36:33What if AI could recreate the voice of somebody you loved who died? What if it destroyed your reputation with words you never said? And what if you fell in love with something that was never human? I'm Mark Fennell, and in my brand new Audible original podcast, I'm travelling the globe to investigate the very personal ways AI is already changing our relationships, our memories, and our sense of what is real. Unreal. Listen now on Audible. You stepped out for your morning jog. Except it's not your usual morning jog. You started listening to an epic sci-fi book on Audible. Thirty chapters later, you've accidentally run a half marathon.

37:13You lost track of how far you've run somewhere just past the city limits. You can't stop. You have to find out what happens next. Then it's over. The universe seems bigger. You feel different. You feel like you have no idea where you are. Audible. Stories that speak to you.

37:43Colin Angle:It's May 2022 in Bedford, Massachusetts. Colin Angle picks up the phone. On the line is a representative from Amazon. They want to talk about buying iRobot. We should mention here Amazon is Audible's parent company. This isn't the first time Amazon has come calling. Back in 2016, the same year iRobot sold its defense division, Amazon approached the company about an acquisition. But iRobot's board said no. They believed the offer undervalued the company. At the time, iRobot could afford to say no. The Roomba was dominant. The competition hadn't fully arrived yet. This time is different. iRobot just lost money in the first quarter of 2022, and it's on track to lose even more in the second.

38:34Sales are declining, and Chinese competitors are everywhere. But a partnership with Amazon, which could integrate Roomba into its fast distribution system and its Alexa smart home ecosystem, well, that could change everything.

38:50Colin Angle:Amazon's opening offer is$64 per share. Angle rejects it. He says the company is worth more. You know, sometimes a company isn't selling itself because it failed. It's selling because the economics of competing on its own have fundamentally changed. As industries mature, the advantage often shifts from having the best product to having the strongest ecosystem, distribution, software, prospective customers, and complementary products all working together. In many industries, that's where the real competitive edge ends up. Even so, a buyout won't make sense for the seller or the buyer, if the math doesn't support the offer.

39:36Colin Angle:A month later, Angle picks up again. An Amazon representative, the same one he's been talking to since the first call back in mid-May, wants to know iRobot's price for acquisition. Angle says it's$70 a share, well above the$40 that iRobot's stock is currently trading at. Angle is negotiating like a man with leverage. But in reality, iRobot's financial situation is deteriorating and fast. The company desperately needs this deal. There's a pause on the line. Then, Angle adds something Amazon didn't ask for, but that they'll discover soon enough. There's something you should know before you respond.

40:22We're going to miss our second quarter numbers. We're lowering guidance for the rest of the year, too. Oh, I see.

40:30Colin Angle:Well, Colin, we're going to need some time to look at that. A few weeks later, Goldman Sachs issues a report about iRobot. It's a warning about the company's financial performance. Hmm. You think Angle should have taken that first offer for$64 a share? Starting to sound like an episode of Deal or No Deal, doesn't it? Amazon calls back. It's dropping its offer to$60 a share. Angle counters with 61. Finally, both sides agree. The deal is big news. But that same day, iRobot revealed devastating financial numbers. Revenue is down 30%, and its operating loss has swelled to over$63 million for the quarter.

41:20Colin Angle:iRobot blames retailers pulling back on orders, spooked by consumers suddenly squeezed by inflation, rising interest rates, and a new war in Ukraine rattling the whole global economy. The Amazon deal is still on, though, and iRobot has its lifeline. Unless regulators decide to cut it.

41:48Colin Angle:It's spring 2023 in Washington, D.C. iRobot CEO Colin Angle and a team of company attorneys walk briskly down Pennsylvania Avenue. They're here for a deposition with the Federal Trade Commission. The FTC has spent the past six months investigating the potential competitive impact of Amazon's proposed acquisition of iRobot. It hasn't said publicly what it thinks about the deal, but it's under pressure from Senator Elizabeth Warren, who represents iRobot's home state, to examine whether the deal would give Amazon an unsettling new window inside people's homes. Today, Engel is in D.C. to make the case that the deal should stand.

42:33Colin Angle:He passes by a pair of limestone statues depicting two muscular men struggling with two equally muscular horses. The statues are titled Man Controlling Trade. Inside the building, another struggle over trade is about to begin. For months, Engel and his legal team have worked day in and day out to convince both the FTC and regulators in the E.U. that this deal won't just be good for iRobot, it'll be good for consumers too. Angle believes he has a strong case, and he thinks the FTC is willing to hear him out. But as he walks down a hallway headed to a hearing room, he notices something that disturbs him.

43:15Colin Angle:On the doors of offices on either side of him, news clippings are tacked up, bold-faced headlines that Trumpet mergers the FTC is blocked. Angle pauses. He scans those headlines. They make him uneasy. To him, these aren't just news stories about careful regulation. They're hunting trophies. And he wonders whether the next headline will be about iRobot. His shoulders slump as he continues toward the deposition room. In the end, the meeting isn't the friendly conversation he'd hoped for. As 2023 goes on, the walls keep closing in. In July, the European Commission announces a formal investigation into the deal.

44:02Colin Angle:In November, the EU issues a statement formally objecting to the acquisition. As the year ends, Engel wants to keep fighting. But that's no longer his decision to make.

