E-commerce giant Amazon on Friday announced an agreement to buy iRobot, maker of home-cleaning robots such as Roomba vacuums, for $1.7 billion in cash. Amazon stock dipped on the news while iRobot stock rocketed.
Seattle-based Amazon said it will pay $61 a share for Bedford, Mass.-based iRobot. The deal is subject to customary closing conditions, including approval by iRobot's shareholders and regulatory approvals.
On the stock market today, iRobot stock surged 19.1% to 59.54. It ended the regular session Thursday unchanged at 49.99.
Meanwhile, Amazon stock slid 1.2% Friday to close at 140.80.
Roomba Vacuums Hot Prime Day Specials
"Over many years, the iRobot team has proven its ability to reinvent how people clean with products that are incredibly practical and inventive," Dave Limp, senior vice president of Amazon Devices, said in a news release.
"Customers love iRobot products — and I'm excited to work with the iRobot team to invent in ways that make customers' lives easier and more enjoyable," he said.
Amazon already has a sizable consumer electronics business. It makes Alexa-enabled smart speakers, Fire TV streaming devices and television sets, tablet computers, Kindle e-book readers, and home security devices. It also has tried its hand at home robotics with the Amazon Astro home monitoring and companion robot.
With iRobot, Amazon gets Roomba robot vacuums, Braava robot mops, Aeris air purifiers and other gadgets.
Roomba vacuums are often top sellers in the electronics category during Amazon Prime Day shopping events.
Amazon Stock Ranks No. 1 In Group
Amazon stock ranks first out of 59 stocks in IBD's Retail-Internet industry group, according to IBD Stock Checkup. But it has a mediocre IBD Composite Rating of 69 out of 100. The Composite Rating scores a stock's key growth metrics against all other stocks regardless of industry group.
IRobot stock ranks sixth out of 12 stocks in IBD's Household-Appliances and Wares industry group. But it has an ultra-low Composite Rating of 4.
IRobot has reported declining sales for three straight quarters. In the June quarter, its revenue dropped 30% year over year to $255.4 million. And it posted losses for the last three quarters as well.
The acquisition of iRobot will give Amazon greater capabilities in the smart home market, says MKM Partners analyst Rohit Kulkarni. Amazon competes in that market with Alphabet's Google and Apple, he said in a note to clients. Kulkarni rates Amazon stock as buy with a price target of 170.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
