A tough week for the hardware industry

About a week, iRobot, noand Rad Power Bikes both have been filed for bankruptcy.

They’re very different companies — sellers of Roombas, lidar, and e-bikes, respectively — but as Sean O’Kane, Rebecca Bellan, and I discussed on the Equity Podcastthey faced similar challenges, including price pressures, major contracts that fell through, and a failure to establish themselves beyond what made them successful.

You can read a preview of our discussion below, Sean gives an overview of what we’ve written, Rebecca takes a look at what it’s like to have a Roomba, and I speculate on what the popular stories of this debacle leave out.

Sean: Rad Power is big for an e-bike company, but small, I think, in most people’s minds, since it’s still small. They were established a long time ago and became popular even before the epidemic, and they are considered to be the leader of the industry, in terms of the type of bikes they are producing, good advertising and marketing and trying to connect with customers – which is very difficult to find in the world of e-bikes, where many of them are like companies of the alphabet pages of Amazon.

They rode the wave of the epidemic when micromobility took off, and people were thinking more about how they got around, they weren’t going to the office. And we see this in bankruptcy filings. It only shows the income three years ago, but they earn more than $100 million in 2023 – like $123 million, I think it fell about $100 (million) last year, and because of the bankruptcy this year, it was about $63 million, so it dropped a lot. They have a pretty diverse list, but they haven’t found a way to set it up there.

And I think you can say the same about the other two companies. Luminar is another company founded in the early 2010s, it went underground in 2017, and its goal was to take lidar sensors, which at that time were expensive and large and only used, for example, in defense and aerospace applications. 2017 was the first version of autonomous vehicles. They wanted to use the sensors, making them cheaper in the process. This helped them get business deals, especially with Volvo, and later with Mercedes Benz, and several other players. But they really focused on that, and that’s one of the reasons they ended up writing this week, too.

And then iRobot (was) the most popular of the three companies – most of the people listening probably have a Roomba at home or something like that. It’s one of these things where iRobot has become synonymous with something else, so the technological advancements that build that thing move so fast that they’re out of stock while they’re looking for a way out. And we all saw this, they were trying to get with Amazon, and the deal was blocked by the FTC and here we are.

They are very different companies, but they all faced similar problems. Do any of you have a Roomba?

Rebecca: No, I don’t have a Roomba. This surprises me, but I bought my mom a Rad Power bike years ago, and she loves it. But now, you know, they were not only a bankruptcy case, but they had it the problem is the batteries – he couldn’t recall because he was, like, “If we recall these bikes, we’re going to be out of money.” But they are still going for money!

I would like to know about the tariff, and how it affected everyone’s policy. You hear a lot on social media, people who merge, how other FTC shutdowns (including) lead to companies going out of business, or being bought by a Chinese company instead of an American company.

Sean: iRobot represents, to me, the kind of biggest business problem in the world, could you have built this company here in the United States with sales methods in the last 15 years? Maybe not. So it makes sense that they relied heavily on China – which, let’s be real, probably caused these other companies to come out and copy what they did.

This reminds me in Trump 1, when he raised the prices of Chinese products, and we saw a lot of startups like Boosted Boards and other things in the micromobility space hit. So they are helping things, of course. The battery memory and Rad Power was, I think, a great tool in the end, but the price points put them on an inconsistent footing which made it difficult for them to respond to such things.

Anthony: Usually when a company fails, there are (are) major structural issues, and then there is probably a very close issue. And especially in the case of iRobot, I think many former executives and outside commentators are link to this Amazon deal which was reached a few years ago – it seems like the EU does not allow it to pass, and there is an idea that, “Okay, well, by canceling the deal, you put a sword in their heart that ultimately killed the company.”

This story probably ignores the fact that there were other things that made them want to find it in the first place.