44:21Colin Angle:It's January 2024 in Bedford, Massachusetts. Colin Angle is slumped in his desk chair at iRobot's headquarters. His phone is ringing. His inbox is filling up. But he's not answering. He knows very bad news about iRobot is spreading. On the wall behind him, a TV is tuned to a local news station. The anchor announces that Amazon is walking away from the merger with iRobot. When Amazon announced the acquisition a year and a half earlier, it threw a lifeline to iRobot. In the 18 months it followed, Engel and Amazon fought for regulatory approval. But the EU has said no, and Amazon, having exhausted its options, has decided to walk away.

45:11Colin Angle:Engel shuts off the TV and paces the room. He can hardly believe how bad things have gotten. The Amazon deal promised something iRobot hasn't had in years. Stability. It would have allowed iRobot to compete with cheaper Chinese rivals from a position of strength. Now, with the acquisition off the table, iRobot is taking drastic measures. It's cutting a third of the company's workforce. Angle is going too. He resigns as CEO, although he'll still advise the company over the next 12 months. Angle starts cleaning out his office. He spent 34 years building iRobot, taking it from a leaky office in Cambridge where plaster fell off the walls when it rained, to the builder of one of the most recognized consumer tech brands in the world, Roomba.

46:08Colin Angle:He picks up his final box. Aruma passes by him in an otherwise empty hallway, going about its routine, oblivious, still doing its job. Angle walks out the door. Now, it's someone else's turn to clean up iRobot's problems. But that cleanup won't come. iRobot immediately begins subleasing part of the Bedford headquarters it had proudly remodeled only a few years before. By spring, it finally releases a combo mop vacuum at a budget price, something its competitor Roborock, now the market share leader, has been selling for the past six years already, and something that Colin Angle had once argued couldn't do the job as well as two separate robots.

47:01Colin Angle:The following spring, iRobot unveils its largest product lineup ever. Four new Roombas, every one of them finally equipped with LiDAR, the technology Angle once called a dead end. And just one day later, iRobot reaches its own dead end when the company announces serious doubts about its ability to stay in business. By December 2025, in a final bit of irony, iRobot files for bankruptcy and is acquired by Picea Robotics. the Chinese company that manufactures many of the Roombas. Now, here's an irony worth sitting with. Over nearly a decade, U.S. policy moved in opposite directions, and both moves ended up shaping iRobot's decline.

47:52Colin Angle:First, tariffs imposed on Chinese goods were meant to protect American manufacturers. But iRobot said they raised costs at the exact moment the company needed margin to survive competition from lower-cost rivals. Then, regulators moved to block Amazon's acquisition of iRobot. The concern was competition in consumer data. The deal that might have stabilized the company never happened. And without it, iRobot couldn't survive on its own. Now, the data and the company are under Chinese control. And in late July of this year, that foreign control came under the spotlight. The White House directed the FCC to ban all foreign-made robotic devices, including home floor vacuums.

48:44Colin Angle:The ruling applies to new models, but it puts Chinese-owned Roomba and others like Roborock in uncertain territory when it comes to reaching U.S. consumers. As of now, Roombas are still being made. The machines still move across floors in millions of homes, and iRobot still has an office in Bedford, Massachusetts. But it's no longer independent. iRobot was proof that Rodney Brooks was right, that simple rules applied consistently can produce something that seems intelligent, that maybe is intelligent. His idea was a breakthrough. But over time, the Roomba became far more complex, its microprocessors stuffed with more data than an average smartphone.

49:34Colin Angle:And maybe that complexity could have made it the star of the smart home, a little disc rolling around talking to the thermostats and the light switches. But iRobot never got there, and it didn't figure out how to sell a mop-vacuum combo for under$300, like its competitors did until it was too late. And yet, somewhere out there, a Roomba is still running its route, bumping into a chair leg, redirecting, finding its way around. It doesn't know that the company that built it is no longer independent. It doesn't know its bosses are in China. It just keeps rolling along.

50:22Colin Angle:Be sure to follow Business Wars on Audible or wherever you get your podcasts. And Audible subscribers can listen to new episodes of Business Wars one week early and ad-free right now. All you have to do is join Audible in the Audible app or by subscribing on Apple Podcasts. From Audible Originals, this is Episode 2 of Roomba, Hitting the Wall for Business Wars. A quick note about the recreations you've been hearing. In most cases, we can't know exactly what was said. These scenes are dramatizations, but they're based on research. If you'd like to read more, we recommend a TechCrunch story titled Colin Angle on iRobot, the FTC, and the Amazon deal that never was by Connie Loizos.

51:06Colin Angle:Also, a story in the Boston Globe titled iRobot Agreed to be Acquired by Amazon by Anissa Gardison. I'm your host, David Brown. Joseph Guinto wrote this episode. Our senior producers are Jenny Bloom and Emily Frost. Our producer is Tristan Donovan of Yellow Ant. Karen Lowe is our producer emeritus. Our managing producer is Desi Blaylock. Fact-checking by Gabrielle Jolay. Sound design by Josh Morales. Kyle Randall is our lead sound designer. Executive producer for Audible, Jenny Lauer-Beckman. Head of creative development at Audible, Kate Naven. Head of Audible Originals North America, Marshall Louie.

51:41Colin Angle:Chief content officer, Rachel Giazza. Copyright 2026 by Audible Originals LLC. Sound recording, copyright 2026. by Audible Originals, LLC.

51:57What if AI could recreate the voice of somebody you loved who died? What if it destroyed your reputation with words you never said? And what if you fell in love with something that was never human? I'm Mark Fennell, and in my brand new Audible Original podcast, I'm travelling the globe to investigate the very personal ways AI is already changing our relationships, our memories, and our sense. of what is real. Unreal. Listen now on Audible.