iRobot terminates deal with Amazon, laying off 31% of staff

Listen to this article

An edited image showing an iRobot Roomba with Amazon branding. | Source: iRobot, Amazon

iRobot Corp. today announced it is terminating its planned acquisition by Amazon.com Inc. The companies mutually agreed on this decision and blamed “undue and disproportionate” regulatory scrutiny for the demise of the deal.

“We’re disappointed that Amazon’s acquisition of iRobot could not proceed,” said David Zapolsky, senior vice president and general counsel at Amazon, in a release. “We’re believers in the future of consumer robotics in the home and have always been fans of iRobot’s products, which delight consumers and solve problems in ways that improve their lives. Amazon and iRobot were excited to see what our teams could build together, and we’re deeply grateful to everyone who worked tirelessly to try and make this collaboration a reality.”

Zapolsky cited the need for global competitiveness and said that regulators are impeding innovation.

“This outcome will deny consumers faster innovation and more competitive prices, which we’re confident would have made their lives easier and more enjoyable,” he said. “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.”

“Undue and disproportionate regulatory hurdles discourage entrepreneurs, who should be able to see acquisition as one path to success, and that hurts both consumers and competition—the very things that regulators say they’re trying to protect,” stated Zapolsky.

Amazon’s acquisition of iRobot faced multiple hurdles

The companies signed the proposed acquisition agreement on Aug. 4, 2022, and the Seattle-based e-commerce giant would have acquired the Bedford, Mass.-based robotic vacuum vendor for up to $1.7 billion in cash. That amount was lowered to $1.42 billion after iRobot acquired new debt, and it laid off 10% of its staff, or about 140 employees.

iRobot tried to reassure customers that its plans for mapping consumers’ homes would not result in the sale of private information.

In September 2022, the U.S. Federal Trade Commission (FTC) launched an investigation of Amazon and iRobot’s plans. In October 2022, iRobot and SharkNinja received an initial determination in a patent-infringement lawsuit, ruling in favor of iRobot.

In April 2023, iRobot got a bit of good news, as the U.K. Competition and Markets Authority cleared the proposed acquisition. In September 2023, iRobot introduced the Rooma j9+ robot vacuum, the Roombo Combo j9+ robot vacuum and mop, and iRobot OS 7.0.

In November 2023, the European Commission said that its preliminary view was that the acquisition could restrict competition. 

The companies have signed a termination agreement that resolves all outstanding matters from the transaction, including Amazon paying iRobot a previously agreed-upon $94 million termination fee.

iRobot co-founder Colin Angle steps down as CEO

iRobot also announced that co-founder Colin Angle has stepped down as chairman and CEO. He will continue to serve on its board of directors until his current term expires in May 2024. Angle has agreed to remain with the company as a senior advisor for up to 12 months.

“iRobot is an innovation pioneer with a clear vision to make consumer robots a reality,” stated Angle in a release. “The termination of the agreement with Amazon is disappointing, but iRobot now turns toward the future with a focus and commitment to continue building thoughtful robots and intelligent home innovations that make life better, and that our customers around the world love.”

“When I founded iRobot more than three decades ago, having more than 50 million of our products in homes worldwide was beyond my wildest imagination,” he added. “I am incredibly proud of what our team has accomplished over the years. From the development of the first Roomba in 2002 to our latest generation, they have been relentless in building and delivering new and iconic ways for consumers to clean and live.”

“At the same time, I know there is a lot of work to do to map iRobot’s next chapter,” noted Angle. “Given the nature of the challenges facing the company, the board and I have mutually decided that iRobot will be better served by a new leader with turnaround experience. I would like to sincerely thank our team members around the world for their commitment to our mission of helping people do more.”

iRobot has appointed Glen Weinstein, executive vice president and chief legal officer, as interim CEO. He has been with the company since 2000. Andrew Miller, lead independent director of iRobot’s board, has been appointed chairman of the board. Miller previously worked at PTC, among other high-tech companies.

“iRobot is a pioneer of the consumer robot field and beloved by its customers around the world,” asserted Miller in a release. “With a legacy of innovation and a foundation of creativity, the board and I believe that iRobot can – and will – grow its presence and continue to build a cutting-edge suite of robotic floorcare solutions that help consumers make their homes easier to maintain and healthier places to live.”

“To do this successfully, however, we must rapidly align our operating model and cost structure to our future as a standalone company,” he added. “Though decisions that impact our people are difficult, we must move forward with a more sustainable business model, and a renewed focus on profitability. We are confident that the actions we are announcing today will enable us to chart a new strategic path for sustainable value creation.”

“On behalf of the board, I would like to extend my sincerest gratitude to Colin for more than 33 years of leadership in building a company that has changed the world,” said Miller. “I particularly appreciate Colin’s support of this transition. We are also grateful to Glen for stepping up to guide our company through this important period. As the search for our next CEO progresses, I know we will benefit from Glen’s deep knowledge of our business, having been an integral member of iRobot’s leadership team for over 20 years.” 

iRobot shares restructuring plans

iRobot today also announced preliminary fourth-quarter results. It said it anticipates reporting full-year 2023 revenue of $891 million, a 25% drop from the same period in 2022 and a GAAP (generally accepted accounting principle) operating loss of between $265 million and $285 million, and a non-GAAP operating loss of approximately $200 million.

The company ended fiscal year 2023 with $185 million in cash and cash equivalents, funded primarily from its previously announced three-year $200 million credit agreement with The Carlyle Group, which matures on July 24, 2026.

iRobot announced a number of moves to “more closely align its cost structure with near-term revenue expectations and drive profitability.” This includes restructuring its supply chain, research and development, and sales and marketing, as well as laying off more staffers and abandoning work on robotic lawn mowing, among other things. 

iRobot announced a reduction in force (RIF) of 350 employees, representing 31% of its workforce as of Dec. 30, 2023. The company plans to notify all the affected workers by March 30, 2024, and it will take restructuring charges of between $12 million and $13 million for severance and related costs.

iRobot named Jeff Engel as chief restructuring officer, and he will report directly to the board and Weinstein. It also listed the following financial and strategic initiatives:

• Achieving margin improvements and generating approximately $80 million to $100 million in savings by renegotiating terms with joint design and contract manufacturing partners
• Reducing research and development expenses by approximately $20 million year-over-year through increased offshoring of non-core engineering functions to lower-cost regions
• Centralizing global marketing activities and consolidating agency expenditures to reduce sales and marketing expenses by approximately $30 million year-over-year while seeking efficiencies in demand-generation activities
• Rightsizing the company’s global real estate footprint through additional subleasing at its corporate headquarters and the elimination of offices and facilities in smaller, underperforming locations
• Focusing iRobot’s product roadmap on core value drivers and pausing all work related to non-floorcare innovations, including air purification, robotic lawn mowing, and education

“The company will continue executing key strategic activities to support iRobot’s return to profitability, including increasing its brand recognition, driving product innovation, and redesigning its go-to-market strategy,” it said. “Enhancements to the company’s go-to-market playbook will focus the business on iRobot’s most profitable customers, geographies, and channels, including its growing direct-to-consumer channel, while rebalancing the company’s spending mix between price, promotion, and demand generation to optimize returns.”