Commercial and military robot maker iRobot occupies a singular place in U.S. Army history — one that the Army is likely uncomfortable with.
The company is the producer of the only piece of equipment to survive the Army’s $20 billion debacle known as Future Combat Systems, which was canceled by then-Secretary of Defense Robert Gates in 2009 after a litany of cost, scheduling and performance issues became more than the Pentagon brass was willing to contend with.
The company’s Small Unmanned Ground Vehicle (SUGV), developed with the Defense Advanced Research Projects Agency, was spun off from the program and has since been deployed to combat units in Iraq and Afghanistan for use in anti-bomb operations, and to perform watch and surveillance missions.
The successful SUGV and its cousin, the PackBot, have been the drivers for iRobot’s military sales, making up the vast majority of the 4,500 robots the company has sold to 30 different governments around the globe. And the work will continue: The Army’s 2013 budget proposal requests $83 million for 76 additional SUGVs to field to two infantry brigade combat teams.
But recent company guidance indicates that the defense sector isn’t the high-growth area for robotics that it has been in recent years.
In February, iRobot reported fourth-quarter 2011 revenues of $131 million — a 15 percent spike from the previous year — and an increase in yearly revenue of 16 percent to $465.5 million. But CEO Colin Angle told investors that, while sales for commercial robots are expected to increase 15 percent in 2012, the company is forecasting military sales to slide as much as 20 percent due to “the great uncertainty we’re seeing in the marketplace.”
Speaking at the JPMorgan TMT Conference in May, Angle said that in “the next 18 months or so ... the military side of the business is not going to be the growth driver, but remember it’s only 25 percent of our business.” Growth for the company “has shifted” to the home robot business, especially in Europe, where one in five vacuums sold today are robots.
Still, iRobot’s chief strategy officer, Joe Dyer, said robots have the potential for being one of the next great industrial success stories in the U.S., since their increasing ability to do “technology for labor trade” will be applicable not only in commercial labor markets, but also in scout missions, perimeter security, infantry equipment hauling and other time-consuming military, police and security missions.
Unlike some other modernization initiatives where the Pentagon is gravitating toward commercial components, in many ways the opposite is happening in the robotics industry, where government requirements and investment are driving advances in technology due to urgent battlefield needs.
In some ways, Dyer said, the latest advances in robotics technology mirror the research and development of the 1960s, ‘70s and ‘80s, when the Pentagon and NASA were driving the cutting edge of technology.
“One of the reasons defense work is as important as it is to a company like iRobot,” he said, “is because in many ways, it’s back to the future. It is technology [gaining] tremendous leverage from work done by DoD that is spawning investment.”
The robotics industry is in many ways just getting started, and for now is dominated by smaller companies, many of which have sprung up to fulfill the military’s needs in Iraq and Afghanistan. In a 2011 study of the industry, the Industrial College of the Armed Forces at the National Defense University found that “the nascent Robotics Industry lacks the homogeneity sometimes found in more mature industries. Robotics firms do not compete across all market segments; instead they compete selectively within discrete segments.”
Some of these small companies will get eaten up by large defense contractors once some of the battlefield requirements begin to go away. Patti Rote, the robotics industry program director at Carnegie Mellon University, who also works with the bipartisan Congressional Robotics Caucus, said that smaller companies are starting to look for business outside of the Defense Department since “they realize that the DoD won’t be around in the magnitude it has been for the past 10 years.”
While Pentagon leaders have repeatedly underscored the necessity of unmanned systems for the future battlefield, when it comes to future requirements, Dyer, a retired U.S. Navy vice admiral, contends that “the easiest thing to do in DoD budgets is the thing you did before” — thus existing systems will likely remain the centerpiece for investment.
In the current fiscal environment, what he referred to as the “Eisenhower companies” — big prime contractors — “are going to be pressing hard to sustain the old ways of doing business,” Dyer said, which puts the squeeze on many of the newer technologies from small companies that have been fielded to meet urgent operational needs in Iraq and Afghanistan.
The SUGV has made the transition, becoming a program of record, but DoD still faces the challenge of evaluating all of the systems it purchased on the fly to rationalize sustainment, equipping and training packages as they are integrated into the larger force.
Asked if she sees small robotics firms being bought out by larger, more established companies, Rote replied, “I hope so,” adding that buyouts are one of the exit strategies for new companies with a limited business model. “They expect it to happen,” she said.
Headquarters: Bedford, Mass.
Employees: About 600
2011 revenue: $465.5 million
Military sales: 25%