Amazon Takes Its Roomba Back to the Store
(Bloomberg) -- There are two ways to look at the collapse of Amazon.com Inc.’s deal to buy iRobot Corp., which makes Roomba vacuum cleaners. The one that led the companies’ joint statement Monday cited “no path to regulatory approval in the European Union.”
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But there’s another potential explanation: buyer’s remorse.
In the 17 months since Amazon agreed to the deal, iRobot’s business has faltered. Faced with the choice of going to war with regulators — potentially in a years-long quagmire on both sides of the Atlantic — or cutting its losses, Amazon chose to bail.
From its home base in Bedford, Massachusetts, iRobot has long punched above its weight. The Roomba has been so successful that it defined its own product category.
What competitors lacked in brand recognition, though, they made up for in low prices and shipping volume. The robot vacuum market now has “an unprecedented number of players,” according to Parks Associates, which tracks smart home devices. That includes a multitude of startups, South Korean and Chinese electronics giants and stalwart vacuum brands like Bissell and Dyson.
In a survey of US households with home internet that Parks Associates conducted in early 2019, 63% of respondents who owned a robot vacuum reported having a Roomba. By the end of last year, that share was down to 48%.
IRobot has blamed “increased pricing competition” for dragging on sales. It held layoffs in 2022 and 2023, subleased part of its headquarters and scaled back advertising and research and development. The company has incurred about $500 million in losses since 2021.
When Amazon called off its $1.4 billion purchase on Monday, iRobot announced yet another round of cuts, totaling 31% of its workforce, and the departure of its chief executive officer.
Spokespeople for Amazon and IRobot declined to comment beyond their public statements. In one of them, David Zapolsky, Amazon’s general counsel, said the termination of the deal will “deny consumers faster innovation and more competitive prices, which we’re confident would have made their lives easier and more enjoyable.”
Amazon's top lawyer also suggested the regulatory scrutiny from Washington and Brussels would prove self-defeating: “Mergers and acquisitions like this help companies like iRobot better compete in the global marketplace, particularly against companies, and from countries, that aren’t subject to the same regulatory requirements in fast-moving technology segments like robotics.”
The retreat is something of a new look for Amazon, which has defended itself against past charges of anticompetitive practices, betting its moves would stand up in court if it came to it. Amazon faced down skeptical regulators during its recent purchases of MGM and One Medical. With iRobot, Amazon didn’t even offer European regulators a compromise, or what’s known in regulatory negotiations as a merger remedy.
The financial impact to Amazon of walking away will be minimal: a $94 million breakup fee, which iRobot will use to pay down debt and compensate its financial advisers. For Amazon, which has $64 billion in cash, it’s like a restocking fee.
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