iRobot, the U.S. company that became known for its Roomba robotic vacuum cleaners, has declared bankruptcy. They are managing their financial crisis through the pre-packaged Chapter 11 process. The law firm is on the verge of collapse. These factors are soaring expenses from U.S. tariffs and fierce competition from competitor plants. On Friday, iRobot’s share price sank by more than 13% on the Nasdaq trading platform in New York. This sudden drop marks a growing concern by investors for a variety of reasons.
In 1990, three members of the Massachusetts Institute of Technology’s Artificial Intelligence Lab founded iRobot. They soon decided to focus their advanced innovations on defense and space tech. In 2002, the company took a fateful turn with introduction of the Roomba, which fast became a household word. To date, iRobot has sold more than 20 million units of its robotic vacuum cleaners. The firm has about 7,000 employees across the globe.
Even with this impressive track record, iRobot has faced difficulties turning regular profits in a tough commercial sector. The firm was forced to slash costs and pour money into the development of new technology to stay in the game. For iRobot, that amounted to an extremely high 46% import tariff on products manufactured in Vietnam. This is where the company assembles most of its devices for the U.S. market. These tariffs have paved the way for a dramatically high cost, which is already $23 million (£17.2 million) this year, and counting.
In a further setback, iRobot’s planned $1.7 billion acquisition by online retail giant Amazon was blocked by the European Union’s competition watchdog last year. That deal, which has now been derailed, was meant to bring the company the capital cushion and resources it needed to help steer it through its financial woes.
Once worth about $3.56 billion in 2021, iRobot is now valued at about $140 million. The firm’s market capitalization has plummeted 95%. This drastic reduction is a testament to its continuing fight against competition from Chinese counterparts and the increasing costs of production caused by tariffs.
In a surprise turn of events since the Chapter 11 filing, Shenzhen-based Picea Robotics is prepared to assume control of iRobot. This firm is the chief manufacturer of iRobot’s devices. This turnabout provides iRobot with a clear path forward. Its effort to both return its operations to a state of normalcy and adequately ensure it reestablishes itself firmly in a re-envisioned marketplace.