Amazon has decided to terminate its proposed acquisition of iRobot, the renowned manufacturer of Roomba robot vacuums, citing insurmountable regulatory hurdles in the European Union.
The fallout from this decision has rippled through iRobot, leading to significant job cuts and a change in leadership.
iRobot Responds to Failed Amazon Deal
The termination of the deal was not only attributed to EU regulators but also implicated US lawmakers who played a role in complicating the agreement. The aftermath of this development sees iRobot taking drastic measures, including a reduction of almost one-third of its workforce, affecting 350 employees. The specific types and locations of jobs being eliminated remain undisclosed, with notifications expected to be dispatched by March 30.
Colin Angle, the longtime chief executive and co-founder of iRobot, stepped down from his position. In the interim, Glen Weinstein, iRobot's chief legal officer and executive vice president, will take over the leadership role. The unexpected announcement sent shockwaves through the market, causing iRobot's stock price to plummet by 9% to $15.50 per share on Monday. Over the past month, the stock had already experienced a significant 56% decline amid speculations of regulatory obstacles.
iRobot's financial woes were further underscored by a 25% drop in sales in 2023, amounting to $891 million. As part of the fallout, Amazon is obligated to pay iRobot a $94 million termination fee. Colin Angle, the outgoing CEO, expressed disappointment but conveyed iRobot's determination to forge ahead independently. He emphasized the company's commitment to developing innovative robots and intelligent home solutions.
The severed ties with Amazon have compelled iRobot to make strategic cutbacks, discontinuing the development of new products in air purification and robotic lawn mowing. The cost-cutting measures include a $20 million reduction in the research and development budget and a $30 million decrease in marketing expenses. Additionally, certain offices and facilities in underperforming areas will be closed, and surplus space at iRobot's headquarters will be leased out.
The air purification initiative, initiated with the acquisition of Aeris Cleantec AG for $72 million in 2021, and the robotic lawn mower project faced setbacks in the wake of the terminated acquisition. These developments mark a shift in iRobot's focus and a reevaluation of its strategic priorities, according to The Boston Globe.
Amazon Disappointed as iRobot Deal Collapses
The collapse of the deal also prompted Amazon to express its disappointment, with David Zapolsky, Amazon's general counsel, lamenting the denial of potential benefits to consumers in terms of innovation and competitive prices. Despite this setback, iRobot's departure from the proposed acquisition did not surprise local robotics experts, who noted the company's recent financial challenges.
Tom Ryden, executive director of the local nonprofit MassRobotics, highlighted the significance of Colin Angle's departure and the concerning job cuts. He expressed hope that the laid-off employees might contribute to or join startups, thereby strengthening the regional robotics ecosystem.
Ben Z. Rose, president of Battle Road Research, acknowledged iRobot's need to make tough decisions in light of the deal falling through. He noted that the anticipation of joining Amazon might have been a distraction for iRobot, and the company must now focus on right-sizing its business to navigate the evolving landscape.
iRobot, founded in 1990 by Colin Angle, Rodney Brooks, and Helen Greiner, gained widespread acclaim for its Roomba vacuum cleaner. However, the company has faced challenges in producing another blockbuster product in recent years.The proposed acquisition faced scrutiny from regulators and privacy advocates, particularly in the European Union, where concerns were raised about potential anti-competitive practices by Amazon. While privacy advocates celebrated the deal's collapse, critics argued that it could have strengthened Amazon's dominance in the smart home devices market.
The termination of the $1.4 billion acquisition deal raises questions about Amazon's regulatory challenges and its impact on future deals. iRobot, on the other hand, must navigate a challenging landscape, reassess its strategic direction, and weather the financial consequences of the failed acquisition, Reuters reported.
