Now, I am all in favor of conservative shareholder balance sheets with zero debt, but this has to be balanced by by some risk of investing in marketing campaigns that will lead to sales and greater brand awareness, especially when you are first to market, as iRobot was with the Roomba. There is just too great an opportunity here.
Enter Google: deep pockets, great marketing department, and more traffic than anyone else in the world. Plus the brand name. Affixing the Google logo to an iRobot product will help ease the internal mental friction to buy for many familiar with the caliber of Google software products (which keep getting better and better).
First of all, all my financial analysis says iRobot’s stock is cheap (which is why I am long.) Google can buy a cash-producing company and all its patents and relationships for a premium of the stock’s current worth, and for less than 2% of cash on hand (assuming a $1 billion sales price). Additionally:
- Google’s brand makes iRobot’s brand stronger (synergy);
- there can be cuts made in the redundancies of the operation of the companies (synergy);
- Google’s marketing expertise can work for the new iRobot division, which they had been lacking in (synergy);
- Google gains access to potentially more government contracts via iRobot’s connections, which Google has always sought (synergy); and
- iRobot’s know-how in building robotics, plus all their other intellectual property.
To quote Jack Donaghy (Alec Baldwin’s “30 Rock” character), “Don’t ever bad-mouth synergy.”
I am just an investor trying to forecast the future. Based on the fact that Amazon.com, Inc. (NASDAQ:AMZN) paid $775 million for Kiva Systems, which creates tiny robots that make warehousing more efficient (an investment that will raise the company’s margins long term), I believe that iRobot might be a tasty target for someone out there. And my hope is I might have laid out some of the synergies the company might have with Google. Don’t ever bad-mouth synergy!
The article Will Google Buy iRobot? originally appeared on Fool.com and is written by Margie Nemcick-Cruz.
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